Dairy firm Arla Foods has announced that group revenue increased by 8.1% to €10.3 billion in 2017, driven by higher sales prices, increased branded sales, and a better geographical and product mix.
The company delivered a 27.4% increase in pre-paid milk prices to its farmer owners, and a net profit of 2.8% of revenue within its target range.
In particular, Arla saw double-digit revenue growth in sales of Arla branded products (+10.1%), in international markets (+13.2%), and in its Arla Foods Ingredients business (+19.6%).
"In 2017, we delivered a strong performance built on the good balance of brands, categories, and geographies that we have in our business to drive growth," said Peder Tuborgh, CEO of Arla Foods.
"Most importantly, this enabled us to pay out significantly higher milk prices to our farmer owners and utilise our balance sheet to enable the substantial capital investments we are making in 2018.”
Brand Performance
Arla Foods says that growth of branded products 'remains crucial' for the company, as its helps offset market and raw material price volatility, having a greater impact on non-branded products.
In 2017, the dairy firm grew its share of branded business to 44.6%, with the aim of reaching 45% by 2020.
The Arla brand saw sales rise 10.1%, driven by higher volumes, while Lurpak was up by 8.3%, Castello by 3.1%, and Puck by 6.8%.
The company says that it saw 'strong gains' in many markets with Arla skyr and Arla protein drinks, reflecting changing consumer trends, while the launch of new cream cheese products boosted growth in the US.
Commenting on the financial performance, Natalie Knight, CFO of Arla Foods, said that this is "the single biggest organic revenue increase" inside one year in the company's history, excluding mergers.
"It was driven by our continued drive into international markets as well as our focus on growing and developing our strategic brands in all markets,” she added.
Outlook
Looking ahead, Arla Foods expects revenue in 2018 to be at a similar level of €10-€10.5 billion, as a result of higher milk volumes and an improving product mix, which are likely to be largely offset by negative currency developments.
Earlier this month, Arla announced plans to invest over €500 million in 2018, focussing on larger and improved production capacities, as well as new technologies.
The company said that strategic growth markets such as the Middle East and North Africa, China, Southeast Asia, Sub-Saharan Africa, and the US remain the focus for 2018.
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Sarah Harford. Click subscribe to sign up to ESM: The European Supermarket Magazine.
