Arla has announced a new five year growth strategy for the UK, with a heavy focus on liquid milk exports and recruiting new farmers to meet increasing demand.
As part of the strategy, Arla says it will explore export opportunities out of the UK for the first time as well as the need for more milk, from existing and potentially new farmer suppliers.
Over the next five years, the co-op is looking to grow its UK business through categories like liquid milk, yogurts, butter and spreads. Its ambition is to grow the branded share of the revenue to 45% from 38%.
In the next five years, Arla Group will increase its investments by more than 40% to £3.4bn, in sustainability actions, product innovations, capacity expansions and digitalisation.
As previously announced, the cooperative also targets more than 50% growth across its UK organic retail and foodservice business in the next five years.
Ash Amirahmadi, managing director of Arla Foods UK, said: “This growth and value-up ambition is about improving the value of dairy for our consumers through high quality products that meet their demands, for our retail and foodservice customers as we add category value and growth, and for farmers through a sustainable farmgate price.
“With an ambition to reduce on-farm emissions by an additional 30 per cent by 2030, big investments are still needed on farms.
"Therefore, in the UK, our Future26 strategy will ruthlessly focus on creating the maximum value of all our milk that enables dairy farmers to invest more in on-farm long-term sustainability measures.”
Arla says it will also work to "significantly improve" farmers' profitability, so they can cover their increased costs and also invest in the on farm sustainability agenda.
Mr Amirahmadi said that for a number of years, the cooperative had indicated that the lack of profit in own label liquid milk in the UK was "not sustainable".
"It delivers little to no profitability for farmers and is a category of the UK dairy sector where the market is failing to deliver value for farmers. It is unsustainable," he said.
"This is made even more critical by the fact that the costs of producing milk is increasing like never before and our farmers are continuing to experience significant inflation."
As global demand for dairy continues to outgrow international supply, Arla says the value of milk and dairy products on the world market has shifted to a new, sustained high level.
It says this shift means more opportunities to increase the value from its UK milk and subsequently the returns for the farmers that own the cooperative.
As part of its Future26 strategy, Arla will therefore also explore opportunities to begin exporting raw milk from the UK to supply its global supply chain.
It has begun trials to move milk to its European processing sites as a "means to supply its growing international sales of sought-after dairy products and to improve the profitability of UK milk for its British and European farmer owner".
To deliver the scale of growth across its global and UK strategy, Arla says it will explore the need to recruit more milk from existing and potentially new farmers, including in the UK.
Global demand for dairy over the next five years is estimated to continue to increase by 2 percent year on year, it explains.
However, there are "clear signals" from milk producers around the world that the increases in supply required to meet that rising global demand are "now far less certain".
Mr Amirahmadi said: "We will welcome and continue to support members who wish to help us grow our milk pool by increasing their supply and growing their businesses sustainably.
"While we are not recruiting as of now, we will also investigate opportunities to gradually open up for new members or contracted milk who share our farmers’ commitment to producing high quality milk more sustainably."
