Inside Arla A MAGA ZI N E FO R A R L A FA RMER OW N ER S A BO U T YO U R COMPA N Y
Double strength: Starbucks partnership is a growing success PAGE 4
Expanding Arla’s musclepower in whey innovation PAGE 8
Innovation Farms look into the future of dairy farming PAGE 14
Future26 strategy:
Future-proofing the cooperative and returning more to farmer owners PAGE 16
DECEMBER / 2021
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6
2 billion touchpoints
Milk and coffee - a recipe for success
How a digital approach to marketing has made it more targeted and cost-efficient.
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There is whey more to explore We visit a self-proclaimed ‘giga´-nerd’ at Arla’s new innovation centre.
16 New strategy: Future26 The time to define the future of dairy is now. Get to know our new strategy.
Arla’s partnership with Starbucks is steaming ahead.
Editorial
Dear farmer owner
14 Trialling the future Arla’s Innovation Farmers test the future of dairy production.
When we launched our new strategy, Future26 in November, we made Arla’s aspiration for the coming years clear: to lead our industry in value creation and sustainability. Based on our work over the past years, we are in a good position to do just that – capturing the potential in a growing global dairy industry. To be successful, however, we need to adapt to new consumer demands, a shift in channels and growing pressure to transform food production. In this issue of Inside Arla, you can find out more about how our new strategy will set the direction as well as our priorities and targets for the coming years. You can also read about some of the areas where we have already taken great steps towards creating the future of dairy. Among these is the Starbucks brand, which is performing very well in a fast-growing segment. We also take a look at how our innovation farms are helping develop and trial new solutions to the benefit of the whole cooperative. And you will also get an insight into the industry-leading research and product development taking place in Arla Foods Ingredients, another part of our business set to grow further in the coming years. I hope you enjoy it. PEDER TUBORGH CEO
22 From farm to pizza We join Domino’s as they take a close look Arlagården® and Climate Check.
Digital
Taking marketing online for better results Today’s consumers spend more time on their phone, tablet and computer than on TV and newspapers. This means a markedly different approach to marketing, which is now more digital and is produced internally in Arla. The result is far more effective campaigns.
“Digital channels are very powerful if used properly. And the campaigns that are run, produced and implemented by Arla itself perform better – so today we reach more consumers for less,” explains Thomas.
During 2020, a potential consumer looked at an Arla recipe on YouTube, saw a promotional ad, or responded to an Arla post on social media, 500 million times. A figure that shows how consumers have moved – from TV, newspapers and magazines to the computer and phone. And Arla’s marketing has moved with them.
Heading into the new strategy period, the focus will be on Arla connecting with consumers on the entire journey – from first impression to purchase.
The development started in 2015, at a time when there was a wealth of Arla websites and marketing partners across the markets. This made it difficult to all pull in the same direction, marketing 35 brands across more than 30 markets.
“We want to make better use of digital opportunities, and we are initiating closer cooperation with the retailers. It all has to work seamlessly together, so that what consumers see on TikTok and Facebook, plays together with what they experience in the supermarket or when they shop online,” continues Thomas.
“We needed a shared digital strategy so that we could make sure that people still thought Arla’s products were interesting,” says Thomas Heilskov, global head of Digital. He is also responsible for The Barn, which is Arla’s internal advertising agency – established in 2019 when it was decided to cut external agencies and do more of the work in-house. Today, The Barn is responsible for everything from campaigns to managing ads, content for social media, data processing and much more.
Where previously about 20 per cent of the budget was spent on digital efforts, it is now over 40 per cent, a number that continues to rise.
“Our most important measure of success is that Arla builds even stronger brands. And we can see that Arla’s brands are doing well commercially. The fact that we have been able to do this at a time when consumers are becoming more and more sceptical about advertising, indicates that we are doing something right,” concludes Thomas.
A decision that has proven to make the whole marketing process faster, better and cheaper.
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WHAT IS THE BARN? The Barn is Arla’s own agency which covers a range of competencies across marketing, advertising, video production and data analysis, that were previously bought in from external agencies. The central office is in Viby, while there are smaller local offices in Stockholm, Leeds, Dubai and soon in Germany. Digital investment by numbers
In 2021, digital media will make up
42 PERCENT OF THE MARKETING BUDGET – up from 26 percent in 2018
Consumer engagements are expected to grow from 230 million in 2016 to close to
2 BILLION IN 2021
In 2021, The Barn will be implementing more than
3,000
DIGITAL CAMPAIGNS
across 30 different markets
This year, Arla advertising played on YouTube amounts to
2,038,619 HOURS OR 232 YEARS
Our iconic brands
Strong stuff:
Starbucks partnership is booming
In total, 840 million units have passed the counter, and sales are expected to pass one billion units sold this year.
