Arla Presentation
Arla Presentation
Arla Presentation
By doing this they made efficient use of their milk and higher quality products.
The earnings they made from their milk were equally split between the dairy farmers and
together they built a good future for themselves and the next generation on their farm.
Over the years, the cooperative idea proved increasingly attractive. Small farmer
cooperatives merged and became stronger. They expanded from local to regional to
national cooperatives.
In 2000, the largest Danish dairy cooperative merged with its Swedish counterpart and Arla
Foods, the first cross-border dairy cooperative, was formed.
The cooperative idea also flourished in other countries and through recent mergers
cooperative owners in the UK, the Netherlands, Germany, Belgium and Luxembourg have
joined Arla Foods.
Mission Statement Analysis
Vision of Arla
"Creating the future of dairy to bring health and inspiration to the world,
naturally..."
Mission Statement
"Arla’s mission is to secure the highest value for our farmers’ milk while
creating opportunities for their growth."
Analysis of Mission
Statement
Does it include...?
Customers Products/ Services Markets
No Yes No
No Yes No
No No No
No No
Score
Excellence Integrity
No No 1.0/4.5
Arla’s
Performance
Financial Performance
Brands & Products of Arla
Brands and Products
4. CSFs match Unique Capabilities or Not? If yes, then they become Competitive Advantage of Nestle.
Critical
Critical Success Factors in Dairy
Success Medium/Large
Factors Good/Excellent
Customer &
Geographic
Brand Portfolio
and Well-
Consumer
Suppliers
Consumer Behavior and
R&D Presence Positioned Relationships
Engagement Prices
Products through
marketing
1. Excellent R&D department: R&D helps in constantly finding healthier and tastier products for consumers.
2. Consumer engagement: Showing that the consumer is important is a key for success. Well-established brands can benefit of high market
share also because of their consumer engagement and keep its importance at the core of the business.
3. Geographic presence: Successful firms are present all around the world and compete increasingly against each other to gain market share in
every country.
4. Large product portfolio: Offering a big variety of products is important to be successful. Any firm can substitute whatever product in the
market with its own one. It is important to target profitable segments and apply a heavy and specific marketing strategy.
5. Consumer Behaviour: With a fast-changing sociocultural behaviour and ageing population, it is crucial to innovate products and adapt them
to the market. Consumers look for the healthiest and cheapest solutions.
6. Suppliers Relationships: Farmers will have vested interest due to continued co-operative structure.
Internal Analysis – Unique Resources
• Farmers Owned: Arla is completely owned by around 11,200 in 7 countries farmers who are the very essence of the company and Dairy
supplies.
• Geographic presence: Arla foods is operating at 30 countries with over 19,000 employees. The company is comprised of around 13,000
farmers who are the actual owner of the company.
• R&D: Arla has Innovation Centre, along with product development teams in the UK, Sweden, China, Germany, Netherlands, Finland and the US.
They do this with state-of-the-art science and consumer labs and a 2000 m2 pilot plant. Another initiative is Arla Food for Health, which was
founded in the spirit of exploring the competences between the four stakeholders to carry out best-in-class dairy health and nutrition
research and become a platform for knowledge sharing, training and education.
• Diversified portfolio: Arla has more than 30 brands covering all the dairy categories ranging from Milk, Cheese, Butter, Cream, and
Yoghurt. Its product profile has more than 80 products and 438+ SKUs. The product range is enough to meet the dairy requirement of
people around the globe.
• Brand reputation: Arla sets it self to be the best dairy provider and it is well received specially in Europe and Middle East. Its strong
brand image is one of the reasons behind its higher sales.
Nestle’s Value Chain Analysis
• Arla owns and controls the
full value chain. Its farmers
produce milk which it buys
and then sells or turns into
other dairy products which
it then sells worldwide.
Quality and provenance are
not issues — and this is very
powerful in the food
industry.
