Higher price of milk warning issued by Cravendale maker Arla Foods amid shortage
Arla Foods, the maker of brands including Cravendale, Skyr and B.O.B milk, has warned that customers will face higher prices in the coming months amid a shortage of milk on a global level.
The company said it “anticipates that volatile market conditions driven by geopolitical tension and uncertainty” will continue but that a positive trend on consumer purchasing power from the first half of 2024 should carry on for the rest of the year.
Arla Foods, which also owns the Lurpak brand, added that this is expected to “translate into a continued upturn in demand for dairy” but it warned that “it is uncertain how consumers will react to the expected higher retail price levels following the commodity price increases”.
The business also said that the level of uncertainty is “also underlined by a lesser volume of available milk on a global level”.
The group is headquartered in Denmark while its UK head office is based in Leeds.
Arla Foods added that its performance price and revenue for the first half of 2024 was slightly lower than the same period in 2023 but that it expects a “strong market momentum” to continue for the rest of the year.
As a result, the company has adjusted its full-year expectations for revenue from €13.2bn-13.7bn to €13.4bn-13.9bn but that it still expects to deliver a profit within the range of between 2.8 per cent and 3.2 per cent.
Arla Foods has also changed its full-year expectations for strategic branded volume-driven revenue growth from 1-3 per cent to 3-4 per cent.
A ‘robust half-year’ for Arla Foods
Chief executive Peder Tuborgh said: “We are satisfied that the momentum created by our farmer owners and employees in 2023 has continued into 2024, and today Arla is able to announce a robust half year result with a competitive milk price that paves the way for enhanced sustainability efforts going forward.
“We are proud that Arla Foods is performing well in a volatile global market.
“Customers around the world are demanding our products, we are ready to deliver, and we will continue to invest in the company’s future.”
In the UK, Arla Foods “delivered a strong performance” across its branded portfolio with total volume growth of 11 per cent and branded revenue increasing at 5.4 per cent.
The group said that this had predominantly been driven by Lurpak, Arla Protein and its foodservice brand, Arla Pro.
In foodservice, total volume growth was up over 13 per cent with branded revenue up 5.6 per cent, “driven by new business wins”.
However, total net revenue declined by 11 per cent to £1.2bn compared to the same period last year, “as a result of falling commodity and commercial prices”.
‘Trading conditions will be more challenging’
Bas Padberg, managing director of Arla Foods UK, added: “Following the high levels of inflation that we saw back in 2023, Arla has continuously reinvested back into our brands, to deliver value for our shoppers and ensure the necessary growth needed to return the highest possible milk price to our farmer owners.
“This combined with increased consumer buying power in the first half of the year has led to a strong performance across our branded range.
“Whilst we expect consumer confidence to remain into the second half of the year, trading conditions will be more challenging than we have seen in recent months as commodity markets rise again and we balance reduced global supply with the increasing demand for dairy.”
Chief financial officer Torben Dahl Nyhol said: “We are very pleased to deliver a competitive milk price.
“At the same time, the return to branded growth happened with a higher magnitude than expected due to the strength of our brands and successful efforts to regain growth, so we are on a positive trajectory.”