Business Profile: Peter Lauritzen, CEO, Arla UK

Arla is the biggest milk buyer in the UK with ambitious plans to secure an extra 800m litres of milk a year by 2017. Gemma Mackenzie speaks to the man in the driving seat of the UK arm of an EU dairy giant producing well-known brands Cravendale, Lurpak and Anchor

Why should producers stay with or join Arla?

We are a farmer-owned co-operative and our interests are our dairy farmers. Our vision is to create the future of dairy and secure the highest possible value for farmers’ milk.

We have invested £500m in the UK since 2007, we have some of the strongest brands in dairy – Lurpak, Cravendale and Anchor – and we are a major supplier to six of the key retailers. I am sure plcs care but we are looking after our farmers. It’s our farmers who decide everything and the profit we make goes back to them. That’s a true co-op.

How many additional producers do you plan to recruit over the next five years and how?

In February we confirmed we want to secure an additional 500m litres by 2017, but I can tell you now this will be more.

We will share our story and our mission to secure the highest possible value for the farmers’ milk and create an opportunity for growth. If we can do this, we will give the farmers confidence to grow their businesses for the long-term future. We have a 130-year strong track record of delivering for farmers.

What are your plans for the company?

In the short-term, we will start processing at our new Aylesbury plant, which will be operational in October. This will secure a long-term home for British milk – it’s the largest fresh milk facility in the world.

After the merger with Milk Link, we became the UK’s number one cheese manufacturer. We have launched our Anchor Cheddar and brought production back to the UK for Anchor butter and spreads.

We will also add some specialities [to the UK market] under our global Castello brand.

These investments demonstrate our long-term commitment to British farmers and British milk.

What are the major threats to and opportunities for UK milk processors and how should the industry respond to them?

Everybody is taking about quota removal in 2015 and concern about increased production throughout Europe. We have to tackle these issues head on. We need to get our act together in the UK by investing in the market and facilities so we can counter that possible milk flow.

What are the major threats to and opportunities for Arla and how do you plan to respond to these?

One of the strengths is that we have a strong strategy in place. We have a balanced business and a global presence. We have a very defined strategy for 2017. Post 2015, we have to move 1bn extra litres of milk from all of our farmers. We have to be ready for increased production; that’s why we are investing in companies and markets to be able to do it. We have to be able to take farmers’ milk, process it, add value to it and deliver it with a good milk price.

What did you change in the business after the SOS Dairy campaign?

In September 2012, we launched our milk sourcing model.

We also offered farmers new contracts so they adhered to the code, and the Arla Direct contract was launched in February.

The whole idea of the voluntary code is that the farmers get more control. Where do they get the most control – the plc, a privately owned company or a co-op? If farmers go the co-op route, how much closer can they go?

What makes Arla different from other dairy processors?

It’s quite simple. We are working for our farmers – they are the owners of the business. We have a strong strategy in place, a balanced business in the UK and a global presence.

The profits we are making go back to the owners, the farmers. This is why we are different from plcs and private companies. Everything is decided by farmers. I think it’s a fantastic model – the most successful dairy companies in the world are co-ops.

Arla in a minute

  • EU farmer co-operative with more than 12,000 farmer owners across UK, Belgium, Luxembourg, Denmark, Germany and Sweden
  • £2bn turnover in the UK
  • 26% share of GB milk pool, buying 3.2bn litres of milk from more than 3,200 farmer suppliers in three milk pools
  • 1,600 UK farmer owners via Arla Milk Link, supplying 1.3bn litres a year
  • 1,250 Arla Foods Milk Partnership (AFMP) members – these own part of UK business and will become full EU co-op members next year – supplying 1.6bn litres a year
  • 350 farmers on direct supply contracts producing about 300m litres a year
  • About 4,000 employees across 18 processing sites. Brands include Cravendale, Anchor and Tickler cheeses
  • World’s largest fresh milk processing facility in Aylesbury, Buckinghamshire due to start production in October
  • Arla Milk Link September 2013 price of 32.31p/litre compared with Milk Link price of 26.88p/litre in September 2012. AFMP September 2013 price of 31.63p/litre compared with 26.88p/litre in September 2012.

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