Arla Foods announces structural changes to cut costs

Swedish-Danish dairy cooperative Arla Foods has announced plans to cut costs by DKK500m ($85.76m) across its global operations, in order to keep up with international competitors.

Under the restructuring plan, the cooperative will eliminate 250 administrative positions before the end of 2012, and restructure another 150.

According to Arla, the changes will lower complexity, ensure clearer job roles and responsibilities, and are necessary for offering better prices to cooperative owners.

The cooperative will also lower its investment in market research and analysis activities as well as procurement costs on packaging and other materials.

Arla CEO Peder Tuborgh said that while Arla’s turnover is increasing, it has a responsibility towards its owners and other dairy farmers to ensure that the turnover rises significantly faster than the cost.

"Our international competitors are able to turn ideas into action quicker than before and, therefore, Arla needs a more simple and structured way of working," Tuborgh added.

Arla said that it will continue to seek opportunities to improve the administrative structure and also evaluate the global production structure to identify efficiency measures within the chain.

Earlier this year, Arla announced that it will be investing DKK1.8bn ($308.63m) to boost production and to create a stronger dairy structure.

About half of the investment will be allocated to capacity and rationalisation projects, while DKK246m ($42.18m) will be invested in projects in the ingredients division, including a new drying tower at Denmark Protein in Videbæk.

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Image: Arla Foods has announced plans to eliminate 250 jobs in the course of 2012. Photo: Arla Foods