Farmer-owned Arla Foods has revealed its plans to build an innovation center in Nr. Vium, Denmark to “unleash the wonders of whey,” by 2021. Part of Arla Foods Ingredients, the new center will be home to leading scientists and innovators who will discover and deliver new ways of using milk and whey to serve the needs of the world’s growing population, according to the company.

Arla’s belief in innovation is the key to unlocking the future of dairy was demonstrated when it opened the Arla Innovation Centre (AIC) in Skejby, Denmark last year. With the €36.3 million (US$42.15 million) investment, Arla is now creating a hub for research and development innovation within whey and milk-based ingredients.

Peder Tuborgh, CEO of Arla Foods, explains: “The world’s population is growing, which increases the need for healthy and sustainable food. It is a big challenge, and for Arla, we want to be part of the solution. We know that dairy nutrition can play an important role in securing a healthy and balanced diet for people across the world, and with this innovation center we will use cutting-edge research and technology to explore milk and whey to their full potential as ingredients for a wide range of nutrition.”

The investment in the innovation center, which is expected to open in 2021, was recently approved by Arla Foods’ Board of Directors, supporting the company’s strategic focus on innovation. The center will be part of Arla Foods Ingredients (AFI), the Arla subsidiary that has transformed whey from what was once considered a waste product to premium, high-quality ingredients used for infant nutrition, clinical nutrition, sports nutrition, health foods and other foods and beverage products.

Henrik Andersen, Group Vice President of Arla Foods Ingredients, also comments: “Our customers are always looking for new solutions to adapt to changing consumer demands. Our focus is to explore all the components in the milk and whey and combine them to enhance the nutritional or functional value of a product. Together with our customers, we will explore this even further in our new innovation center to help them develop new products that meet the specific nutritional needs of children, athletes, patients and consumers.”

The new center, located in Nr. Vium, Denmark close to Arla Foods Ingredients’ (AFI) largest production site, Danmark Protein, will create a unique environment for process development and pilot production, according to the company. At the center, scientists, technicians and innovators will cover all aspects of research and development within whey and milk – from advanced separation technologies to isolate specific components of the whey or milk, to heat treatment and pasteurization technology to improve functionality and shelf-life.

Niels Østergaard, Vice President Research and Development, Arla Foods Ingredients, tells: “As a company, we believe that innovation is the key to unlocking the future of dairy. With AFI being Arla’s most profitable commercial segment, an investment in a new innovation center is an investment in future growth for AFI and thus all farmer owners in all areas.”

“At the new innovation center, our focus is to explore all the components in milk and whey and combine them to enhance the nutritional or functional value of a product as well as looking for new solutions to adapt to changing consumer demands,” he explains. “We also want to focus on exploring all the components in milk and whey and combine them to enhance the nutritional or functional value of a product.”

According to Østergaard, the center will employ up to 90 people.

Currently, approximately 70 scientists, technicians and engineers are working with innovation in Arla Foods Ingredients, but according to Henrik Andersen, the innovation center will provide even more opportunities.

“The colleagues working with innovation in AFI are among the most talented in the world and it is our ambition to continue to attract the very best caliber of colleagues that share our mission of discovering and delivering all the wonders whey can bring to people’s lives. This will be an exciting place to work with the most challenging development projects in the dairy industry,” Andersen claims.

Arla bounces back from a tough first quarter
The news comes as Arla Foods reports that it has improved its profitability and delivered revenue growth of 2.2 percent to €5.1 billion, driven in part by the company’s strategic brands in the first half of 2018 and rebounding milk prices after a weak first quarter. With a stable outlook for the rest of 2018, Arla expects to reach its full-year targets for net profits, branded growth and to exceed its expectations for cost reduction through its restructuring program Calcium.

The first half of 2018 was characterized by challenging market conditions with a continued weak currency and unfavorable development in both fat and protein prices. However, price levels began to improve in the second quarter of 2018. Despite higher retail prices consumers remained attracted to Arla’s strategic brands across categories.

In the first half year of 2018, Arla delivered a net profit share of 2.2 percent, up from last half year’s profit share of 2.1 percent. The company expects to reach its full-year net profit share to be within the 2.8 to 3.2 percent target range.

Operational costs increased in the first half year as a result of inventory revaluation from changes in milk price, higher sales volumes, as well as increased inflation-driven costs for energy and transportation.

“It was a tough start to 2018 as we took urgent action to repair our bottom line, which was impacted by the double-whammy of a weak British pound and unfavorable prices. This urgency delivered a positive result as we were able to improve our profitability and the performance of our milk price over the period. However, there is more work to be done as we continue to relentlessly execute our transformation program, Calcium, which will further improve our performance,” says CEO of Arla Foods, Peder Tuborgh.

Calcium delivers
Early in 2018, the three-year transformation and efficiency programme Calcium was announced by Arla’s management to reduce cost by €400 million. In the first half of 2018 Calcium was already able to deliver the first positive contributions of €9.5 million. For the full-year of 2018, Arla expects Calcium to provide a positive contribution of at least €50 million, up from the initially forecasted €30 million.

“I’m pleased to say that Calcium is starting to deliver – every week we see steady progress across the program. Our top management, leaders and employees are working adamantly on each initiative that will enable us to pay a more competitive milk price to our farmers, compete more effectively in the markets and categories we operate in worldwide and boost the strategic investments that will sustain our long-term profitable growth,” notes CFO in Arla Foods, Natalie Knight.

Of the €400 million Calcium is expected to deliver by 2021, Arla aims to direct €300 million to its farmer-owners via the prepaid milk price while reinvesting €100 million into areas that fuel growth.

Full-year expectations
For the full year, Arla will remain focused on balancing branded growth in a higher retail price environment. Continued execution of the transformation program Calcium will be the company’s other key priority. Arla’s revenue outlook for the full year 2018 is expected to be €10.0-10.5 billion and Arla’s branded growth is expected to be at the high-end of the previously communicated target range of 1.0-3.5 percent.

Net profit share for 2018 is expected in the targeted 2.8-3.2 range.

“Unpredictable weather conditions and market volatility have unfortunately become constant companions to the dairy industry and the current situation signal caution for the coming months. However, we have taken urgent action to secure that Arla remains a strong and competitive cooperative for our farmer-owners, as we continue to provide high-quality, safe and sustainable food to the world’s growing population,” concludes Tuborgh.