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Brexit, commodities force Arla Foods to launch cost-cutting plan

FBR Staff Writer Published 23 April 2018

European dairy giant Arla Foods has initiated an internal transformation program in an effort to realize more than €400m of savings by the end of 2020.

The program, dubbed Calcium, seeks to strengthen the company's performance to the benefit of its farmer-owners and further boost its investment capability.

The Danish dairy firm said that the move comes owing to external factors that have affected its business, including the currency impact of Brexit and unfavorable developments in commodity markets.

It has also indicated that some of its employees are likely to be impacted by the cost-cutting program.

Arla Foods CEO Peder Tuborgh said that the currency impact of Brexit has hit the company’s performance and the reversal in commodity prices on fat and protein has affected its relative performance against its international rivals.

Tuborgh added: “These developments have negatively impacted our profitability, and as a responsible business we have to act to remove the impact of these new developments, and the action we are taking is a three-year transformation programme which cuts across our whole business and sets out to restore our profitability.”

Arla Foods said that through the Calcium program, it plans to bring in improved efficiency in all areas of the company. Thereby, the three-year program is expected to boost its performance to the benefit of its farmer-owners and further increase its investment capability.

The Calcium program will cover activities across Arla, including production, products, sourcing, promotional marketing and people. It is expected to make changes in the ways of working, cutting down on bureaucracy and complexities, and reducing costs.

The program is anticipated to transform the company by generating significant efficiencies with two key objectives. While one of them is to give better returns to the company’s farmer-owners and sustaining a competitive milk price, the other is to reinvest into business segments that fuel growth, said the dairy company.

While Arla is likely to return around €300m out of €400m savings to its farmers through the farmgate milk price, the remaining €100m or so will be used in its Good Growth 2020 strategy to accelerate more growth and boosting the company’s profitability.


Image: Arla’s cost-cutting program is expected to impact some of its employees. Photo: courtesy of Arla Foods.