Arla Foods: A Cooperative Company

Abstract

This report deals with strategies of Arla Foods and the challenges faced by the company. There
was little bit ups and downs in the market share of the brand but they have overcome it very
strategically. Arla Foods is farmer owned dairy company and the company also cares about its
owner, customer, consumer and environment as well. To meet the expectation of all the
stakeholder they have set different strategies for all of them. Therefore, to maximize the market
share and profit they have to gone through various challenges and continuous development.

Introduction
Dano has been a household name in Bangladesh since 1962. Initially, Bangladeshi people
found the Dano as an imported goods but the internationalization concept made it possible to
enjoy a foreign product from native country. Internalization has been of great interest to nearly
every company. There is no single and universally accepted definition of internationalization but
from an economics point of view, it is defined as the process where business gets more involved
in the international markets. In the contemporary world, businesses begin their operations
domestically but must draw up a long-term plan on how the business will be going international.
Internationalization phenomenon has significantly changed the landscape for most business
resulting to a very dynamic market situation with severe competition for the companies. The
reason behind going for international market varies from one company to another. However,
most firms pursue internationalization because domestic market has become inadequate because
of the economies of scale and multiple opportunities that are available in the foreign markets.
Internationalization has been one of the strategies being used by Arla Foods to reduce the
cost of operations. Businesses with overhead costs can have the excess cost cut down in
countries that have relatively deflated currencies as well as low cost of living. As the government
tax is very high on imported finish goods that is why Arla Foods adopted the internationalization
concept to reduce the cost of operations. There are many entry modes that companies can use to
join foreign markets but all these modes can be categorized in two broad modes. The first mode
is the non-equity mode, which comprises of export and contractual agreements. The second

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mode is referred to equity mode of entry, which is known to include wholly owned subsidies and
joint ventures.

An Overview of Arla Foods

Way back in the 1880’s, dairy farmers in Denmark and Sweden formed small
cooperatives to invest in common dairy production facilities. 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. As per the website of Arla Foods, in 2000, the largest Danish
dairy cooperative merged with its Swedish counterpart and Arla Foods, the first cross-border
dairy cooperative, was formed (www.arla.com).

Arla Foods heritage goes back to the 1880s. As per the website of Arla Foods, their
philosophy of producing natural, healthy and high quality dairy products dates back to the 1880s
when dairy farmers in Denmark and Sweden joined forces with one common goal - To produce
and provide the best dairy products. Total 12,700 other farmers across Europe, helping each
other to achieve high quality standards, they believe it’s all about working together. Because we
are farmer-owned, all of our earnings go back to our farmer owners. This means that when
people buy our products the money is split equally between each litre of milk that our owners
supply. That’s also a key part of our cooperative philosophy (www.arla.com).

As stated in the website of Mutual Group, there was no direct supervision of Arla Foods
in Bangladesh before 2013. Mutual Milk Products Limited was authorized packer of Dano Full
Cream Milk Powder and importer of other brands of Arla Foods upto September 2013. Arla
Foods Bangladesh Limited started their direct operation in Bangladesh from October 2013
(www.mutual-bd.com). Arla Foods is one of the world’s largest milk producers with an annual
turnover close to US$13.5 billion and a history dating back to 1880 when the company was
established (The Financial Express, March 06, 2014). With the announcement of the merger
came the introduction of Arla’s brand new product line which will be launched under the Dano
Daily brand name. Dano Daily is specially designed and formulated to address the nutrition

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deficiencies of the people of Bangladesh and deliver the necessary daily nutrition to people
belonging to the lower socio-economic strata (LonkaBangla Financial Portal, March 06, 2014).
As per the website of Bangladesh Brand Forum, Arla Foods recognized as a best brand
back to back in 2015 and 2016 and second best brand back to back in 2013 and 2014
(www.bangladeshbrandforum.com).

Mission
Arla’s mission is to secure the highest value for our farmers’ milk while creating
opportunities for their growth." - As a cooperative company owned by milk producers, their task
is to ensure that they can create as much value as possible from the milk producers' milk - and
thereby achieve a competitive milk price for them - for both their owners and other suppliers.

