In the report, CEO Peder Tuborgh said as Arla increases the scale of its international operations, the company acknowledges the impact on societies.
The report covers sustainable dairy production, with Arla noting it has decreased its climate impacts by 12.4% compared to 2005 levels, with a 25% goal by 2020.
Human rights assessments
To comply with UN Guiding Principles for Business and Human Rights, Arla conducts human rights assessments to investigate the potential impact of the company’s activities when considering entering into new markets, with products, production or partnerships.
In 2016, in-depth human rights assessments were conducted in several markets, including the Democratic Republic of the Congo, Egypt, Bangladesh and Indonesia.
Growth in Asia
Jesper Colding, who has led Arla’s Business Unit Asia in Malaysia since its inception in 2015, told DairyReporter Arla wants to keep growing its business in a responsible way.
“Proposing value added product to the marketplace is what we have in mind and I think we have very interesting ideas on a number of areas where you will see us growing, but we don't just want to grow to grow, or to move milk,” Colding said.
Colding said what Arla envisioned in 2015 with the start-up of the unit is what is happening.
“I think what we had envisioned a couple of years ago, in terms of the key things we wanted to do and where we would like to be now, is more or less what we're doing.”
Colding said while China is ‘the cornerstone of our Asian aspiration,’ the company continues to learn more about the entire region, and “being much closer to the market, we also see key opportunities arising there.”
Thinking beyond China
He said it was important to make the right choices, given the size of the region.
He pointed to Indonesia, Bangladesh and the Philippines as important markets.
“Bangladesh, where we actually have been for a number of years, obviously is a country that is developing. But we've seen very rapid growth in Bangladesh in the past couple of years and we think we can we can do a lot more together with Bangladesh consumers.”
Finding the right partners in each market is important, Colding said, adding that they look to “partners who know the market, who have a route to market, and a distribution capability in the market.”
Local production
In China, Arla has worked with Mengniu since 2012, and has a partner in Bangladesh, and Colding said Arla is looking for partners in the other markets to “really leverage what we can export out of Europe.”
As well as exports, Colding said Arla looks to set up local production in some of the markets.
Consumer acceptance
Colding said the perception of Arla in Asia, from a consumer standpoint, is a good one.
“The acceptance rate is high, there's a high level of trust in Arla – when you double click on the company Arla – and obviously in countries like China where digital and internet penetration is very high and you have 600m consumers on mobile phones – we are only a click away from consumers really investigating who we are,” Colding said.
“When consumers look behind the company, they like the story. They like the transparency.
“They like that we are really taking care of the milk through the value chain and they like the promise of health and goodness in the simplest way as possible and these type of consumer trends you see in many of the markets where consumers are becoming more affluent.”
Colding said the issue is no longer related to consumers feeding the family.
“The issue is more lifestyle issues and healthy food choices, where what we're trying do as a company plays well.”
Product growth areas
While China may be the cornerstone, Colding said there is still relatively low consumption of dairy products there.
“I think if you take the cheese market, then it's really early days. What we particularly see is the growth of foodservice and cheese.
“We put a cheese innovation center in place in Beijing a couple of years ago that has really worked with understanding consumer preferences, and what that means in terms of our own product development and R&D.”
And Colding said knowing what consumers want, and adjusting accordingly, is important to selling products.
“Adjusting and refining our own propositions is very much part of what we need to do,” Colding said.
“We cannot just export what we have out of Europe and then assume that that's going to satisfy a Chinese consumer.
“They are every bit as sophisticated a consumer and very well informed consumer as you would find in for example the UK.”