Announcing its 2014 financial results, Arla described the year as one of "two so opposing halves" that began with "strong economic tail winds" that gradually turned to "head winds" as supply began to outstripped demand and Chinese consumption "ebbed off."
These head winds "grew in strength" in August 2014, when Russian Prime Minister Dmitry Medvedev introduced a one-year ban on the import of agricultural products from the European Union (EU), the United States, Australia, Canada, and Norway.
"2014 showed that the global milk price is extremely volatile, and therefore Arla cannot announce any expectations for its revenue nor the performance price for 2015," said Arla.
Record results
Despite such volatility, Arla Foods reported revenue of €10.6bn (US$12bn) for the year - up from €9.87bn (US$11.2bn) in 2013.
Profit also jumped, from €295m (US$336m) in 2013 to €314m (US$357m).
Arla's 13,500 dairy farmer owners across Denmark, Sweden, the UK, Germany, Belgium, Luxembourg, and the Netherlands, supplied 11.7bn kilos of milk in 2014, up from 9.5bn kilos in 2013.
Performance price, which indicates the value generated from each kilo of milk supplied, also increased from €0.41 in 2013 to €0.417 in 2014.
“In a rollercoaster year for the global dairy industry, Arla’s strong brands and focus on efficiency and cost control enabled us to make the most of the upturn and to be competitive through the downturn,” said Peder Tuborgh, CEO, Arla Foods.
“Market conditions and the Russian embargo are making the financial situation difficult for our owners, but we have worked hard to minimise the effects by sticking to our strategy of creating growth outside Europe and strengthening our business across our European core markets.”
Despite stunted access to Russia, which accounts for around 1% of Arla revenue, from August onwards, the company's international business reported growth of 14%.
“There has been steady growth of 20% in the Middle East and Africa," said Frederik Lotz, CFO, Arla. "In 2014 we have begun to enter new markets in Asia and Africa, and in 2015 we will continue to move into markets where safe and high-quality dairy products are in growing demand."
"Continuing challenge"
Denmark supplied Arla with more milk than any other country in 2014.
The UK, however, remained the largest market for Arla in terms of revenue.
With sales of €2.8bn (US$3.2bn), the UK represented 27% of overall revenue.
"The UK business has delivered in a very challenging market and we have embedded some of the measures needed for sustainable growth in the long-term," said Peter Giørtz-Carlsen, executive vice-president, Arla Foods UK.
"We are acutely aware of the continuing challenge, but it is vital we remain firm in our approach to build an organisation that is competitive today and into the future."
“Our focus remains on adding value to our owners’ milk by improving our efficiencies, and having a strong position across all our dairy categories and global brands as well as maximising our revenue by moving our milk into the categories that offer us the best returns," Giørtz-Carlsen added.