Providing More and Better Milk

Got milk? In Mexico, apparently there is not enough. “There is a 30 percent deficit of milk production in the country, while the European dairy market is producing more than what the continent needs,” says Janus Skøt, General Manager of Arla Foods. He says Mexico’s dependence on milk imports represents a significant opportunity for the European company. “The consumption here is higher than the national production and Arla Foods is focused on filling the dairy gaps in Mexico with innovative products to offer healthy and nutritious options.”
At present, Europe accounts for 70 percent of Arla Foods’ current billing. However, according to Skøt, “there is not much growth or demand in Europe.” Much of the global demand is located outside the EU and the company is able to distribute its products in these markets thanks to a cooperative of 14,000 farmers from the UK, Denmark, Sweden, Germany, Belgium, Luxembourg and The Netherlands. Together, they produce 14 billion kilograms of milk per year, while the entire national production in Mexico is 11 billion kilograms.
The Food and Agriculture Organization (FAO) recommends per capita consumption of dairy products equaling 150kg per year. In Mexico, according to the 2012 Ministry of Economy Analysis of the Dairy Sector, milk consumption is insufficient: 110kg per capita. According to FAO, many developed countries have established regulations to guarantee milk supply. As a result, their individual consumption is more than 150kg and they are able to supply for developing countries.
Owned by its farmers and considered the fourth-largest dairy company in the world, Arla Foods has four global brands sold in more than 100 countries and it is also the largest distributor of organic milk in the world. The company is the result of a fusion of two Scandinavian companies: MD Foods, from Denmark, and Arla, from Sweden. The group has 60 manufacturing plants, each focusing on the production of one category. In 2016, the grouo had revenue of approximately EU$10 billion. Arla Foods’ value proposition to lead Mexico’s imports is to offer healthier and more natural products. “There are not many organic products in Latin America. We want to offer products for a healthier community, without artificial additives, with less sugar, fat and sodium,” Skøt says. Such is the case of its most innovative products: Kids milk, or the fortified milk of its brand ABC Kids. “Our Kids milk has 26 vitamins and 19 percent fewer carbohydrates than other similar products in the market.” Also, the formulas for its Gold Lines include probiotics that help children’s digestion.
The company’s growth strategy is based on producing more specialized dairy products that result in higher returns for the farmers. “We have enough milk. We are fine with the amount we produce, but now we are trying to maximize the value of this milk through the development of innovative products.” Skøt explains the price is very low and the return is not so big when commercializing a bag of 25kg of powdered milk, but when the same amount of milk is transformed into more sophisticated products like certain types of cheese, butter or milk, the price of milk per kilo increases in value. He believes, in the long term, this is a better commercial strategy.
Arla Foods is also competing with high standards that guarantee the security of its production and distribution. “If the consumer is looking for a product that guarantees transparency along the value chain, we are the choice.” According to Skøt, this transparency is a result of the cooperative model of leadership. “We are a cooperative. The owners are the farmers who supply the milk to all the companies that belong to the group.” If something happens to one product, they can return to the farm where the milk was produced and report problems there. “We are not blind to the most important part: the milk.”