Vision
Arla’s vision is creating the future of dairy to bring health and inspiration to the world,
naturally. At Arla Foods, we envision a future in which the full potential of dairy is realized.
Where natural dairy products outcompete less healthy alternatives. Where the taste of natural
dairy product is celebrated in homes and professional kitchens around the world. Where food
manufactures turn to high quality dairy-based ingredients to improve their products. It is a future
in which safe dairy nutrition is affordable and accessible to everyone.

Challenges Faced by Arla Foods

The Major challenge faced by Arla Foods in Bangladesh market is melamine in milk
powder. The issue was raised in 2008. During that time, Dhaka University Chemistry
Department revealed that eight popular milk brand found contaminated (The Daily Star, October
24, 2008). It was obvious that Dano is one of them as Dano was the most popular brand. The
melamine issue was first rised in China in Yashili 2 milk. It was reported that “the presence of
harmful melamine in Yashili 2 milk formula has found according to the report by Plasma Plus.
The amount of melamine present is 72.77 milligram per kg of milk” (The Daily Star, September
30, 2008). However, Arla Foods deals the situation very strategically and received a government
declaration as melamine free brand after tests at home and abroad (The Daily Star, November 05,
2008)

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Arla Foods Corporate Strategy
Arla's business strategy rests on a solid foundation - mission, identity and vision. It serves
as an operational guide to how they, as a business, aim to create value for their farmer owners
towards 2020.

Good Growth Strategy 2020

Arla Foods want to develop their role as a global food company that adds value to
people’s lives through natural nutrition and responsible operations. In order to succeed, they will:
(i) Excel in eight dairy categories (ii) Focus on six geographical regions and (iii) Win as one
united and efficient Arla.

Excel in eight dairy categories

Aral Foods have matched their own strengths in the dairy categories to the consumer
needs they see globally. This has led them to identify growth opportunities on a global or
regional scale in eight categories. In these, they want to excel with innovative products, a world
class supply chain, compelling marketing and strong partnerships with their customers. The
prioritized categories and ambitions for them are:
Milk and powder: Arla wants to lead and shape the market with nutritious value-added
products.
Milk-based beverages: Arla wants to shape the market for on-the-go products that are
made from natural ingredients.
Spreadable cheese: Arla wants to be a leader with both cream cheese that is made from
natural ingredients and high quality processed cream cheese.
Yogurt: Arla wants to build a strong position that is based on health benefits and natural
ingredients.
Butter and spreads: Arla wants to be a global leader with world class products made
from natural ingredients.
Speciality cheese: Arla wants to be a leading player with creatively crafted products and
concepts.

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 Mozzarella: Arla wants to create a global foodservice position with high quality
mozzarella.
Ingredients: Arla wants to be the global leader in value-added whey.
Focus on six regions
Arla Foods will focus on six regions in which they believe Arla has the greatest potential
to grow a long-term profitable business for their farmer-owners. Over the years Arla has built a
strong position in Northern Europe where we are the preferred dairy company for consumers,
and the Middle East where our brands are among the strongest in the food industry. They will
continue to build on these market positions as they also develop their business in four other
regions i.e. China, Nigeria, USA and Russia as Arla’s main focus markets. Towards 2020, they
expect 50 percent of their growth to come from Europe. The other 50 percent will come from the
regions outside Europe.

Win as one Arla

Over the past years Arla has grown significantly in Europe with no less than six mergers
in Central Europe, the UK and Sweden. They have been aligning the different companies into
one and harvesting the synergies that the mergers created. They will now take this unity to the
next level. As per the website of Arla Foods, they will strengthen their global category and brand
building, their innovation across borders and commercial excellence. Arla’s marketing will
become more global, improving the spend effectiveness, and they will drive more radical
innovation across six regions. Arla’s entire supply chain will be even more efficient as they will
establish one European milk pool to ensure a more holistic use of their milk across the Arla
group. Overall, Arla have set a new ambitious cost improvement target of EUR 400 million to be
reached by the end of 2019 (www.arla.com).

