Starbucks is proving a lucrative partner for Danish dairy cooperative Arla Foods, which reports revenue growth of 13% in its strategic brands in the first half of 2022, but warns falling global milk production is expected to hinder full year results
Arla Foods has reported increased at-home and on-the-go consumption of its Starbucks RTD beverages | Photo credit: Starbucks
Arla Foods has weathered 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, which has been manufacturing and marketing drinks for Seattle-based coffee chain Starbucks since 2010, attributed significant price increases in its retail and food service and commodity trading businesses as driving growth.
Arla Foods said its Starbucks partnership, which was extended for 21 years in 2018, had outperformed expectations at 19.5% due to increasing at-home and on-the-go consumption of the chain’s milk-based ready-to-drink (RTD) coffee beverages.
Arla Foods also reported its Starbucks product range as having benefitted from new market opportunities in the Middle East and North Africa (MENA) and Southeast Asia.
The company’s international business segment achieved revenue growth of 18% to reach €1.04bn ($1.04bn), while its European and UK business segment increased 10% to reach €3.53bn ($3.54bn).
In July 2022 Arla Foods announced $43.3m investment to expand its Esbjerg production plant to meet growing global demand for RTD chilled coffee beverages. The company said that the expansion will increase production capacity by approximately 20%, whilst also expand packaging lines and cooling areas at the dairy plant.
However, the Danish company expects global milk production to decline further in the second half of 2022, weakening consumer confidence and consumption. Therefore, it has lowered its revenue expectations for full year 2022 to €13.5bn ($13.5bn).
As a result of 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 said this will support future investments.
“Changes in consumer behaviour continue to be multifaceted and difficult to predict and we expect our branded growth will slow down further. As a cooperative, we remain committed to be in a position to pay out the second instalment of our planned full year supplementary payment of a total of at least 1.5 EUR-cent per kilo of milk to our farmer owners,” said Peder Tuborgh, CEO, Arla Foods.