Arla has opened its UK recruitment hotline register

Given recent global milk production declines it was always a question of when rather than will Arla look to recruit new producers.

Well as of today Arla are compiling a register of producers who wish to supply them potentially as full members or direct suppliers.  So, the door is opening.

Note Arla have also confirmed its NOT a case of first to call first to be considered.

Last year when Arla launched its Global 5-year Future 26 Strategy the required additional milk was planned to come from expansion from existing members.  However, the explosion of on farm costs resulting in a worldwide decline in milk output means in order to achieve its ambitions, including meeting the encouraging 2% year on year increase in global demand for dairy products predicted for at least the next 5 years, Arla requires additional milk both from new joiners and existing members in the coming years from across its European milk fields.

Arla certainly has ambitious plans to grow its UK business including increasing its 38% branded revenue share to 45%.  For any disillusioned non-Arla organic suppliers, the target is to grow its UK business by more than 50% in the next 5 years and for these farmers whilst it carries some risk it will no doubt be appealing to submit a termination notice this month.

The announcement will be welcomed by not 100’s but 1,000’s of producers equally it will be disastrous news for some milk processors (liquid, cheese and brokers) as well as the aligned pools particularly Tesco, Sainsburys and the Co-op group.

For sure the Arla recruitment register could see a seismic percentage of some processor’s farmers seeking to leave. However, it’s a certainty that Arla will be selective in who it recruits and the criteria they need to meet particularly with regards to sustainability, climate efficiency, right volumes in the right geographical locations and equally important new farmers with the right long-term mindset.

In a press release Ash Amirahmadi commented

“For a number of years, we have indicated that the lack of profit in own label liquid milk in the UK is not sustainable.  It delivers little to no profitability for farmers and is a category of the UK dairy sector where the market is failing to deliver value for farmers.  It is unsustainable.  This is made even more critical by the fact that the costs of producing milk is increasing like never before and our farmers are continuing to experience significant inflation”.

The release then goes on to give what Ian believes is a reality check that

“Global demand for dairy continues to outgrow international supply

 Explore export potential for Arla’s UK Milk.

  As global demand for dairy continues to outgrow international supply, the value of milk and dairy products on the world market has shifted to a new, sustained high level.  This shift means more opportunities for Arla to increase the value from its UK milk and subsequently the returns for the farmers that own the cooperative”.

“As part of its Future26 strategy, Arla will leave in also explore opportunities to begin exporting raw milk from the UK to supply Arla’s global supply chain and has begun trials to move milk to its European processing sites as a means to supply its growing international sales of sought-after dairy products and to improve the profitability of UK milk for its British and European farmer owners”.

Arla claims they can earn 15% more money today by exporting British milk and that’s what it is prepared to do.  For years if not decades UK producers have lacked options.  Now the alternatives are plentiful.

The recruitment is not confined to Arla UK it is an Arla European initiative.  It clearly confirms Arla has growth plans, ambitions, including further investment (on top of £1 billion already invested) in its UK processing section coupled with plans to open up new markets particularly outside the UK.

As has been stated in this column last year one or more UK retailers is likely to be short of milk and when that happens, not if, they will be crying over spilt milk.

The Arla door is starting to open in what is its biggest market and for sure retailers and processors had better take note and react quickly if they want continuity of supply.

Industry reaction and what this means

Some processors have reacted negatively in horror fearing they will lose producers to Arla.

Others have read their press release and taken the view that it sends a very strong message that the UK Dairy Industry is open for business but it will no longer supply milk to customers at loss making prices.  As John Allen of Kite Consulting said in a podcast with Chris Walkland and Ian on Friday that liquid milk sold at a discount, for example today 4 pints for £1.15, will no longer be at the cost of producers and processors.  Retailers can sell at any price they wish but the discounts will no longer be passed down the line with the dairy farmer taking what’s left.  

Whether processors like it or not either they pay the Arla price or more or risk losing farmers.  Already very strong evidence points to at least two processors with less than 50% of their milk requirements coming from direct farm supplies from April 1^st.  That’s a situation more processors will face if they lag behind.

 

To listen to the kite podcast and the collective thoughts on todays Arla announcement click on

Arla give a boost to UK dairy | Kite Consulting (simplecast.com)

 

Below is the full Arla press release

 

Arla announces new 5-year growth strategy for the UK

 

Following the launch of the global Arla Group Future26 strategy, Arla is announcing new growth ambitions in the UK for the next five years – with a heavy focus on strengthening the sustainability, value and efficiency of dairy.