Strategy for Consumers

Arla believes that their products, activities and growth should improve the lives of
people. Across the world, food unites people. Everyone needs it to keep going throughout the
day. It’s become more important that food is healthy and produced responsibly. People are
looking for less processed food products made from natural ingredients. That’s where Arla’s
dairy products have an important part to play. For them, Good Growth is about growing their
business by adding value to people’s lives.

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 With the Arla® brand they aim to bring health and natural goodness to people through
dairy products that they use throughout their day and their lives. They will lead and shape the
market with innovative nutritious value-added products made from natural ingredients, produced
in a responsible way. They will remind people that milk is a wonderful, nutritious product and
that Arla milk comes from their passionate farmer owners who deliver high quality milk. They
will not only provide naturally nutritious food that fuels your body, they also want to add quality
to your life. They will inspire people to explore good food through their Lurpak® and Castello®
brands. Arla will ensure that they are a global leader in natural quality butter and spreads and
they aim to be a leading player in creatively crafted speciality cheeses.

Strategy for Farmer Owners

Arla is a cooperative owned by dairy farmers and committed to creating the highest value
for their milk. They are currently the world’s fifth largest dairy company in terms of milk intake
(According to the website of Arla Foods). Their farmer owners are expected to increase their
milk production from approx. 14 billion kg in 2015 to 16 billion kg in 2020. Arla’s strategy
focuses on growing the value of their milk. In the past years, they have worked to build a more
solid position in a dairy industry that has become much more competitive and global. They will
continue to strengthen their position by providing dairy products that inspire and fulfil the needs
of people around the world.
Towards 2020, they expect 50 percent of growth to come from Europe, which is one of
six focus regions in their strategy. Particularly in the UK, Denmark and Sweden, where they
want to be the dairy champion that leads and develops the market for dairy products. The other
50 percent of growth will come from markets outside Europe. They are going to focus on five
market regions in which Arla set out to grow a long-term profitable business for their farmer
owners.
Middle East is a well-established region for Arla with strong markets and leading
positions which they will continue to develop. Arla have a clear ambition to achieve strong
positions in selected dairy categories in China, United States and Nigeria. They also remain
hopeful that Russia will re-open for business, at which point it will still be a very attractive
market for Arla.

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Strategy for The Planet
As per the website of Arla Foods, they know that long-term success is only achieved if
they are able to add value to people’s life while acting responsibly towards the environment and
the communities they are a part of. In 2050, there will be nine billion people on this planet
(www.arla.com). In Arla, they recognize they have a responsibility, as one of the world’s leading
dairy producers, to develop new solutions that reduce their impact on climate and the
environment. To Arla, sustainability means offering foods with the highest possible nutritional
value, to as many people as possible, using as few of nature’s resources as possible. Their milk
and dairy products can contribute to nutrition, health and food security for millions.
Made in an efficient way using best management practices, their products can form an
important part of a sustainable diet, as defined by the Food and Agriculture Organization of the
United Nations (FAO). They intend to play an active role in fulfilling UN’s Sustainable
Development Goals through their Code of Conduct, Human Rights Policy, Health Strategy and
Environmental Strategy, including their Sustainable Dairy Farming Strategy and sourcing
policies for palm oil, soy and cocoa.

Environmental Strategy 2020

Arla has worked with environmental strategies for decades with emphasis on different
environmental aspects. In their 2020 strategy they have taken a 'lifecycle management'
perspective - from cow to consumer. Their environmental strategy 2020 focuses on:

Sustainable Farming
Arla wants to source milk and other agricultural material which have been farmed in a
sustainable manner.
Climate
Arla wants to reduce greenhouse gas emissions throughout their entire supply chain -
from cow to consumer.
Water and Energy
Arla have respect for resources by reducing consumption and changing from fossil to
renewable energy sources.
Zero Waste
Arla wants to avoid waste however when this is not possible they treat waste as a
resource to be reused or recycled - they call this zero waste.

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Health Strategy
Arla deliver the natural power of milk in exciting ways that make it easier for you to live
a healthy life.