Our iconic brands
In the spell of 11 years, the combination of ready-to-drink iced coffee and milk has developed into a huge success for the partnership between Arla and Starbucks. It draws on the key strengths of both parties, and we still haven’t seen the end of its full potential.
Soft drinks, juice, water, iced tea, vitamin drinks and the likes are the classic ready-to-drink products that customers have bought in kiosks and supermarkets for decades. But all of these traditional beverages are now experiencing stagnant or declining sales. This trend, however, does not apply to the new category of ready-todrink iced coffee products. It is on a roll and keeps capturing new markets. The partnership between the American coffee chain Starbucks and Arla has benefited from this development. When Arla and Starbucks first launched their collaboration in the ready-to-drink category 11 years ago they started out in just three markets. Today, ready-to-drink iced coffee products are sold in 50 countries in Europe, the Middle East and Africa. The partnership has become the leading supplier of milk-based readyto-drink products in these three regions. In total, 840 million units have passed the counter, and sales are expected to hit one billion in 2021. A new production line at the existing production facility in Saudi Arabia
has just started up with a view to further accelerate growth in the Middle East.
“We started out the collaboration with quite high expectations, and they have since been exceeded many times by the results,” says Rasmus Malmbak Kjeldsen, head of Milk Based Beverages. In his mind, Starbucks is the strongest coffee brand in the world and one of the world’s strongest brands overall, and thus an excellent partner to Arla. Likewise, Arla has been a good match to Starbucks.
“We have been good at executing our strategy at Arla. Not just by launching into new markets and getting the goods out to evermore stores, but also by creating an interesting range of products. So far, we managed to brilliantly complement one another,” says Rasmus Malmbak Kjeldsen.
More markets on the horizon
The global ready-to-drink coffee market is one of the fastest growing in the category, and since Starbucks and Arla became licensing partners in 2010, sales have grown by an annual average of 37 per cent.
“The ready-to-drink iced coffee category continues to grow very fast. It is mainly thanks to the 5
younger millennials who have really embraced the products. We have hit a market where on-the-go is combined with pleasure and at the same time our products give an energy boost, which is sought by many customers,” says Rasmus Malmbak Kjeldsen. Future growth
The collaboration with Starbucks is a long-term strategic agreement which is set to expire only by 2039. It licenses Arla to manufacture, distribute and market Starbucks milk-based ready-to-drink coffee beverages in Europe, Middle East and Africa.
“We are constantly developing products. Who is to say there can’t be such a thing as carbonated coffee drinks?” says Daniel Morales, Global Brand and Category Director. In the same breath, he also mentions products with less sugar but with the same taste, drinks with a double shot of coffee and products that can be a supplement to energy products such as Doubleshot iced coffee. Ready-to-drink coffee is still a rather new category. But according to Rasmus Malmbak Kjeldsen, the strategy and roadmap are designed with the ambition for the partnership to maintain its current status as undisputed market leader until 2025 and beyond that. A status, which the partnership
Our iconic brands
already proudly achieved some years ago.
“We need to constantly develop the product portfolio in order to follow the changes in consumer taste. Just like Pepsi introduced Pepsi Max when they saw the need for a low-calorie version without sugar. We also want to reduce calories in our products. By adding soda, we will be able to give our consumers a more refreshing taste,” he says. Competition is new
of milk, which according Daniel Morales, only emphasises the potential of the products. More sustainable coffee drinks
Starbucks is strongly committed to sustainable goals, and according to Rasmus Malmbak, they expect an equally strong emphasis on the green agenda from their commercial partners. A recent partnership meeting focused on the efforts on farm
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“We actually welcome the competition. It will help increase the overall awareness of the category,” says Daniel Morales. In his view, Starbucks and Arla have not just the best taste and the right packaging, but on top of it, also the benefit of being the biggest player in the market. The profit per litre on ready-to-drink is significantly higher than on a litre
“We have a strong collaboration with Starbucks. We work closely on the business case, new ideas, consumer profiles, recipes for products and not least on the issue of sustainability,” says Elena Marchenko, Global Marketing Director at Milk Based Beverage. The partnership is based on weekly meetings, monthly performance meetings, and quarterly strategy meetings. Next steps
the great efforts delivered on the farms actually makes a big difference
In the past, the market was not packed with competitors. But now other major manufacturers such as Nestlé and Costa are entering the coffee beverage market. At the same time, cheaper brands are also in the market.
duced coffee beans are being favoured.
