As expected, the first half of 2023 was dominated by continued inflationary pressure, declining dairy commodity prices, and a shift in consumer behaviours towards discount channels and private label products. This impacted Arla’s performance in the first half of 2023, however, the cooperative was able to soften the negative impact of the market dynamics and deliver a performance price of 49.7 EUR-cent/kg milk, enabling a half-year supplementary payment to farmer owners of 1 EUR-cent/kg milk based on the half-year volumes as planned.
Arla group revenue was EUR 7,067 million for first half of 2023, a 10.7 per cent increase compared to EUR 6,382 million in the first half of 2022, primarily driven by earlier implemented price increases in Arla’s retail and foodservice. Branded revenue grew by 6.9 per cent, driven by Lurpak with 7.2 per cent and the Arla brand with 3.6 per cent. Arla’s average performance price, which measures the value cre-ated per kilogram of owner milk, remained on par with the first half of 2022 with a slight increase of 0.1 EUR-cent/kg to 49.7 EUR-cent/kg. However, compared to the performance price for the full year of 2022, the performance price in first half 2023 saw a decrease of 5.4 EUR-cent/kg.
Driven by changes in commodity prices, Arla’s milk price dropped from its all-time high, seeking a new balance in a market where milk production is going up and consumers are spending less. Arla’s average pre-paid milk price increased to 48.2 EUR-cent/kg in the first half of 2023 compared to 46.6 EUR-cent/kg in the first half of 2022 and 52.0 EUR-cent/kg for the full 2022 year.
Says Peder Tuborgh, Arla Foods CEO: “As anticipated, the market conditions put our branded products under pressure. However, we managed to protect our relative market shares against our competitors, and I am pleased that we were able to secure group earnings, a competitive milk price and a half-year supplementary payment to our farmer owners of 1.0 EUR-cent/kg milk based on the half-year volumes as planned.”
In the first half of 2023, Arla achieved a net profit of EUR 103 million, or 1.5 per cent of revenue com-pared to 3.0 per cent in the same period last year.
After years of extraordinarily high growth in branded volumes, growth rates were impacted by changing consumer patterns. Strategic branded volume growth landed at -6.0 per cent in the first half of 2023 (adjusted for the impact from our former Russian business, which was divested in the first half of 2022, our Strategic branded volume growth would have landed at -5.1 per cent). This was primarily driven by a drop in volumes in Europe of 5.7 per cent, and a 4.0 per cent decrease in international volumes.
Added Torben Dahl Nyholm, Arla CFO: “During the first half of 2023, we continued to see inflationary pressure resulting in consumers moving towards discount channels and private label products and putting a pressure on our branded products.”
In Europe, a few brands managed to maintain strong volume growth in an unpredictable market. Arla’s strategic investments delivered strong volume growth, with the Starbucks™ business growing by 21.6 per cent and Arla®Protein by 51.6 per cent. In the International zone, both the Starbucks™ business and Puck® achieved a 3.3 per cent growth in branded volumes. For more visit arla.com
