Danish dairy giant: Middle East boycott to cost US$64 million
The boycott of Danish products in the Middle East will, on average, cost Arla Foods’ 10,000 Danish and Swedish farmers DKK 40,000 (US$6,400) each. So far, Arla’s annual loss from the boycott has been calculated at DKK 400 million (US$64 million). This, however, assumes that Arla’s cheese and butter products will return to Middle Eastern stores reasonably soon, and that, before the end of 2006, Arla will have recovered 50% of its pre-boycott volumes. Considerable uncertainty, therefore, is attached to the figure.
”Our challenge is to regain consumer confidence in the Middle East,” Managing Director Peder Tuborgh told Arla Foods’ 140 co-operative members and 10 staff representatives gathered at the Board of Representatives’ meeting in Aalborg on Wednesday and Thursday.
The US$64 million loss derives from lost revenue from the Middle Eastern markets and the fact that surplus milk is currently being sold at a loss as industrial butter and milk powder. ”Despite the difficult situation, we believe that Arla has a future in the Middle East,” adds Peder Tuborgh. “Over 40 years, we have worked hard to build our brands in the Middle East in order to provide our co-operative members with a stable income. As a result, we have an intimate knowledge of the market and we will not give up easily.”
The DKK 400 million loss equates to 7 (Danish) øre per kilo milk. At its meeting next week, however, Arla's Board of Directors will consider the loss' impact on the milk price paid to the individual milkproducer.
Last year, Arla’s turnover in the Middle East totalled DKK 3.2 billion (US$512 million), of which two-thirds derived from Saudi Arabia.