European dairy cooperative Arla Foods has unveiled its new five-year strategy to "cement its commitment to create sustainable dairy production and to grow its business responsibly".

In the next five years, Arla said that as part of the strategy - FUTURE26 - it is prepared to increase its investments by more than 40% to €4 billion.

This investment would focus on sustainability, digitalisation, new production technologies and product development, while also increasing its dividend to €1 billion to support its farmer owners on their "sustainability journey".

New retainment policy

Arla has just announced a new retainment policy allocating a higher supplementary payment of €1 billion over the next strategy period.

Going forward, the supplementary payment will be 1.5c/kg of milk instead of the current 1c/kg of milk, provided the company achieves an annual net profit of at least 2.8% of revenue, and to be paid out in two installments in March and September instead of only once a year.

“With our Good Growth 2020 strategy, we created the right recipe to grow our brands, deliver efficiencies and invest in sustainable actions across our value chain, while securing a competitive milk price to our farmer owners," Arla Foods CEO Peder Tuborgh said.

"Standing on this successful platform, our new strategy FUTURE26 will move our cooperative to the next level, grow our global business responsibly to meet the fast-changing eating habits among consumers and their increasing demand for sustainably-produced dairy products and improve returns to our farmer owners."

Sustainable dairy production

In the next five years, the company said it will continue to take "industry lead on data-driven sustainable dairy production throughout its value chain and raise its commitments to meet the 1.5° goal set by the Paris Agreement".

"Over the last decades, Arla’s farmer owners have steadily worked towards sustainable farming and today they are among the most climate-efficient dairy farmers in the world producing milk with an average of 1.15 kg CO2e per kilo of milk," the company said.

Arla’s farmer owners are committed to accelerate their reduction of greenhouse gas emissions towards the science-based 30% goal in 2030.

"Across its operations, Arla has raised its target to a 63% reduction of greenhouse gas emissions by 2030 which it will deliver by accelerating its conversion to green electricity, fossil-free fleets, making all packaging recyclable and having zero virgin plastics in branded packaging by 2030."

Market leader

During Good Growth 2020, the previous strategy, Arla "strengthened its position as a market leader" in northern Europe, the UK and the Middle East.

In the next five years, Arla will "utilise its key competitive advantage and grow its branded business by 3-4% year-on-year by investing in category innovation and development, new production technologies and supply chain scale".

Arla will also invest in its global specialised high-quality milk and whey ingredients business, Arla Foods Ingredients (AFI) to "secure world class innovation and collaboration and develop new solutions for its partners".

The newly-opened Innovation Centre in western Jutland in Denmark "aims to be the powerhouse to step change future opportunities and innovation efforts in AFI".

Arla also intends to strengthen and expand its presence in the markets of China, West Africa, and southeast Asia within dairy categories such as butter and cheese, organic, affordable dairy nutrition and early life nutrition.

Arla also aims to reach cost savings of €500 million before inflation during the next strategy period.

Arla also intends to invest in "end-to-end solutions to deliver efficiencies and improve productivity through further automation, digital tools, and upskilling of employees, reducing waste and energy consumption".

Defining moment

“We are at a defining moment for dairy and our farmer owners. The twin challenges of climate change and malnutrition are the most difficult facing our global food systems," CEO Peder Tuborgh added.

"It requires urgent action, and dairy is part of the solution. If there ever was a time to step up and create the future of dairy, it is now.

In the next five years, we must collaborate with our owners, customers and partners to accelerate our transformation to a resilient and sustainable dairy value chain fit for the future."

Arla notes that in the next five years, the global dairy market is expected to grow by 2% each year.