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by Arla’s owners to improve on sustainability and the coffee giant responded very positively.
“They heard the details of our green ambitions and saw real numbers from the farms, and since they know just how difficult it is to achieve such improvements, they were really impressed. So, the great efforts delivered on the farms actually makes a big difference,” says Rasmus Malmbak. The partnership also has a green agenda of its own. Thus, among many efforts, work is being done to replace plastic with fibres, new packaging is made from recycled materials and sustainably-pro-
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Already next year, Arla and Starbucks are expected to take a major step towards a brand new market with the launch of a 750ml packaging. The idea being that iced coffee should not only be a product that is bought on-the-go, it should also have its firm place in the fridges in the homes.
“Starbucks has already managed to revolutionise the coffee market once with hot drinks in cafés around the world. Now we believe that the same thing is about to happen with cold coffee drinks through a strong partnership with Arla,” says Rasmus Malmbak. The potential for development of new milk-based products is far from exhausted, so Rasmus Malmbak is on the outlook for other brands that can develop similar collaborations with Arla.
“We are currently very successful in combining coffee and milk, but we are always looking for new opportunities. Who is to say that Arla cannot find more partners like Starbucks with equally strong brands? Anything is possible,” says Rasmus Malmbak.
Our iconic brands
Products are sold in
50 COUNTRIES
x23 Sales have increased more than 23-fold since the first year
The partnership with Starbucks started in 2010
Number of units sold in 2020:
185 MILLION
37%
Total sales since 2010 are expected to reach
Since Starbucks and Arla became licensing partners in 2010, sales have grown by an annual average of 37 per cent.
1 BILLION units in 2021
The drinks are made from
The partnership is the
ARABICA COFFEE
LEADING BRAND IN ICED COFFEE
from Starbucks Coffee Company
in Europe, the Middle East and Africa
Starbucks’ range of ready-to-drink iced coffee has so far been produced at Arla’s plant in Esbjerg, purchased according to ethically responsible practices. New production has just begun in Saudi Arabia.
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DAIRY TALES
Mie Rostved Bechshøft, one of the Arla scientists exploring the health benefits and commercial possibilities in whey.
DAIRY TALES
Exploring the potential of whey With its staff of international researchers, Arla Foods Ingredients’ new high-tech innovation centre is set to take the utilisation of whey to new heights. It meets a rapidly growing global demand for solutions that benefit cancer patients, athletes and infants.
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DAIRY TALES
Arla Foods Ingredients processes almost 7 billion litres of whey per year, producing 45,000 tonnes of protein and 130,000 tonnes of lactose. Product is not sold directly to customers but to food producers around the world. These ingredients have a multitude of applications – from high-protein drinks that help cancer patients with very little appetite, to better infant formula, or optimised protein bars that help faster recovery and muscle building.
Between fields and farms and small village of Nr. Vium in Western Jutland, Denmark sits one of the dairy industry’s most advanced innovation centres. Inaugurated earlier this year, it is exploring new ways to develop and commercialise a wide range of specialised whey ingredients. Just 20 years ago, whey was a waste product largely used for animal feed, but today is it big business. Arla is one of the leading dairy companies in the world in terms of research, product development and sales, in a global market that already has a turnover of 10 billion euros a year.
The new centre has better facilities and advanced separation technology, so that proteins and lactose, for example, can be separated in new ways. And that underpins Arla’s position in the market in more than one area.
“The centre will expand our muscle-power within innovation, allowing us to do new and more advanced experiments and develop new products,” says Niels Østergaard, Head of the Innovation Centre at Arla Foods Ingredients.
“It is a pleasure to sit among some of the world’s most talented researchers in the field,” continues Mie Rostved Bechshøft. “I have colleagues from China, Iran, Argentina, the UK, the Netherlands and Portugal. And I actually think that we are now becoming even more attractive to researchers around the world,”
Unexplored area
Among the employees who have already moved into the centre is Mie Rostved Bechshøft. In her own words, she is a ‘giga nerd’ who has a master’s degree in molecular biology and has written a PhD in biomedicine. She applies her expertise on the human body and proteins to the development and optimisation of products.
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Developing specific ingredients
The centre also builds bridges to global research, clinical trials and collaboration worldwide. Cooperation that has great commercial value and can also help solve some of the world’s most urgent food challenges.
