Arla Foods has announced a strong set of results for 2011, and the company has told DairyReporter.com that this is due in large part tighter ‘global brand’ focus that is boosting its entire portfolio.
The Danish-Swedish-German co-operative group reported a turnover of almost DKK 55bn (DKK 49bn: 2010) while profits also grew to DKK 1.311bn (DKK 1.268bn: 2010).
Welcoming “strong results in a difficult time”, given the European debt crisis (with 80% of Arla’s business based in Europe), CEO Peder Tuborgh admitted that greater consumer uptake of discount, rather than branded problems, had hurt Arla’s earnings in this region.
“But at the same time, we’re seeing a rising demand in markets outside Europe, which will offset the flattening growth in Europe,” he added.
Tuborgh noted Arla’s success in Middle East and North Africa (MENA) and Russia, where sales grew by 16% (DKK 4.1bn) and 27% (DKK 540m) respectively, as well as a “major breakthrough” towards becoming a major market player in Germany, following the firm’s merger with Hansa-Milch and its Allgäuland-Käsereien acquisition.
Arla, Lurpak, Castello
Arla said that half its 2011 revenue growth was organic – the firm is targeting a DKK 75bn turnover by 2015 – and was in part driven by good growth for its three ‘global brands’: Arla (+8%, DKK 20.6m) Lurpak (13%) and Castello (+8%).
CFO Frederik Lotz said global brand growth ahead of the rest of the company was very positive, with sales driven by “strategically important products with high added value” and a focus on selected global markets.
Arla’s global brand strategy was launched in October 2010, and involves focusing on its three global brands; the firm’s 2015 group strategy involves targeting Russia, Poland (+19% sales growth) the US and China as ‘special growth markets’, but the firm suggested yesterday that 2011 performance in the latter two was more muted.
Endless number of brands...
Asked whether Arla had benefited from focusing its resources on fewer ‘global brands’, the spokesman said: “There’s no doubt that this is a big advantage to us, and we’ve seen it work almost immediately.
“Before we had a global brand strategy we had an endless amount of brands in each market. We’re working on – and we’ve also worked on this over the past two years – streamlining and finding synergies, to build up around these three global brands.
“We’re making sure that the brands that did not have potential as a standalone brand, can either become a sub-brand to one of these three main brands, or possibly we just stop producing it. You have to focus your business to get the most profit out of it.”
He added: “We had to change some of the products – packaging, quality, so forth. Moving a brand into another brand is a journey that requires product adjustments.
“That’s taken a lot of work, but we’re definitely seeing the benefits of that because of the value these brands have is translating to more of our products.”