Inbound Logistics
Arla is owned by 11,200 farmers and the way company’s inbound logistic works is:
• Collection of milk from farmers
• Either forwarding the milk to other markets or changing in to value added
products and then selling
• The collection is done from different regions of Europe, there are 13 collection
points overall.
• They operate their entire value chain with a continuous focus on efficiency and optimization of their raw materials.
3. All of this drive a sustainable increase in milk supply and value creation per kg of milk for their own owners.
Outbound Logistics
• Arla is committed to Delivering the right goods in the right quantities at right time for customer satisfaction.
• For this reason they have created value for customers as well as their owners.
Arla is:
➢ Using automation – Including robotic order picking – to improve its logistics performance.
➢ Using Tachomaster digi cards for their drivers. The digi cards take away the need to have both the digi card and the finger scanner. So, Drivers when driving only need to clock in on one
system.
➢ Using the Astro WMS (Warehouse Management System) from Consafe Logistics in all Group fresh food terminals within the Nordic countries for speed, flexibility and precision.
➢ Using voice picking at its fresh food terminals since 2005. This has resulted in significant improvements, both in terms of quality and safety, and some improvement in productivity.
3. The drivers are at ease while delivering the products which results in higher efficiencies.
4. To date, they have succeeded in decreasing their CO2 emissions by 12% since 2005, despite increased production.
Marketing and Sales
• Arla’s marketing and sales organizations have focused on increasing volumes in profitable positions in both core markets and markets outside the EU.
• Arla has proactively made the decision to maintain their investments in marketing and innovation with the objective to push more milk into retail and foodservice and reduce industry
commodity sales.
• Arla is now also focusing on ecommerce and online sales of its branded products. It recently entered the e-commerce space by partnering with different online retailers such as Amazon.
• Arla Foods has never pursued a homogenous brand communication strategy for the Arla brand across countries or sub-brands but has instead employed more fragmented marketing
strategies to leverage the sub-brands’ local strength.
• Arla Foods has primarily been selling to traditional retailers, especially supermarkets and hypermarkets. Sales through these constitute ~75% of Arla Foods’ revenue, with major clients
including ICA, Lidl, Tesco, Aldi, Coop, to name a few.
• Arla presents its dairy products and recipes in all its advertisements in a way which does not attempt to mislead consumers.
• It supports the role of parents and other appropriate adult role models by providing information on the nutritional profile of healthy products, where relevant
• It does not represent products as substitutes for meals when they are not intended as such.
1. Consumers, specially millennials needs are now met easily as they consume more frequently in small quantities.
2. As the global retail market is going towards ecommerce, Arla’s products are now easily available for their customers.
3. With rapid replenishment at larger stores, customers get what they want.
4. Through science-based nutrition products, Arla helps enhance the quality of people's lives by supporting health and providing care for consumers with special needs (lactofree).
After Sales Service
Arla’s focus to customer service has been to process the orders and requests as fast and as error free as possible.
For this reason, arla has not disturbed the manual order placing cycle of its customers, however, it has used the services from OmPrompt.
Now, Arla’s customers continue placing orders as they did before, by fax or mail sent to the customer service team in a wide variety of formats. Orders are auto-
forwarded to the OmPrompt Sentient Supply Chain platform, which identifies order fields in the document and extracts the required data, and then uses logic to
validate the information.
This ensures that all the necessary fields have been received, are valid and comply with Arla’s business rules, such as minimum quantities, units of measure and
product codes. Clean, valid orders are then sent by the OmPrompt platform to Arla’s ERP system.
Not only has the project improved customer service by eliminating order processing errors, but it has freed customer contact resources who can now spend
more time on value-added activity:
• Arla has attempted to further enhance the skills and well‐being of its employees through three major activities by the use of:
• Research and innovation is of fundamental importance to Arla Foods, and the company’s innovation range covers milk‐based products such as milks, yoghurts, desserts, cheeses, butters, spreads, soups, sauces,
milk powders and milk‐based food ingredients.