It is an incredibly exciting area with lots of development going on, and much is still unexplored
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“It is an incredibly exciting area with lots of development going on, and much is still unexplored. We have to prioritise hard because there are so many exciting opportunities. And with the new centre we have even more,” says Mie.
Niels Østergaard explains that the demands for the quality of protein is constantly increasing. From the weightlifter wanting to get even better results from his/ her training, to the breast milk substitute that gets even closer to the real thing. Niels Østergaard believes the
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DAIRY TALES
FROM MILK ALL THE WHEY TO THE CUSTOMER
10 kg milk is used to produce 1 kg cheese
The products are shipped to our B2B customers worldwide
This gives 9 kg liquid whey AFI’s main raw material in the whey business
AFI’s staff of researchers constantly invent new and better specialized protein and lactose products
The whey is processed at a AFI or partner factory
Our customers use our ingredients in a wide range of categories from bakery and beverages to medical, infant and sports nutrition End consumer
ARLA INNOVATION CENTRE NR. VIUM The new innovation centre in Nr. Vium covers 9,000 square metres of state−of−the−art facilities, including laboratories for analysis of new ingredients, a test dairy and office space. The centre is home for up to 100 researchers and engineers who will cover all aspects of research and development in whey and milk - from advanced separation technology to improved functionality and durability.
In 2020, AFI had a revenue of
716
millon euro
ARLA FOODS INGREDIENTS Arla Foods’ subsidiary Arla Foods Ingredients (AFI) is a world leader in specialised dairy and whey ingredients, which are mainly used to meet the specific food needs of children, athletes, patients and consumers. The global market for specialised milk and whey ingredients has a turnover of 10 billion euro per year and is expected to grow considerably in the coming years. With the new innovation centre, AFI will intensify its innovative power to expand the business.
DAIRY TALES
Arlagården® gives us assurance that we have whey that we can trust and which meets the customer’s demands
new facilities were necessary to maintain Arla’s position among the world leaders in the field.
Research in sustainable production
Getting the right quality whey into the production is another key element. That is why the whey from Arla’s owners is absolutely central.
“Others have discovered this market, too, and our competitors are upgrading. So, we need to up our game to stay in the lead.”
“Arlagården gives us assurance that we have whey that we can trust and which meets the customer’s demands. There are many requirements regarding origin in connection with breast milk substitute, and having the system makes our whey particularly valuable and useful,” says Mie Rostved Bechshøft.
Located in the middle of the supply chain
The new innovation centre is located right next to Danmark Protein, which is Arla Foods Ingredients’ main production facility that manufactures whey protein concentrate and lactose products. The location is crucial because it literally bridges the gap between innovation and full-scale production.
For Niels Østergaard, the opening of the new innovation centre is just the beginning.
“It brings us as close to the best raw materials as possible, and enables us to fine-tune ideas and quickly scale them up in one overall, streamlined process,” says Niels Østergaard.
“We have often asked ourselves – when have we emptied the source? But there is still so much development potential in whey,” says Niels Østergaard. Breast milk contains at least 1,000 different proteins. Whey includes 340 – but science so far knows only the function of a few of them.
And “close” can be taken quite literally. Between the two buildings runs a thick pipe where the whey can be led directly into the innovation centre for experiments.
“There is almost inexhaustible information and function that is waiting to be discovered by us. Nature has created a very complex matrix. And the centre helps us dive into why and how we can learn from it,” says Niels Østergaard.
Mie Rostved Bechshøft is currently collaborating with the University of Copenhagen, where the parties are investigating opportunities to improve the production of protein so that it can be better absorbed in the intestine and become a better source of nutrition. Other projects may involve making cheeses more creamy or improving the taste in yogurts.
“Those proteins can do much more than we realise. One of our many projects is to develop products that support the cognitive development of children. So, in the future, it might be less about muscles, and more about the brain. We certainly haven’t seen the limits yet.”
“These products need to be palatable. Our products can make a difference to for instance Alzheimer’s patients, so they get enough quality proteins,” says Niels Østergaard.
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Innovation Farms
Helping create the future of dairy Arla’s two first Innovation Farms in the UK and Sweden play a key role in collaborative research and pilot projects. They also act as hubs for commercial teams and key stakeholders to visit to increase their understanding of Arla and be inspired by our industry-leading on-farm agenda.
