Arla Foods Sees a Relative Growth in Sales After Its Partnership With Starbucks

Arla Foods, a Danish dairy company, has bared up against and come safely through uncertainty in the global dairy supply chain to achieve revenue growth of 17% for first half of 2022, reaching €6.38bn ($6.39bn). 

The Danish dairy company has been manufacturing and marketing drinks for Starbucks, a Seattle based coffee chain, since 2010. They have attributed significant price increases in its retail and food service and commodity trading businesses as driving growth.

Arla Foods claimed that its Starbucks partnership had surpassed expectations at 19.5%. This was mainly due to the fact that their at-home and on-the-go consumption of milk-based ready-to-drink (RTD) coffee beverages have increased. The partnership was extended for 21 years in 2018.

Arla Foods also reported that its Starbucks product range has benefitted from new market opportunities that came with setting up bases in the Middle East and North Africa (MENA) and Southeast Asia.

The international business segment of the company achieved revenue growth of 18% to reach €1.04bn ($1.04bn). On the other hand, its European and UK business segment increased 10% to reach €3.53bn ($3.54bn). 

In July 2022 Arla Foods announced an investment plan of $43.3m aimed at expanding its Esbjerg production plant. This comes as the global demand for RTD chilled coffee beverages is increasing tremendously. The company reported that the expansion will increase production capacity by approximately 20%, and at the same time also improve and make the packaging lines and cooling areas at the dairy plant more efficient.

However, the Danish company is aware that it is not going to be all good in 2022, and have accordingly set their expectations. As per predictions, global milk production is going to decline further in the second half of 2022, resulting in weakening of consumer confidence and consumption. Therefore, it has lowered its revenue expectations for full year 2022 to €13.5bn ($13.5bn).

To counter the rising costs of production, Arla Foods will pay out its first ever half-year supplementary payment to farmer owners of 85p ($1) per kg of milk based on the milk volumes delivered in the first half of 2022. The company hopes that this will support future investments.