November 13, 2018

More changes in Arla's corporate functions

In end-October, Arla Foods had announced further changes to a number of its corporate group functions as part of an ongoing transformation programme called "Calcium."

Earlier this year, Arla Foods launched the three-year "Calcium" programme which sets out to achieve more than EUR400 million (US$449.5 million) savings and efficiencies and transform Arla Foods into a stronger and more competitive company.

As reported in August when Arla released its half year results for 2018, Calcium is already contributing positively to the company's milk price pay-outs to farmer owners and delivering ahead of schedule, with total financial contribution expected to be well beyond a forecasted EUR50 million (US$56.2 million) this year.

Part of the transformation process is the continued streamlining of the company's corporate operations and support functions. This process was initiated in the first half of the year, with significant changes already being implemented across global functions such as finance, legal and IT, corporate strategy, member relations, human resources and corporate affairs.

In addition, Arla Foods is announcing further changes to a number of corporate functions, including marketing, supply chain finance, international and human resource.

As a result of the changes announced, 140 positions are expected to be made redundant across affected areas. The impact is predominantly at the company's head office in Aarhus, Denmark, however with smaller numbers of positions affected at the company's administrative offices elsewhere in Europe and North America.

Most of the changes will also impact Arla's marketing organisation, as the company aims to simplify its commercial matrix and empower the frontline by securing a higher speed to market.

"The changes we are announcing will create a simpler and stronger marketing model for our brands, allowing us to (quickly) address local needs both in our European core markets and our newer markets in Asia and Africa. It is part of our effort to build close relationships with local customers and governments in addressing some of the bigger challenges around health and sustainability," said the CEO of Arla Foods, Peder Tuborgh.

"We are doing (the changes) to create a long-term transformation of our company and to reinstate our international competitiveness when it comes to the milk price we pay to our farmers, and I am pleased to see the level of engagement that Calcium is sparking throughout our organisation. It is a big part of the reason why the programme is currently delivering ahead of schedule."

Ongoing cost savings and efficiencies are a vital part of Arla Foods' Good Growth 2020 strategy, and, consequently, the company had initiated Calcium, which will change the company by creating significant efficiencies with two main purposes in mind. These purposes are the improvement of return to Arla's farmer-owners and the maintaining of a competitive milk price, and the reinvestment into business areas that fuel growth.

Calcium will deliver a run-rate of at least EUR400 million (US$449.5 million) of savings by the end of 2020, and the profit impact will build throughout the life of the programme.

The programme is happening at a time when Arla is facing two unique external challenges as a result of the extent of the company's exposure to the British pound and unfavourable developments in commodity markets.

- Arla