April 26, 2018
New cost-saving programme to transform Arla Foods
Arla Foods has launched an internal transformation programme called Calcium, which is set to deliver more than EUR400 million (US$487.1 million) of savings by the end of 2020 through improved efficiency in all areas of the company.
The programme looks to boost Arla's performance to the benefit of its farmer-owners and further strengthen its investment capability.
With Good Growth 2020, Arla has a strong strategy in place that has been expanding the company's business successfully and remains right for trends that are driving the global food and dairy market.
Ongoing cost savings and efficiencies are a vital part of Good Growth 2020 strategy, and consequently, Arla has initiated the three-year Calcium programme which will change the company by creating significant efficiencies with two main purposes in mind.
These purposes are the improvement of returns to its farmer-owners, the maintaining of a competitive milk price, and the reinvesting into business areas that fuel growth.
While the transformational aspirations of Calcium have been carefully planned since the end of last year, the scope of the cost-savings ambition was increased by Arla's management in recent months in light of unique external challenges facing the cooperative as a result of its exposure to the British pound and unfavourable developments in commodity markets.
"What is new, however, are two unexpected developments that have hit us, both of which are outside of our control. These are the currency impact of Brexit on our actual performance and the impact of the reversal in commodity prices on fat and protein on our relative performance against our international peers. 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."
Calcium will cover activities throughout Arla, in the aspects of production, products, procurement, promotional marketing and people. It aims at unleashing the full potential in Arla's organisation by transforming ways of working, reducing bureaucracy and complexities, and cutting costs.
Of the total cost reduction of more than EUR400 million, Arla expects to return approximately EUR300 million (US$365.3 million) to farmers through the farmgate milk price, with additional savings being reinvested in the company's Good Growth 2020 strategy to boost growth and improve profitability.
"Calcium has a high level of involvement amongst our employees and is galvanising and energising our people to deliver better returns for our farmers, and I am incredible proud of them," Tuborgh said.
