The European dairy sector faces huge change

Price pressure and competition are forcing new structures on the European dairy industry, Åke Modig, Arla Foods’ Managing Director, told the meeting of the Group’s Board of Representatives in Halmstad, Sweden on Tuesday.

Arla Foods’ strategy focuses on preparing for change and there are several options available for dealing with such change. It’s for the Group’s co-operative members to select the best. Overall, the Group’s objective is to consolidate its position as Europe’s largest co-operative dairy company and as market leader in several markets.

”The trend in Europe’s dairy industry points towards two blocks – one driven by the French dairies and one led by the German, Dutch or Scandinavian dairy industries where we’ll play an active role,” Åke Modig said.

Leadership gives strength
Arla Foods has achieved its greatest successes where the Group has either been the market leader within a geographical area or within a product category. Being the market leader gives the Group greater trading strength.

Åke Modig believes that Arla’s size was a significant factor in Asda Wal-Mart’s decision to appoint Arla its exclusive milk supplier in the UK. He also believes that the owners and the company must map out a plan for making pro-active decisions.

“Mergers are not objectives in themselves,” he said. “In order for mergers to work, the right economic conditions must be in place. Any future merger partner must also be able to pay a more or less equal milk price.

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