“We really enjoy trying out new ideas and getting things off the ground, so it has been great to be able to contribute and facilitate collaboration between Arla and partners,” says Jane Dyson, who farms at Arla’s first Innovation Farm, Holly Green Farm in Buckinghamshire, with her husband Neil, and their daughter and partner Susannah and Adam Penney. The Innovation Farms aim to support farmer owners to create the future of dairy acting as host sites for novel industry partners to come together and test new concepts and technology. The projects cover a wide range of areas across animal welfare, sustainability, precision farming and more. At Holly Green Farm, one project has evaluated different types of cow brushes, another uses a completely new slurry treatment technology for ammonia abatement.
“The unit on our farm is the first of its kind in the UK. It’s been fascinating
to be so close to the development of something so unique. We’ve seen brand new technologies develop from start-up to practical farm-scale applications,” says Jane Dyson. Sweden
Earlier this year, Finngarne farm near Stockholm, Sweden, became Arla’s second innovation farm. Jörgen Ericsson, fifth generation dairy farmer, has invested extensively in his farm since taken it over in 2009.
“I am passionate about dairy farming and confident there is a future for dairy, but it is necessary that we continue to drive development and invest. If you stand still, you fall behind. Being part of developing new techniques that can improve dairy farming and sharing experiences with other Arla farmers is really motivating,” says Jörgen. The trials at the Innovation Farms test concepts in a commercial farm setting so that fellow farmer owners and Arla can be confident 14
that the results can be transferred and are workable and beneficial to other farms. A window into dairy production
Another key role for the Innovation Farms is showcasing Arla initiatives and dairy farming in general to customers, politicians and other stakeholders.
“We’re proud of our farm and the sector. At lot goes on to improve in our industry that people don’t always recognise, so we really enjoy showing those outside of farming how dairying works,” says Jane Dyson. Jörgen Ericsson agrees:
“We get the chance to show politicians and customers where the food comes from, how modern dairy production works and that the animals are well cared for. There is a lot to be proud of in dairy farming, and we all benefit from being open and transparent about how we operate,” he says.
There is a lot to be proud of in dairy farming,” says Jörgen Ericsson from Arlas Swedish innovation farm.
WHAT ARE THE INNOVATION FARMS? Arla’s Innovation Farms support farmer owners by being host sites for industry partners to come together and test new concepts and technology. They act as a central farm on which to showcase key trials and research projects taking place across Arla and help highlight the evolving practices in Arla farming in animal welfare, sustainability and precision farming. The Innovation Farms also acts hubs for commercial teams and customers so that they can get a better understanding of Arla the farming practices of Arla’s owners. They are also used as education centres to share learnings with other Arla members and industry stakeholders. The projects taking place at Arla’s Innovation Farms span a range of areas, including animal welfare, feed, manure handling and soil health. Here’s a look at some of them:
Regenerative Pilot Farm Arla is exploring regenerative dairy farming practices through a network of 24 pilot farms. The Swedish Innovation Farm is one of the farms taking part in the project which aims to gain more data and knowledge of how dairy farming can help improve and regenerate ecosystem processes via regenerative farming methods. The pilot farms will be trained and coached to implement various regenerative methods over 4 years, and their learnings combined with data collection will build knowledge of how regenerative methods can be applied to different dairy farming systems and how they impact soil, climate and nature.
The Happy Cow Measure
Automating Outcome Measures
Arla is developing an animal well-being measure in a partnership with FAI Farms and Nedap. The system will use behavioural monitoring (using tags, collars and location data) to quantify activity, rumination, eating and lying time of cows and more. Ceiling-mounted sensors will enable us to monitor social networks and postural synchrony. All of these data sources will feed into the development of the “Happy Cow Measure” once they are validated and an algorithm is developed. Data will also be tested against events, such as group changes, that may influence a cow’s welfare.
Projects on both Innovation farms aim to develop systems to automate scoring of animal health and welfare such as Body Condition, and mobility score. Automation of outcome measures aims to score more consistently, objectively, and frequently than in-person observations. The real-time data will allow farmers to understand cow health better and react quicker to health issues in their herds. The project in Sweden aims to align the DeLaval camera scoring system with Arlagården to automatically monitor cows and generate the required data, whilst the project in the UK focusses on mobility scoring.
FUTURE26
New strategy launched at defining moment for dairy Arla’s new global strategy is to future-proof the cooperative and improve returns to farmer owners, including an increased supplementary payment. The strategy will deliver against the opportunities that follow from the growing, but also rapidly changing, demand for dairy.
where dairy has been a more integral part of daily meals for many years, consumers are now searching for products that meet their needs in terms of sustainable production and convenience, as well as health and wellness.
