Arla Foods SWOT and PESTLE Analysis

Strength

1. Fastest growing FMCG brand in European markets: The Arla Brand is one of the fastest growing FMCG brands in European market. In 2019, Arla’s branding and communication teams in European market helped in strengthening the brand by delivering key initiatives to drive equity. It helped in scaling more assets across markets. They created a distinctive visual Arla brand identity. The brand identity has helped in recognition and saliency. The efforts on communication have helped Arla to highly perform on brand memorability and persuasion for all Arla brand advertisements. All Arla brand campaigns now convey their brand essence by providing an emotional platform with which they connect with consumers. Such initiatives have helped Arla strengthen as a first-choice brand.

2. B2B sales to other companies: Arla along with its sales channels, also conducts business to business sales to other companies. These companies use Arla’s products for their production. Arla also is involved in industry sales of cheese, milk powder and butter. These activities are called as trading. Dairy market is becoming more volatile and it is extremely difficult to predict milk volumes required. In this case, trading helps a lot since it allows to manage this seasonal and geographical variability in milk intake. It ensures Arla is able to process and sell all the milk delivered by the members. The increase in trading capacities in higher value commodities such as mozzarella and fat-filled milk powder has helped Arla in strengthening its business. It presents Arla with more options to manage the milk-pool. Even though trading is not a core business segment for Arla, it is important for its success. The revenue from trading accounts for almost 15.2% of total revenue of Arla in 2019.

3. Practicing sustainable dairy farming: Our farmer owners produce around 13 billion kilo of milk each year. Arla milk is already some of the most climate efficient in the world, with a CO₂e emissions intensity approximately half of the global average. As we understand more about climate change and how to fight it, we must evolve even further, and with even greater urgency. Our on-farm Climate Action Plan is being implemented to improve on the effective programmes we already have in place.

Weakness

Opportunity

Threat

Political

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Economic

1. Economic slowdown and declining dairy consumption: Demand and consumption growth The latest available global dairy consumption numbers show a significant drop in the per capita consumption growth of Western markets, from 2.5 per cent in 2017 to 0.5 per cent in 2018. Dairy consumption growth in emerging markets also slowed down from 4.4 per cent in 2017 to 3.3 per cent in 2018. In absolute numbers, approximately 85 per cent of dairy consumption growth was driven by emerging markets. From a category perspective, cheese consumption increased by 0.8 per cent in the European markets, while milk and butter slightly decreased, with 0.4 and 0.2 per cent respectively. Volumes for ready-to-drink coffee and mozzarella grew across all major European markets.

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Social

1. Transformation of consumer preference to plant-based alternatives: The global dairy alternative market in 2017 was estimated at $11.9 billion and has been growing rapidly. The plant based dairy alternatives are showing 6% better return than traditional dairy products. Consumers are now following this trend. In Britain, 25% of people are going for plant-based milk with 33% of young people going for it. The changing taste and consumers’ willingness to try new has been driving the increase of plant-based alternatives. Plant-based alternatives are available in multiple varieties giving the consumers a lot of options to choose from like almond milk, hazelnut milk, other nuts, coconut, quinoa, pea etc. These plant milks are called as mylks. In UK, the plant milk sales have grown up by 30% since 2015. Animal cruelty, industry’s environment impact and increased lactose intolerance have led to this shift from cow milk to plant milk. Arla also has decided to add plant-based products in its portfolio to meet the increasing demand.

Technological

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Legal

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Environmental

2. Changing products labels to tackle food waste: In United Kingdom, a research showed that consumers were confused about food products labelling specially in use-by and best before dates. A poll of 2000 people by Arla showed that only 15% of respondents were clear about the labels and understood them properly. In order to address this, Arla Foods replaced all use-by dates on its branded fresh milk with best before dates. This helped in more clarity to the consumers and helped in reducing food waste.

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