Arla Make Milk Even Better

Milk naturally contains one of the richest combinations of nutrients that you can find in a
single food source. They make milk’s nutrient available in a variety of tasty products that make it
easier for you to live a healthy life. For people’s specific health needs, they add ingredients from
nature to lend a helping hand.

Reason and Aspiration

Modern life is busy and demanding. Cheap foods and beverages are available
everywhere, but often they don’t contain the nutrients that your body needs every day. This is a
main reason why on a global scale we face problems with under-nutrition and lifestyle diseases.
Milk contains one of the richest combinations of nutrients that we can find in a single food
source. It provides us with calcium, high quality protein and many other minerals and vitamins
that children need to grow and that we all need daily to meet the challenges of modern life.
Milk is nutritious by nature. They process their milk gently to maintain the broad range of
vitamins, minerals and bioactive components that are naturally present in the milk. Arla
maintains the natural goodness of the product by using natural aromas and carefully selected
ingredients and additives. People’s health needs vary throughout life. To match specific needs,
they lend nature a helping hand and make their milk even better. It could be by adding protein,
probiotics, vitamins or fibres or reducing lactose. This way, they make it easier for people to live
healthy lives.

Arla Inspire Good Food Habits

If you know how to cook and know which foods are naturally rich in nutrients, you have
a better foundation for a healthy life. Arla wants to inspire good food habits that make it easier
for people to live a healthy life.

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Reason and Aspiration
Healthy eating is important for all of us to live longer, balance weight and reduce the risk
of lifestyle diseases. However, wholesome meals are increasingly replaced by highly processed
foods that are low in nutrients and high in sugar, fat and salt and do not meet dietary
recommendations. This has huge consequence for public health. The more we know about
nutrition, food, cooking and how to balance our diets, the better we’re able to make healthy
choices for ourselves and our families.
Arla wants to champion good food habits and inspire a healthy life. A healthy daily diet
leaves room for the occasional indulgence, which is also part of a good life. Through their wide
collection of online recipes, on-pack information, collaboration with retail customers,
inspirational events and educational programmes, they share their knowledge of what is good to
eat and how to prepare a healthy breakfast, lunch, snack or dinner.

Some of their activities

As per the website of Arla Foods, they covers several activities such as campaigns
emphasizing the importance of wholesome breakfast for better performance through the day;
Online recipes with nutritional information and weekly healthy menu planning; Better snacking
through the day – healthy snacking products available in places such as schools, gyms, hospitals
and amusements parks; Partnering programme in Bangladesh and Dominican Republic (SOS
Children Villages) to provide a daily glass of milk to less fortunate children to help improve their
learning abilities; Partnering the daily Swedish TV4 show and website “Vardagspuls”, which
inspires people to live a healthier lifestyle; Arla Foundation Food Camps to improve cooking
skills and food knowledge among school children in Denmark; Agenda-setting project for
eliminating malnutrition among elderly and patients in hospital (Denmark); On-line Arla
dieticians inspire and advice people to a healthier lifestyle, especially related to good food habits
(Sweden) and partner for the Swedish Olympic Committee to promote milk as Nature’s Own
Sportsdrink, including Olympic Days event, where children meet Olympic athletes and try
different sports, and other partnership with various sports events (www.arla.com).

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Arla Partner to Spread Knowledge about Milk & Health
They build partnerships with their retail customers to promote healthy products and
collaborate with scientists to learn more about the health benefits of milk and natural ingredients.
They explore how they can help people live healthier lives and contribute to the fight against
global lifestyle diseases and undernutrition.

Reason and Aspiration

Across the world, milk products are a recommend part of the daily diet from childhood to
old age. A growing number of people are able to afford milk products on a regular basis.
However, there is also a growing uncertainty about which foods are healthy and some people
have become milk sceptics. The need for knowledge and credible research on milk nutrition and
its role in addressing global health challenges is stronger than ever.
They invest in research into the health benefits of milk and how milk products with added
natural ingredients can make it easier for people to live healthy lives. They collaborate with
experts and openly share their findings to increase the knowledge among people of the
scientifically documented facts. They build partnerships with their retail customers to strengthen
their health profile and to make healthy products more available. To bring the benefits to more
people across the world, they also work to improve affordability and shelf life of their products.

