Arla has surpassed FrieslandCampina in turnover

For the Danish dairy cooperative Arla Foods, the first half of this year was dominated by high inflation, rapidly falling dairy prices and changing consumer spending. This significantly reduces profits. Nevertheless, the income remains above €100 million, while FrieslandCampina saw its profit virtually evaporate in the same period. Arla also overtakes FrieslandCampina in turnover, which can be called a historic development.

In the first six months of this year, the Scandinavian dairy giant achieved sales growth of a sloppy 10% to €7,06 billion. Below the line, this left €103 million in net profit. Compared to the same period last year, the net profit margin halved to 1,5%. When we zoom in on the figures, it appears that the turnover of branded dairy with higher added value also grew. But less than overall revenue growth. This indicates that branded dairy sales are under pressure, which is also confirmed by Arla. Sales in volume at the dairy group decreased by 6%. The drop in demand mainly affects Europe and, to a lesser extent, also the world market.

Inflation
In terms of sales, Arla sees that consumers are switching from A-brands to cheaper house brands. The dairy group cites high inflation as the main reason for this move. Not only in the consumer market, but also in the business to businesssegment, branded dairy is under pressure. Also the foodserviceactivities are trending downwards with a volume decrease of just under 2% compared to the same period last year. However, this seems to be a correction to the huge increase in demand a year earlier when corona measures had just been lifted in many countries. The ingredients division was not affected by a drop in demand in the past. Sales of whey powder even increased by 5%.

Despite the lower figures, Arla CEO Peder Tuborgh is moderately positive. The declining sales of branded dairy had been factored in due to the rapidly rising inflation. In addition, Arla was able to protect its relative market shares against the competition. Tuborgh is also pleased that Arla was able to pay a competitive milk price to its members. Although it fell sharply as a result of the price crash in the dairy markets. On top of the milk price, Arla pays an interim payment of €1 per 100 kilos.

Beyond FrieslandCampina
When we compare Arla's results with those of FrieslandCampina in the same period, the Scandinavian dairy cooperative comes out better. The profit of €103 held up much better than the Dutch counterpart the benefits dropped to a paltry €8 million. This leaves the members of Arla with financial room for a supplementary payment. In addition, Arla passed FrieslandCampina in terms of turnover in the first half of 2023, which has not happened in the past. Arla's turnover, which rose to over €7 billion, is slightly higher than FrieslandCampina's (€6,9 billion). If the ratios remain the same in the second half of this year, Arla will overtake FrieslandCampina in the prestigious rank of Rabobank with the largest dairy companies in the world. Not unimportant with these figures: the members of FrieslandCampina receive a higher milk price, which in turn explains the lower profit. 

Wouter Job

Wouter Baan is editor-in-chief of Boerenbusiness. He also focuses on dairy, pig and meat markets. He also follows (business) developments within agribusiness and interviews CEOs and policymakers.

w.baan@boerenbusiness. Nl

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