Arla aims for market leadership in a tough world

Related tags Arla foods Dairy

Price pressure and competition are forcing new structures on
European dairy producers, argues Arla Foods managing director åke

"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,"​ Modig said.

There is growing pressure on German milk producers after the three dairy groups, Campina, Müller and Hocheifel, discount their milk prices for Aldi. The retail chain has defended the new contract by declaring that the dairy companies are at liberty to demand whatever price they want from the retail trade.

But speaking at the group's board of representatives in Halmstad, Sweden, he underlined his belief that because Arla Foods'​ strategy focuses on preparing for change, the company is well-placed to deal with the new market conditions. Overall, he said, the group's objective is to consolidate its position as Europe's largest co-operative dairy company and as market leader in several markets.

Modig told the representatives that 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, he said.

For example, Arla's size was a significant factor in Asda Wal-Mart's decision to appoint Arla its exclusive milk supplier in the UK. Modig 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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