Arla goes ahead with investment levy plans

Arla Foods is to go ahead with controversial plans to increase the investment levy for its dairy farmer suppliers.

Milk Partnership Limited (MPL) – the investment arm of Arla Foods Milk Partnership – said from January 2012 producers would pay a levy of 0.5p a litre a year, raising £70m over the next eight to ten years to invest in Arla Foods UK

This is on top of the £15m invested in 2008 via a 50/50 joint venture with Arla amba, which created a 6.4% shareholding in Arla UK.

“We see this as a long-term game plan – it is a stepping stone to membership of Arla amba, which is a farmer-owned business with no outside investors,” said Jonathan Ovens at Arla Foods Milk Partnership. “If we want to be part of the bigger co-operative we have to put our money where our mouth is.”

The decision had proved controversial, but producers would be able to take payment holidays if the milk price was not high enough to justify the levy. Investment in Arla was increasingly important in bringing farmers closer to their retail customers, and would strengthen their influence on Arla’s strategic direction at a key time in the development of the industry, he added.

Suppliers had already raised almost £23m through the MPL. Producers who had already invested 1p a litre would raise an additional 4p a litre over the next eight years, with others continuing to pay until reaching the full 5p a litre. Levies collected in 2012 and 2013 would be invested through the joint venture, matched by Arla amba, but from 2014 would buy shares directly.

As part of the agreement, Arla will pay 1p a litre premium on Cravendale sales from mid-2011. This will be shared equally across members in the non-aligned pool, equating to about 0.25p a litre.

Retirees and leavers can recover their investment in three equal instalments on the third, fourth and fifth anniversary of ceasing to be a member.