• Arla’s research and innovation activities are carried out at its three major innovation centers in Denmark and Sweden and two innovation satellites in United Kingdom and Finland.
• Company’s research and innovation activities are organized into three interacting portfolio areas of research:
➢ Technological development
➢ Radical innovation.
• Through these activities, Arla is providing the basis for competence development and knowledge transfer to the remaining innovation chain.
• There are also several different types of collaborative partnerships that Arla engages in, including:
➢ Projects where a major proportion of the funding comes from the Danish Agency for Science, Technology and Innovation within Food and Safety and the remainder derives from participating research
institutions and companies
➢ Projects where around half the funding derives from the Danish Dairy Board’s Research Fund and the remainder from public funds
Technology Development
Research Platforms
• Arla Foods employs around 200 skilled individuals within the area of innovation that range from basic research to new product development.
• These research activities are organized within six major research platforms that represent significant elements in the milk value chain. These
include:
➢ Milk composition
➢ Food safety
➢ Consumer preferences
➢ Wellbeing
• Each platform includes a research coordinator as well as key representatives from organizational units in Arla Foods.
• The research platforms value effective internal communication, agreement and coordination of research‐based knowledge and needs.
Procurement
COST CONTROL
Procurement is always on the lookout for cost saving opportunities which is the foundation for
achieving Good Growth. Having a unified approach to strategic sourcing allows Arla to maximize cost
savings on a global scale that add value to the organization as a whole, and in the end, to their
farmers.
SUSTAINABILITY
Arla is dedicated to acting responsibly towards the environment and the communities that they are
part of. They ask suppliers to sign their Code of Conduct for Suppliers and expect suppliers to support
them in their commitment towards sustainability. Having high standards sets the direction of the
business in seeking alternative ways and becoming more sustainable.
RISK MITIGATION
Operating in a dynamic business environment requires a continuous focus on risk reducing activities.
Procurement seeks to mitigate commercial and operational risks by assessing and sometimes
auditing suppliers. Arla wants its suppliers to meet its requirements for quality, environment, safety
and health as well as complying with their Code of Conduct and their terms and conditions.
How Value
chain can
look like
Good Growth
2020
• The Good Growth Strategy 2020
is focused around external
threats, risks and change.
• It was introduced in 2015 and is a
5 year plan for Arla.
• It is focued around Growth and
Development of Arla.
• In 2018 Arla commenced their transformation
programme, Calcium which will accelerate their
• Time-to-market and time-to-volume remain critical factors in meeting customer demands for increased complexity in product mix and
timely supply.
• Arla Foods, since 2002, has executed a global strategy called “One Arla,” with the objective of standardizing its business processes into
a single system and integrating high-level business information systems with the plant-floor information systems.
• Arla Foods has launched an internal transformation programme called “Calcium”, which is set to deliver more than 400 million euro of
savings by the end of 2020 through improved efficiency in all areas of the company. The programme looks to boost Arla’s performance
to the benefit of its farmer-owners and further strengthen the company’s investment capability.
• Ongoing cost savings and efficiencies are a vital part of Good Growth 2020 strategy, and “Calcium” which will change the company by
creating significant efficiencies with two main purposes in mind:
• Established presence in worldwide developed locations- Arla Foods has extensive dealer network and associates network
that not only help in delivering efficient services to the customers but also help in managing competitive challenges in
Strategy & Execution industry.
• Able to hit different price points with different products and different locations- Arla has built expertise at entering new
markets and making success of them. The expansion has helped the organization to build new revenue stream and
diversify the economic cycle risk in the markets it operates in.
• Merger with MUH and British Bink- making Arla the sixth largest milk producer
• Arla strategic innovation center- has a diverse pool of employees representing many of their markets
• Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any
supply chain bottlenecks.
