Dairy cooperative Arla Foods has launched an internal programme called “Calcium” set to deliver more than €400 million of savings by the end of 2020.
The company hopes the programme will improve efficiency to the benefit of its farmer-owners and maintain a competitive milk price.
Part of its Good Growth 2020 strategy, the cost savings and efficiencies Calcium is expected to bring will play a vital part in its overall strategy.
The internal programme will deliver a run-rate of at least €400 million of savings by the end of 2020, and the profit impact will build throughout the life of the programme.
Arla has spearheaded the programme due to external challenges, such as the weak pound sterling and unfavourable developments in commodity markets.
'Unexpected developments'
CEO of Arla Foods Peder Tuborgh, said two "unexpected developments" that have hit the company.
“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,” Mr Tuborgh said.
“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,” he said.
The Calcium programme will look at ways of reducing bureaucracy and complexities, and cutting costs.
Of the total cost reduction of more than €400 million, Arla expects to return approximately €300 million to the farmers through the farmgate milk price with the additional savings being reinvested in the company’s Good Growth 2020 strategy to fuel further growth and improve profitability.