Some of their activities

As per the website of Arla Foods, they cover several activities such as Arla Foods Executive
Advisory Committee, under this committee, their scientists work together with academics from
international research institutions to assess new scientific findings and to align their research and
product development to match the global health needs. They also initiated, Arla Research Center
for Dairy Health & Nutrition, a collaboration with Aarhus University and University of
Copenhagen with a reach to a network of international researchers. The aim is to strengthen
research into health and dairy-based nutrition. Preventing age-related loss of skeletal muscle
mass, they fund and participate in a research project on how changes in diets and exercise can
reduce age-related loss of skeletal muscle mass. The publicly funded project is a collaboration
between Arla Foods Ingredients, three faculties at University of Copenhagen and a range of

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public and private partners. It covers health care practices, clinical studies and product
development. Why milk is so efficient in delivering vitamin B12, they investigate why milk is so
efficient in delivering vitamin B12. The project is funded by the Danish Strategic Research
Council and is a collaboration between Aarhus University, Aarhus University Hospital and Arla
Foods Ingredients. Sustainable, healthy and affordable products for African markets, Arla is
parts of a project that aims to develop of sustainable, healthy and affordable products for African
markets based on a combination of protein from milk and plants. It involves the University of
Copenhagen, Aarhus University, University of London, Fan Milk International and Triple A. The
research project is funded by the Danish Council for Strategic Research. Optimal diet and gut
microbiota in early life, Arla is part of the Neomune Centre which is a collaboration between
University of Copenhagen, University of Aarhus, University of Giessen, Technical University of
Denmark and Sun Yat-sen University Guangzhou. The objective is to develop the optimal diet
and gut microbiota in early life to obtain better immune, gut and brain functions throughout life.
Increase health equality in Denmark, there is a growing social inequality in Denmark when it
comes to health. People with limited educational background are at greater risk of lifestyle
diseases due to poor diets, smoking and no exercise. Arla is participating in two projects with
The Danish Hart Foundation, the Lung Foundation and other partners to improve the lifestyle
habits for two groups: young people in trade schools and male workers. Male colleagues at four
Arla production sites are participating in the research and are offered a daily breakfast to
evaluate the impact of a good start of the day. The project is publicly funded by the Danish
Ministry of Health (www.arla.com).

Conclusion
Arla Foods is a very popular company in all over the world. To secure this popularity
they need to be careful all the time and adopt all the technological changes. Arla Foods Research
and Development team needs to work hard to find the way forward to meet the expectations of
future generation. Therefore, it is very important for Arla Foods to be strategically sound
regarding all marketing controllable aspects to penetrate more into the market or to hold the
existing market share.

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References

Arla Foods Bangladesh Limited (2017). Retrieved 07 August, 2017 from https://www.arla.com/
Mutual Food Products Limited (2017). Retrieved 07 August, 2017 from http://www.mutual-
bd.com/about.php
Bangladesh Brand Forum (2016). Retrieved 01 August, 2017 from
http://bangladeshbrandforum.com/best-brand-award/
Bangladesh Brand Forum (2015). Retrieved 01 August, 2017 from
http://bangladeshbrandforum.com/best-brand-award/
Bangladesh Brand Forum (2014). Retrieved 01 August, 2017 from
http://bangladeshbrandforum.com/best-brand-award/
Bangladesh Brand Forum (2013). Retrieved 01 August, 2017 from
http://bangladeshbrandforum.com/best-brand-award/
The Daily Star (2008). Gross Mishandling of melamine issue. Retrieved 03 August, 2017 from
http://www.thedailystar.net/news-detail-60019
The Daily Star (2008). Lab test confirms melamine presence. Retrieved 03 August, 2017 from
http://www.thedailystar.net/news-detail-57189
The Daily Star (2008). Melamine-free brands still off shelves. Retrieved 03 August, 2017 from
http://www.thedailystar.net/news-detail-61945

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