Arla UK delivers solid growth despite volatile market conditions

Arla said its UK business has delivered a solid performance in 2021, with revenue growing by 2.6 per cent to £2.17 billion, amid continued disruptions and rising costs.

The company delivered overall branded volume growth of 3.8 per cent despite the cumulative effects of driver and labour shortages, accelerating inflationary cost pressures dampening the performance somewhat.

“2021 was a tough year where we had to navigate through several external challenges to deliver much-needed returns for farmer owners,” Ash Amirahmadi, managing director for Arla Foods UK, said.

“Like many others in the industry we faced disruption from Covid and from labour shortages, but the biggest disruption has come from the unprecedented inflation, which is driving up the cost of operations across the supply chain. Against this challenging backdrop, we have performed well.”

Amirahmadi added that the production costs are increasing “like never before” as a result of the rising costs on farm and across the supply chain.

In the first half of the year, performance was underpinned by continued heightened in-home consumption as a result of the extension of Covid-19 lockdown in the UK, and the full reopening of the foodservice sector in the second half led to a strong 19 per cent branded volume growth for Arla UK’s foodservice business.

After a record-breaking branded growth in 2020, several of Arla’s strategic brands continued their sales growth last year, including Arla Cravendale (6.7%), Arla Skyr (12.5%), and the yogurt brand Arla Protein (38%). The total Arla brand grew 9.6 per cent across the full range of products in 2021.

For the second consecutive year, Arla UK also grew its licensed sales of the Starbucks brand by more than 30 per cent, however the growth of renowned brands like Lurpak and Anchor was affected by the butter- and spreads category readjusting itself after a massive sales spike in 2020.

Whilst both brands did improve their overall market share positions, strategic branded revenue sales of Lurpak decreased by 4.1 per cent in 2021 (after 14.9 per cent growth in 2020), while Anchor decreased by 6.3 per cent in 2021 (after 9.7 per cent growth in 2020).

“I am pleased to see so many of our brands continue to grow as more and more British consumers have turned to these brands in recent years. As a farmer-owned cooperative, we are all about building strong brands that add more value to consumers and, in doing so, also generate more sustainable financial returns for the farmers,” Amirahmadi said.

Total Arla Group revenue increased by 5.6 per cent to €11.2bn (£9.44bn) driven mainly by higher sales prices and strategic branded sales growth of 4.5 per cent.

Arla said it expects inflation and volatility to continue to impact the business and other sectors well into 2022.

“The impact on consumer behavior of on-going market volatility and high inflation will be multifaceted and difficult to predict. It is likely that we will see a slowdown in our branded growth as the market resettles at a new level,” said Peder Tuborgh, Arla Foods chief executive.

Arla Group revenue outlook for 2022 is expected to be €11.8-12.4bn, net profit share will be in the range of 2.8 to 3.2 per cent and leverage is expected to be in the target range of 2.5-2.9.