Heading into a new strategy period, Arla has a very strong starting point, says CEO Peder Tuborgh:
“We can build on the hard work that has been done – on our owners’ farms and in the company – over the past years. We have invested in and taken important steps on sustainability, we have made our operations more efficient, and we have grown our brands which today have a very strong position in the market.”
So, while consumption is growing, it is also rapidly changing, so Arla must adjust, explains Peder Tuborgh. Growth in online channels, demand for more advanced nutrition, changes in shopping patterns and greater expectations on sustainability are among the trends that present new challenges – and commercial possibilities.
A global dairy market that is set to grow.
“Industry experts agree that there is a positive outlook for dairy. The global population is growing, more people are living in cities, and we will see higher incomes across several countries. All of these trends add to the demand for dairy as part of a healthy, nutritious and sustainable diet,” continues Peder Tuborgh.
Capturing these new opportunities requires investment both in the company and on farms, not least to finance the journey on sustainability. In October, the Board of Representatives agreed to a new Retainment Policy that enables Arla to increase its investments to more than 4 billion EUR and to allocate a higher supplementary payment of 1+ billion EUR over the strategy period.
In the next five years, the global dairy market is expected to grow on average by 2 per cent each year, driven particularly by the Middle East, Africa, and the Asia Pacific countries, where Arla has been strengthening its presence and sales for a number of years. In Europe,
“We believe in a future with Arla leading the way in this industry – investing in growth and delivering strong returns to our owners,” concludes Peder Tuborgh.
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FUTURE26
Returning more to farmer owners to future-proof the business A new retainment policy and milk price ambition that returns more to owners are key to developing the future of dairy, says Chairman Jan Toft Nørgaard.
With the Future26 strategy, Arla sets out to capture the potential in a growing, global dairy market – but also a market with changing demands from consumers, customers and political stakeholders. That makes it crucial for Arla to return more value to owners, says Chairman Jan Toft Nørgaard.
“Consumers want their food to be produced responsibly and sustainably, and that means the way we farm plays a bigger role than ever in adding value to our products. This requires making the necessary investment on our farms, future-proofing our businesses,” he says. “That is reflected in our targets to return a competitive milk price, and a new retainment policy that takes its starting point from what owners need to be able to deliver on the strategy,” continues Jan.
MILK PRICE The target for the peer group index in the coming strategy period is 103-107. That means the target is for Arla’s milk price each year to be 3-7% higher than our comparable competitors in Northern European markets.
NEW RETAINMENT POLICY The new retainment policy will allocate a higher supplementary payment of 1.5 EURc per kg of milk instead of the current 1.0 EURc per kg of milk, provided the company achieves an annual net profit of at least 2.8 per cent of revenue. Over the strategy’s five-year span, this will amount to more than 1 billion euros in supplementary payment. The supplementary payment to be paid out over two instalments, in September and March. The size of the September payment will be decided by the Board of Directors based on the half year results and the financial expectations for full year.
SUSTAINABILITY TARGETS:
• Scope 1-2 (company): -63% by 2030 • Scope 3 (on farm): -30% by 2030 • Zero virgin plastics in packaging by 2050 • Carbon net zero in 2050
INVESTMENT:
PROFIT SHARE:
4+ billion EUR
2.8-3.2%
STRATEGIC BRANDED VOLUME DRIVEN REVENUE GROWTH:
3-4% annually
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PEER GROUP INDEX:
LEVERAGE:
103-107
2.8-3.4
THE FUTURE26 STRATEGY STANDS ON FOUR PILLARS:
In the next five years, we will continue to take the industry lead on data-driven sustainable dairy production throughout our value chain, raising our commitment to meet the 1.5 degree goal set by the Paris Agreement.
LEAD SUSTAINABLE DAIRY
For farmer owners this means continuing reduction of greenhouse gas emissions on farm towards the science-based 30 per cent goal in 2030. Across the company operations, we will raise our target to a 63 per cent reduction of greenhouse gas emissions by 2030, which we will deliver by accelerating our conversion to green electricity, fossil-free fleets, making all packaging recyclable and replacing more plastic with fibre-based solutions.
During the Good Growth 2020 strategy period, we strengthened our position as a market leader in Northern Europe, the UK and the Middle East and our global brands Arla®, Lurpak®, Puck®, Castello® and Starbucks® have become stronger and trusted household names. In the next five years, we will utilise our key competitive advantage and grow our branded business by investing in category innovation and development, new production technologies and supply chain scale.