 

As part of the growth strategy, Arla will also explore export opportunities out of the UK for the first time as well as the need for more milk, from existing and potentially new farmer owners in the UK.

 

Britain’s largest dairy cooperative, Arla Foods, is planning long-term investments in its UK supply chain, key sales channels and market leading brands like Arla Cravendale®, Arla B.O.B®, Arla Lactofree®, Lurpak®, Starbucks™ and Anchor®, as it makes clear its plans to become a leading household name.

 

Over the next five years, Arla looks to grow its UK business through a combination of branded and added-value private label innovation in prioritised categories like liquid milk, yogurts, butter and spreads, milk-based beverages and cheese. The ambition is to grow the branded share of the revenue to 45 per cent from 38 per cent.

 

The company will continue to take an industry lead on data-driven sustainable dairy production that meets the 1.5-degree goal set by the Paris Agreement.

 

In the next five years the Arla Group will increase its investments by more than 40 per cent to 4+ billion EUR (around £3.4bn) in sustainability actions, product innovations, capacity expansions and digitalization. As the single biggest market in Arla’s global business, this will also mean increased investments for Arla’s UK operations, with a focus on efficient and sustainable production and categories and channel opportunities such as added-value milks, foodservice and ecommerce.

 

As previously announced, Arla also targets more than 50% growth across its UK organic retail and foodservice business in the next five years.

 

“This growth and value-up ambition is about improving the value of dairy for our consumers through high quality products that meet their demands, for our retail and foodservice customers as we add category value and growth, and for farmers through a sustainable farmgate price,” says Ash Amirahmadi, Managing Director of Arla Foods UK.

 

“The milk that goes into products like Cravendale®, B.O.B® and Lactofree® dairy products comes from Arla’s farms, where our owners are already among the most climate efficient dairy farmers in the world, producing milk with around 50 per cent fewer emissions than the global average. But with an ambition to reduce on-farm emissions by an additional 30 per cent by 2030, big investments are still needed on farms . Therefore, in the UK, our Future26 strategy will ruthlessly focus on creating the maximum value of all our milk that enables dairy farmers to invest more in on-farm long-term sustainability measures.”

 

Improving the profitability of UK liquid milk category

Liquid milk will be Arla’s flagship category in developing the sustainability agenda from farm to store. Arla will work with its customers to lead the category sustainability proposition and significantly improve the profitability so that its farmers can cover their increased costs and also invest in the on farm sustainability agenda.

 

“For a number of years, we have indicated that the lack of profit in own label liquid milk in the UK is not sustainable. It delivers little to no profitability for farmers and is a category of the UK dairy sector where the market is failing to deliver value for farmers. It is unsustainable. This is made even more critical by the fact that the costs of producing milk is increasing like never before and our farmers are continuing to experience significant inflation,” says Ash Amirahmadi.

 

Explore export potential for Arla’s UK milk

As global demand for dairy continues to outgrow international supply, the value of milk and dairy products on the world market has shifted to a new, sustained high level. This shift means more opportunities for Arla to increase the value from its UK milk and subsequently the returns for the farmers that own the cooperative.

 

As part of its Future26 strategy, Arla will therefore also explore opportunities to begin exporting raw milk from the UK to supply Arla’s global supply chain and has begun trials to move milk to its European processing sites as a means to supply its growing international sales of sought-after dairy products and to improve the profitability of UK milk for its British and European farmer owners.

 

Peter Giørtz-Carlsen, Executive Vice President of Arla Foods Europe comments, “With farmer owners and production sites across Europe we have the opportunity to use the scale of our cooperative to create the most value from the milk produced on our farms. Demand for Arla dairy products is growing in Southeast Asia, the Middle East and West Africa, and so it is natural for us to explore how we can best utilise our European milk pool to meet that demand. This includes the milk from our British farmer owners.”

 

Recruiting new farmers to meet increasing global milk demand

To deliver the scale of growth across its global and UK strategy, Arla will explore the need to recruit more milk from existing and potentially new farmers, including in the UK.

 

Global demand for dairy over the next five years is estimated to continue to increase by 2 per cent year on year. However, there are clear signals from milk producers around the world that the increases in supply required to meet that rising global demand are now far less certain.

 

“To meet these future demands and maintain the cost effectiveness of our supply chain, we will welcome and continue to support members who wish to help us grow our milk pool by increasing their supply and growing their businesses sustainably. While we are not recruiting as of now, we will also investigate opportunities to gradually open up for new members or contracted milk who share our farmers’ commitment to producing high quality milk more sustainably,” says Ash Amirahmadi.