Strong performance from Arla Foods’ UK brands helped offset rising costs and disruption caused by the labour crisis last year, the dairy co-op’s 2021 accounts have revealed.
UK revenue grew by 2.6% to £2.17bn last year, with overall branded volumes up 3.8%.
This came despite the effects of accelerating inflationary cost pressures and Arla’s well-documented driver and labour shortages – which led to disruption to its deliveries last summer.
Although Arla said these challenges did “dampen performance somewhat”, the first half of 2021 was buoyed by a continuation of the heightened in-home consumption seen in 2020 as a result of covid lockdowns in the UK.
The latter half of the year, meanwhile, saw Arla welcome the full reopening of the UK foodservice sector, leading to 19% year-on-year volume growth for its foodservice business, driven by the performance of its Arla Pro brand, which grew volume sales by 31.7%.
The Arla masterbrand and Starbucks stood out in 2021 as they “continued to consolidate their market share positions”, Arla added. Across the full year, the masterbrand enjoyed growth of 9.6% across its range of products.
Individual brands to see volume growth included Cravendale (up 6.7%), Arla Skyr (12.5%), and Arla protein (38%).
However, Arla also pointed out the butter and spreads category “readjusted” following a bumper 2020. As a result, Lurpak volume sales dropped by 4.1%, while Anchor saw volumes fall by 6.3%.
Total global Arla Group revenue rose by 5.6% to €11.2bn, compared with €10.6bn in 2020.
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Arla’s performance price – which measures the value the supplier creates per kg of owner milk – was 39.7 eurocent in 2021 compared to 36.5 eurocent in 2020.
“2021 was a tough year where we had to navigate through several external challenges to deliver much-needed returns for farmer owners,” said Arla Foods UK MD Ash Amirahmadi.
“Like many others in the industry we faced disruption from Covid and from labour shortages, but the biggest disruption has come from the unprecedented inflation, which is driving up the cost of operations across the supply chain. Against this challenging backdrop, we have performed well,” he claimed.
“The value of producing milk here in the UK is increasing like never before, due to the rising costs on farm and across the supply chain combined with global demand for dairy causing European commodity prices to continue their strong development. This will be welcomed by our farmer owners who are also having to invest more to stay at the forefront of sustainable farming as they continue to be among the most climate efficient dairy farmers in the world.”
Amirahmadi added he was “pleased to see so many of our brands continue to grow as more and more British consumers have turned to these brands in recent years”.
Looking ahead, Arla said it expected inflation and volatility “to continue to impact the business and other sectors well into 2022”.
“The impact on consumer behaviour of on-going market volatility and high inflation will be multifaceted and difficult to predict,” said group CEO Peder Tuborgh.
“It is likely we will see a slowdown in our branded growth as the market resettles at a new level,” he added. “Our co-operative stands on a solid 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.”
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