Arla reported a 34% rise in profit for the first half of 2020 compared to the same period last year as higher demand for in-home cooking and eating offset lost foodservice sales.
The dairy cooperative, which is owned by around 9,700 farmers in Denmark, Sweden, the UK, Germany, Belgium, Luxembourg and the Netherlands, said its global branded sales volumes grew an “unprecedented” 10.4% in the first half of the year as consumers turned to trusted brands during the pandemic. It also saw a “significant increase” in e-commerce.
While Arla’s food service business declined rapidly amid restaurant and coffee shop closures to deliver 3.3% volume growth in the period, total sales of its butter brands Lurpak and Puck rose a “staggering” 17.7% and 16.7% respectively. In the UK, Lurpak’s main market, demand surged even more by 20.3%. An all-time record was also broken, when in a single week in April 86 truckloads of Lurpak were shipped to the UK.
Significantly increased home consumption and e-commerce sales meant branded volumes in Arla’s European markets performed “exceptionally”, rising 6.3%, compared to 2.3% in the same period last year.
Branded volumes grew by the highest rate in the UK at 15.9%, followed by Germany and the Netherlands/Belgium/France region at 9.3% and 7.9% respectively.
Arla’s newest brand, Kraft, delivered almost 50% above expectations for revenue in the first half of 2020.
Amid market uncertainty caused by the pandemic Arla maintained its 2020 sales forecast of €10.4-10.8bn and a net profit margin of 2.8-3.2%.
“As consumers around the world were forced to stay home, we expected our household brands to do well and they certainly have,” said CEO Peder Tuborgh. He added the company would continue to attempt to capitalise on increased demand for trusted brands among shoppers.
“During the lockdown people have loved to cook with our Lurpak butter and dairy has seen a boost in relevance in households across markets as consumers have valued our products,” he said. “As countries are opening again we are looking at how we best continue to deliver our trusted brands to customers and consumers.”
He added the company was forced to quickly adapt to the crisis.
“It has truly been abnormal times this year and I am very proud of our people and our results. The Covid-19 pandemic is one of the most severe crisis situations I have experienced as CEO of Arla, and we – as many other food companies - saw a very quick change in consumers eating habits as countries shut down around the world. We quickly channelled milk from our Foodservice business into retail and successfully maintained a steady flow of products in demand while our Foodservice business found creative solutions to support their customers. This shows just how robust and agile our cooperative really is for our dairy farmers.”
Arla said it was looking to keep its product portfolio relevant to consumers to ensure the greatest profitability for its farmer owners. In May, it took the “bold and unusual move for a dairy company” and launched the JÖRÐ range of plant-based drinks.
The range, made with “natural Nordic ingredients” such as oat, barley and hemp now available in the Danish market, soon to be followed by Sweden and the UK, during the second half of 2020 and 2021, respectively.