European dairy cooperative Arla Foods has unveiled a five-year strategy to cement its commitment to create environmentally sustainable dairy production and grow the business responsibly.
The company is prepared to increase its investments by more than 40% to over €4 billion (US$4.6 billion) in the next five years, focusing on sustainability, digitalization, new production technologies, and product development.
Arla has also announced a new retainment policy allocating a higher additional payment of €1 billion (US$1.1 billion) over the next strategy period to support its farmer owners on their sustainability journey.
Sustainability efforts
Arla’s farmer owners are committed to accelerating their reduction of greenhouse gas emissions toward the science-based 30% goal in 2030.
Across its operations, Arla has raised its target to a 63% reduction of greenhouse gas emissions by 2030, which it will deliver by accelerating its conversion to green electricity, fossil-free fleets, making all packaging recyclable and having zero virgin plastics in branded packaging by 2030.
Notably, consumers are becoming more conscientious and expect the food they eat to be healthy and affordable and produced responsibly and sustainably.
“We are at a defining moment for dairy and our farmer owners,” says Arla Foods CEO Peder Tuborgh.
“The twin challenges of climate change and malnutrition are the most difficult facing our global food systems. It requires urgent action, and dairy is part of the solution. If there ever was a time to step up and create the future of dairy, it is now.”
A boom on the horizon?
In the next five years, the global dairy market is expected to grow by 2% each year, according to Arla Foods.
In the Middle East, Africa, and the Asia Pacific countries, a growing population will drive increased demand for dairy nutrition. In Europe, where dairy has been a more integral part of daily meals for many years, consumers now search for products that meet their needs within health and wellness, convenience, and sustainable production.
With this global outlook and building on its Good Growth 2020 strategy, it is securing growth and position in both territories, dairy categories, and international brands while also delivering one of the industry’s most competitive milk prices to its farmer owners.
In the future, the supplementary payment will be €1.5 (US$1.73) per kg of milk instead of the current €1.0 (US$1.15) per kg of milk, provided the company achieves an annual net profit of at least 2.8% of revenue, and to be paid out in two installments in March and September instead of only once a year.
Tuborgh believes that with its Good Growth 2020 strategy, the company has created the right recipe to grow its brands, deliver efficiencies and invest in sustainable actions across our value chain while securing a competitive milk price for its farmer owners.
“Our new strategy Future26 will move our cooperative to the next level, grow our global business responsibly to meet the fast-changing eating habits among consumers and their increasing demand for sustainably produced dairy products and improve returns to our farmer owners,” he explains.
A global player in sustainable dairy
In the next five years, Arla will continue to take industry lead on data-driven sustainable dairy production throughout its value chain and raise its commitments to meet the 1.5-degree goal set by the Paris Agreement.
Over the last decades, Arla’s farmer owners have steadily worked toward sustainable farming. Today, they are among the most climate efficient dairy farmers globally, producing milk with an average of 1.15 kg CO2e per kg of milk.
Future26 value creation
During Good Growth 2020, Arla has strengthened its position as a market leader in Northern Europe, the UK and the Middle East and its global brands Arla, Lurpak, Castello, Puck and Starbucks are strong household names.
Arla will utilize its key competitive advantage and grow its branded business by 3 to 4% year on year by investing in category innovation and development, new production technologies and supply chain scale.
Arla will also invest in its global specialized, high-quality milk and dairy ingredients business, Arla Foods Ingredients (AFI), to develop new solutions for its partners.
Arla has also built its export business to markets like China, West Africa and Southeast Asia, where consumer demand for affordable dairy nutrition exceeds local production and supply.
With the Future26 strategy, Arla will strengthen and expand its presence in these markets within dairy categories such as butter and cheese, organic, affordable dairy nutrition and Early Life Nutrition.
As urbanization and higher average incomes change consumer food habits toward more convenience and dining out, Arla will fast track its e-commerce capability to support its customers’ online channels and invest in foodservice innovations and technologies within categories such as mozzarella.
Expanding reach
Last month, a new Arla Foods Ingredients innovation center opened its doors, which is predicted to boost the company’s capabilities in dairy and whey ingredients.
Arla Foods recently examined how dairy farming can help improve soil biology, carbon capture, water quality and biodiversity via regenerative farming methods.
Earlier this year, Arla Foods revealed it is keeping more renewable energy within the cooperative’s value chain by purchasing guarantees of origin directly from its farmer owners.
The company’s recent Climate Checks program confirmed that Arla farmers are among the most climate-efficient dairy farmers. It also provides a clear blueprint of what will drive further greenhouse gas emissions reductions on their farms over the next decade.