SCALE TO GROW
We will also invest further in our specialised high-quality milk and whey ingredients business, Arla Foods Ingredients (AFI) to secure world class innovation and collaboration and develop new solutions for our partners. The newly opened Innovation Centre, in Western Jutland in Denmark, aims to be the powerhouse to step change future opportunities and innovation efforts in AFI.
We have successfully built our export business to markets such as China, West Africa, South-East Asia and Rest of World where consumer demand for dairy nutrition exceeds local production and supply. With the Future26 strategy, we will strengthen and expand our presence in these markets within dairy categories such as butter and cheese, organic, affordable dairy nutrition and Early Life Nutrition.
BUILD GROWTH PLATFORMS
COLLABORATE FOR EFFICIENCIES
As urbanisation and higher average incomes change consumer food habits towards more convenience and dining out, we will fast track our e-commerce capability to support our customers’ online channels and invest in foodservice innovations and technologies within categories such as mozzarella.
Building on the transformation programme Calcium, we will maintain focus on costs through what we are calling “Fund our future”, which aims to reach cost savings of 500 million EUR before inflation during the next strategy period. We will invest in end-to-end solutions to deliver efficiencies and improve productivity through further automation, digital tools and up-skilling of employees, reducing waste and energy consumption.
FUTURE26
Sustainability:
A joint effort Sustainability takes centre stage in the Future26 strategy. Teamwork between farmers and company is crucial to tackle challenges and take advantage of new opportunities, says Hanne Søndergaard, Head of Agriculture, Sustainability and Communication.
“We need to provide the best possible support to our farmer owners on this journey of sustainability. This is a big and complex agenda, and it must be a joint effort,” says Hanne Søndergaard. She heads the new function Agriculture, Sustainability and Communications, and sees sustainability as both the biggest challenge to Arla in the coming years – and the greatest opportunity.
Check programme provides Arla with a strong tool and data to guide the next steps and measure progress towards a lower carbon footprint.
projects, investigating and pilot testing solutions to ensure we can scale them more broadly to the benefit of all our farmer owners,” she says. A voice for dairy
“Arla’s farmer owners are already among the best in the world in terms of sustainability and climate efficiency, and we are being acknowledged by both our customers and political stakeholders for these efforts. We need to build on that momentum,” she says.
“We need to support our farmer owners in finding the best solutions for their individual farms. From the member survey and our dialogue with owners, we know that this is an area where we need to improve, and it is a priority to ensure we make the right tools and guidance available on that sustainability journey,” says Hanne Søndergaard. Supporting farmers also means finding new solutions to apply across the cooperative and industry.
Hanne Søndergaard explains that the efforts put into the Climate
“We will continue to participate in research and technology
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Politically, too, Arla has a big task in the coming strategy period.
“At the moment, we are seeing some big political shifts that will set new demands on farming – and we need to be present in those discussions as a voice for dairy, our farmers and continuing to promote the goodness of dairy as a nutritious, sustainable and affordable part of feeding a growing world. That health and nutrition message will be at the core of our story of dairy.”
Arlagården®
“
Arlagården® helps us to ensure our products are produced under high food safety and animal welfare standards
”
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Arlagården®
“Arlagården and Climate Check help place Arla among the very best” ®
The Arlagården programme plays a key role in documenting the high standards of Arla’s farmer owners. It is a balancing act of making it as user-friendly as possible for Arla farmer owners while keeping up with changing demands.
a strong focus on sustainability, and here we can help each other succeed. As a large food company, we can inspire them to find the right solutions as new trends emerge,” says Josephine Hybel.
The hunting dog, Frida, welcomes the party, tail wagging and a dead mouse between her teeth. Welcome to the countryside. We are at Arla farmer owner Sjoerd Ydema’s farm near Rødkærsbro, Denmark. Ryan Whittaker and Chris Shepherd from Domino’s Pizza in the UK, along with Arla representatives, are visiting the farm as part of a two-day introduction to Arla in Denmark.
Getting to know Arla – from farm to fork
During the two days in Denmark, the visitors were introduced to Arla’s history and goals. A visit to Arla’s innovation centre included pizza baking in an oven similar to Domino’s own, to showcase how Arla’s mozzarella meets the chain’s requirements. And at Rødkærsbro Dairy, they were given a tour of the production and participated in a quality check of the cheese.
