Blog: Dean BestAmbitious Arla sets out stall

Dean Best | 3 November 2008

Hidden among the mountain of third-quarter results last week, it was news of dairy giant Arla Foods' plans to shake up its global operations that really caught the eye.

After a wide-ranging review, Arla has laid out plans that it believes will strengthen the business and position it firmly among the sector's heavyweights. Investment in product innovation will double, its stable of brands will be consolidated (including the creation of a new, namesake brand) and markets including the US, Russia and China will win a greater share of Arla's spending. For a company the size of Arla, it is an ambitious strategy.

Outlining Arla's five-year plan, CEO Peder Tuborgh admitted the next phase of the company's history would be "an enormous challenge". However, he added: "It's not impossible for us to achieve our objectives and it is important for us to give our all and gain ground."

Arla's overhaul should be seen through the prism of the wider dairy sector. Dairy watchers believe the industry is ripe for further consolidation. The merger of Dutch groups Campina and Friesland Foods, once it wins EU approval, is expected to be the first in a number of such deals. Indeed, Arla intimated to just-food that it is eyeing tie-ups in Europe, so expect more changes on the dairy landscape in the months ahead.

The US food industry could be set to see something of a tidal-shift over the next year - at least in the way its products are labelled. A number of the country's largest food makers - including General Mills and ConAgra Foods - have signed up to the Smart Choices Program, a labelling scheme designed to give US consumers more information on the nutritional content of their food. The Smart Choices symbol and nutritional information will start appearing during the middle of next year and could herald a transformation in the way food is marketed in the US. Nevertheless, as ever, there will be questions as to how far a labelling initiative can solve such a multi-faceted issue as obesity.

One US company cutting down is Wal-Mart, which last week announced that it would cut capital spending on its domestic stores by a third this year and slow the pace of store openings. The world's largest retailer then signalled its belief in the potential of the emerging retail markets with plans to shift more capital towards faster-growing countries in the next five years. "You will see in the next five years more of a shift towards the emerging markets of the world," Mike Duke, Wal-Mart's vice president of international markets, told analysts last week. "Those markets like Brazil that we're really pleased with, and markets like China."

As ever, those emerging markets have been grabbing your attention in recent days. While a just-food research report highlighted the promise of China's packaged food and retail sectors, retailers in Russia caused some concern over their financial health as they navigate the stormy waters of the economic downturn with news of a multi-million dollar government support package. Could some of Russia's less robust retailers soon be picked off by a multinational?


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