Dairy cooperative Arla has reported 5.6% growth in sales, to €11.2 billion, in its financial year 2021, driven by higher sales prices and strategic branded sales growth of 4.5%.
The dairy group added that it delivered a ‘strong performance’ in a year marked by continued disruptions due to the pandemic and market volatility due to high inflation.
Arla Foods CFO, Torben Dahl Nyholm, commented, “2021 was another year defined by COVID-19, and although the global economy recovered much faster than expected, the volatility of the dairy market and high inflation put pressure on us and our farmer-owners.
“With strong operational execution, we successfully navigated the global challenges, strengthened our financial position, and grew our brands, while delivering savings across our supply chain.”
Arla’s performance price – which measures the value Arla Foods creates per kilogram of owner milk – was 39.7 eurocent in 2021 compared to 36.5 eurocent in 2020, it added.
Arla maintained a competitive pre-paid milk price that increased by 23% throughout the year.
In Germany, Arla’s price for conventional milk averaged 36.31 eurocent in 2021, up from 33.72 eurocent in 2020, excluding the planned annual additional payment (1.5 eurocent/kg of milk) and the annual capital contribution.
Manfred Graff, deputy chairman of the supervisory board of Arla and a German farmer from the Eifel region, added, “2021 was a tough year for farms, as both our cooperative members and our business were affected by the ongoing impact of the pandemic and the huge increase in production costs.
“I am therefore pleased that our cooperative was able to achieve a competitive milk price even in the face of these challenges and that, as part of the new consolidation policy, the envisaged, annual additional payment was increased by 50%.”
The co-operative’s retail sales were at the upper end of expectations as it continued to meet the increased demand for dairy products for at-home consumption.
The Arla, Castello and Starbucks brands continued their journey of growth in 2021.
Its Lurpak butter brand gained market share in Denmark and the UK, while increased investment in e-commerce business resulted in 17% growth in Arla’s online sales channels.
Peder Tuborgh, CEO of Arla Foods, said, "Our strategically important brands performed exceptionally well in 2021. This is due to continued strong consumer demand for high-quality, natural and nutritious dairy products.
“Month after month, we have consistently managed our sales and operations to meet the conditions. Then, as the lockdown measures were eased and more people returned to work, we ensured product availability for consumption at home, in restaurants and on the go as demand fluctuated.”
Read More: Arla Doubles CO2 Emissions Reduction Target
Arla expects inflation and volatility to continue to impact the business and other sectors well into 2022.
It has forecast group revenue in the range of €11.8-€12.4 billion for 2022, while it expects net profit share in the range of 2.8% to 3.2%.
Tuborgh explained, “The impact on consumer behaviour of on-going market volatility and high inflation will be multifaceted and difficult to predict. It is likely that we will see a slowdown in our branded growth as the market resettles at a new level.
“Our cooperative stands on a strong foundation and as we have demonstrated in 2020 and 2021, we will continue our strong operational execution throughout our supply chain to meet any new demands and requirements in this uncertain environment.”
Arla plans to invest €600 million in 2022 and focus on structural investments, such as expanding Starbucks production capacity at Esbjerg Dairy in Denmark, finalising the powder tower in Pronsfeld in Germany, and further digitalisation in its supply chain, among others.