Weaknesses
• Business structure is very spread out, could create disconnect between specific areas
• Arla has much less milk production in developing countries, where over 80% of future growth is projected to come from
• Disconnect- Arla wants to consolidate brands, but at the same time, they demand revenue comes from new product launches
• Business Model of Arla Foods can be easily imitated by the competitors in the Dairy industry.
Weighted
Key Internal Factors Weight Rating
Score
Strengths
Collective ownership by over 12,000 farmers 0.1 4 0.4
Innovation in dairy technology, particularly in nordic countries 0.08 3 0.24
Existing, proven marketing plan with variety of dairy goods 0.05 3 0.15
Established presence in worldwide developed locations 0.04 3 0.12
Able to hit different price points with different products and different locations 0.07 4 0.28
Committed to automated labor 0.05 4 0.2
• The new technology provides an opportunity to Arla to practices differentiated pricing strategy in the new market. It will enable the firm to
maintain its loyal customers with great service and lure new customers through other value oriented propositions.
• The market development will lead to dilution of competitor’s advantage and enable Arla to increase its competitiveness compare to the
other competitors.
• New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This
investment has opened new sales channel for Arla. In the next few years the company can leverage this opportunity by knowing its
customer better and serving their needs using big data analytics.
• Local Collaboration - Tie-up with local players can also provide opportunities of growth for the Arla Foods in international markets. The local
players have local expertise while Arla Foods can bring global processes and execution expertise on table.
• Increasing customer base in Developing Markets - There is an absolute potential in developing economies for dairy products and
production.
• Trend of customers migrating to higher end products - It represents great opportunity for Arla Foods, as the firm has strong brand
recognition in the premium segment, customers have experience with excellent customer services provided by Arla Foods brands in the
lower segment. It can be a win-win for the company and provides an opportunity to increase the profitability.
Threats
• Changing demographics - As the baby boomers are retiring and new generation finding hard to replace their
purchasing power. This can lead to higher profits in the short run for Arla Foods but reducing margins over
the long run as young people are less brand loyal and more open to experimentation.
• Changing political environment with US and China trade war, Brexit impacting European Union, and overall
instability in the middle east can impact Arla Foods business both in local market and in international market.
• Competitors catching up with the product development - Even though at present the Arla Foods is still
leader in product innovation in the Strategy & Execution segment. It is facing stiff challenges from
international and local competitors and from private labels also.
• Shortage of skilled human resources - Given the high turnover of employees and increasing dependence on
innovative solution, Arla can face skilled human resources challenges in the near future.
• Saturation in urban market and stagnation in the rural markets - For Arla Foods this trend is an ongoing
challenge in the Strategy & Execution segment.
• Matching Structure With Strategy to serve the rural customers than urban customers given the vast
distances and lack of infrastructure.
Arla’s Dealing with Risks
• The risks for Arla’s in 2019 are identified in 6 different areas, these are:
References •
•
•
•
https://www.arla.com/our-brands/all-our-brands/
https://www.arla.com/inspiration/
https://www.arla.com/milk-and-coffee/
https://www.arla.com/milk-and-tea/
• https://www.arla.com/food-and-inspiration/us/arla-recipes/naturally-tasty-cheesecakes/
• https://www.arla.com/goodness-in-a-jar/
• https://www.arla.com/sustainability/
• https://www.arla.com/company/sustainable-dairy-farming/
• https://www.arla.com/sustainability/our-climate-ambition/
• https://www.arla.com/company/
• https://www.arla.com/company/sustainable-dairy-farming/
• https://www.arla.com/company/healthy-living/
• https://www.arla.com/company/farmer-owned/
• https://www.arla.com/company/visit-a-farmer/
• https://www.arla.com/company/responsibility/
• https://www.arla.com/company/strategy/
• https://www.arla.com/company/research-and-innovation/
• https://www.arla.com/company/management/
• https://www.arla.com/company/investor/
• https://www.arla.com/company/news-and-press/latest-news/
• https://www.arla.com/company/procurement/
• https://www.arla.com/company/contact/
Thank you!