The goal is to get to know Arla and Arla Pro better with a view to possible collaboration, says Josephine Hangaard Hybel, who is responsible for the mozzarella category in Arla’s Foodservice:
“Domino’s is a strategically important customer for Arla Foodservice. We already have a partnership with the chain in six countries, and now we hope to be able to add the UK. This first two-day meeting allowed us to show Ryan and Chris what Arla can offer them as a possible partner,” she says.
The final stop was visiting Sjoerd’s farm. On the trip down the feed passage, everything from bed stalls and the cows’ hierarchy to Arlagården® and Climate Check was talked about. Sjoerd also gave the group an insight into his own Climate Checks, including the areas where he will focus to achieve a lower overall climate footprint for the farm.
Why ‘partner’? Isn’t Arla just a supplier of – in this case – mozzarella?
“It is very much a partnership when we are dealing with the large customers. Like Arla, they all have
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Arlagården®
Q&A During their visit to Fårupgaard, Inside Arla asked Ryan Whittaker and Chris Shepherd from Domino’s UK of their impressions after visiting one of Arla’s farmers. programmes are a big part of Arla and they are some of the best we have seen in the industry. Arlagården® and Climate Checks are a big part of why Arla is among the very best when it comes to sustainability.”
Why was it important for you to visit an Arla farm?
“We have to know and trust the entire supply chain – from farm to fork – because consumers are becoming more demanding in terms of traceability. In the past, consumers’ main concern was the price of the pizza, but now they also want to know where the ingredients come from and that the supply chain is sustainable. It is a trend that has grown bigger and bigger – especially within the last year. Green organisations and politicians are putting pressure on us as food suppliers – sustainability is not the last item on a meeting agenda, but the very first.”
So, what was it like visiting Sjoerd and his 425 dairy cows?
“It was a really good experience. Sjoerd puts a lot of pride and dedication into his work as a dairy farmer and he gave us a great tour around the farm where he told us about the cows and his daily chores. It was interesting to hear about his Climate Check. He showed us his results – including which areas he does well and where he can improve. Sjoerd is happy to receive pointers on what he can do better in order to reduce the climate footprint of the farm and that was very inspiring to hear. He is motivated for change and that’s the kind of story we want to share with the people buying our products.”
What is your impression of Arla’s Arlagården® and Climate checks?
“In the two days we have been here we have talked to many different Arla employees, and Arlagården® and Climate Checks pop up in most of the conversations. We really get the sense that the two
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Arlagården
Arlagården®: Keeping a strong tool sharp The Arlagården® programme plays a key role in documenting the high standards of Arla’s farmer owners. It is a balancing act to make it as user-friendly to work with for Arla’ farmer owners while keeping up with changing demands. “Arlagården® is trusted and recognised by our customers across markets,” says Eva Maria Gattringer, Head of Farm Performance Programmes. “It is fundamental to documenting the standards of our farmer owners to ensure we produce some of the best dairy products in the world.” “Arlagården helps us to ensure our products are produced under high food safety and animal welfare standards, as well as other standards highly valued by our customers. To maintain the strength of the system, we need to adapt and evolve with customer demands, new scientific insight and policies. It is, however, a priority to make the system as user-friendly as possible,” she continues. “One of the key take-aways from this year’s member survey was that many owners find it a big task to submit their Arlagården® data four times a year, and we are working to make this quarterly data submission as easy, quick and intuitive for our owners as possible.” That work involves close collaboration with the Arlagården® Preparatory Working
Group, consisting of farmer owners from all regions, as well as the four Area Council Chairmen involved in improving the process and tools. Earlier this year, the number of questions in the “Farm Information” section (previously Arlagården® Plus) was reduced to include 33 fewer questions. The work to improve user-friendliness continues, explains Eva, who hopes owners will notice a positive change in the February window. She says a less solid system may lead to customers asking for individual checks or more frequent audits. Many customers today require at least annual audits at Arla’s production sites, but accept audits only once per three years from farmer owners, given that farmers assess their own performance and secure compliance to Arlagården® on a more regular basis. “It is matter of striking the right balance,” concludes Eva. “Ensuring we always have a strong and updated set of data that meets the requirements across a range of customers and markets, but also a system that is as easy to work with as possible for our farmers,”
Inside Arla is the magazine for Arla’s owners about your company. The magazine is published in six languages. The magazine is printed on FSC certified paper and is also available online. Publisher: Arla Foods amba, Sønderhøj 14, 8260 Viby, DK. Print: Stibo Complete. If you do not want to receive a printed version, let us know at insidearla@arlafoods.com.
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