Food and Beverage Business
Finance

Consumer Preferences Shift Back to Branded Products, According to Arla Foods Report

Consumer Preferences Shift Back to Branded Products, According to Arla Foods Report Arla Foods Food and Beverage Business

The farmer-owned cooperative, Arla Foods, reported its 2023 results, citing a boost in brand sales in the latter half of the year. However, overall sales remained flat at €13.7bn ($14.75bn) for the year. “The consumer market is in much better balance,” according to CEO Peder Tuborgh, who expressed optimism for 2024. The company notes that the return of consumers to branded products drove strong performance in the latter half of 2023.

CEO Tuborgh acknowledges the challenges of navigating a “deflated and volatile global dairy market” and headwinds from currency fluctuations. Nevertheless, Arla anticipates continued volatility but approaches 2024 with confidence. The company achieved a net profit of €380m, representing 2.8% of revenue, within its target range of 2.8-3.2%.

Regarding revenue growth in European markets, CFO Torben Dahl Nyholm attributes it to pricing efforts implemented in late 2022. Arla’s price increases were limited in 2023 compared to cost inflation, indicating a more balanced approach. The company forecasts revenue growth between 1.0% and 3.0% for 2024, signaling a positive shift compared to previous guidance.

Arla’s strategic branded volume-driven revenue fell 6% in the first half but grew 4.1% in the second half of 2023. Tuborgh emphasized the return of consumers to the company’s brands and a more balanced approach between brands, discounted, and retailer products. Asked about the performance of Arla’s plant-based range Jörđ, Tuborgh noted that it is still relatively small and in the early stages.

Transitioning to the food and beverage industry trends, Arla expects that positive momentum will continue in 2024. The company has focused on addressing consumer sentiment and reaping the benefits of returning consumers to its brands.

Arla’s confidence is underpinned by the stronger performance in the latter half of 2023. CEO Tuborgh emphasized the return of consumers to the company’s brands and noted that its promotions are “more back to normal levels now”. The company also anticipates continued growth, with a revenue target of €13.2bn to €13.7bn for 2024.

In addition, Arla indicates that European market growth was mainly based on pricing efforts, underscoring its strategic approach to driving revenue. This approach is situated within the context of navigating a challenging global dairy market. The company has demonstrated resilience in facing headwinds from currency fluctuations and volatility.

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