Dairy giant Arla rolls out organic milk in UAE, posing price threat to other brands

DUBAI - Arla Foods, one of the world’s biggest dairy companies, has launched its first own-brand organic milk in the United Arab Emirates, targeting the broader population with a recommended retail price cheaper than what's already on the shelves.

“We want to democratise organic. We want to target the broader population, from the lower middle class and upwards,” Rasmus Malmbak Kjeldsen, senior vice president of Arla’s operations in the Middle East and North Africa told Salaam Gateway.

Arla products sold in the Middle East are halal-certified by Netherlands-based Halal HQC, said Kjeldsen.

It will roll out its own-brand organic milk to the rest of the Gulf Cooperation Council (GCC) countries from January, starting with Saudi Arabia.

In the UAE, Arla’s recommended retail price for its 1 litre organic UHT milk is 9 dirhams ($2.45) and 2 dirhams for its 200 milliliter range.

UHT organic milk in the UAE market sells for between 10 and 15 dirhams, Salaam Gateway found with a check of local prices online at two hypermarkets and in-store prices at three smaller, organic retailers.

Organic Foods and Cafe, a member of UAE's Al Accad Group, retails its Organic Larder brand of Belgium-sourced 1 litre UHT organic milk for around 10 dirhams. UK's Daioni sells for around 11 dirhams, France’s Elle and Vire’s for around 14 dirhams, and United States’ Koita and Italy’s Granarolo for around 15 dirhams. 

Fresh organic milk retails for twice as high as UHT. Local brand Organiliciouz, which runs a dairy farm in Sharjah, retails its 1 litre fresh organic milk for around 20 dirhams.

Organiliciouz Dairy CEO Obaid Saqer Al Marri told Salaam Gateway the company will be affected by Arla’s entry. "Of course, it is going to affect us, because we are relatively young and still in our first stage," said Al Marri.

"We would feel threatened due to the lack of support young start-ups face. We have huge financial challenges, which include importing cow organic feed, as well as paying large amounts in listing fees with supermarket partners,” he added.

Organic Larder retails its locally-sourced fresh milk at around 22 dirhams.

However, Arla will not be competing in the fresh milk segment anytime soon but will first focus on its new launch. "In the short-term we do not see ourselves farming in the region. We want to see the potential realise itself first and then I wouldn’t exclude the option of longer-term having local production," said Kjeldsen.

The Danish co-operative is owned by 12,500 farmers in Denmark, Sweden, Germany, the UK, Luxembourg, the Netherlands and Belgium.

According to Kjeldsen the company produces 1 billion litres of organic milk a year. Its total output was 13.9 billion kilograms of milk in 2016.

“By being the biggest producer of organic milk we obviously have the scale. The scale brings down the costs,” said Kjeldsen.

He said that Arla hopes its prices for the UAE will be at a level consumers would tap into. “We realise that it is less of a premium than what you see today in the market,” he added.

The company behind brands such as Anchor, Castello, Lurpak and Puck is aiming for a 10 percent share of the existing UHT market in the Middle East in five years, said Kjeldsen.

“In terms of sales in the Middle East, by the end of 2022, we have the ambition of earning slightly less than 100 million euros under the whole Arla brand,” he said.

This will include the launch of a pipeline of other products, including non-organic dairy.

Its sales from outside Europe grew 10.15 percent for the first half of this year to reach 792 million euros ($932.9) compared to the same period last year due to higher sales prices and volumes, it said in its half-year financial report. Its international sales account for around 16 percent of turnover.

Arla's Europe revenue nudged down marginally to 3,177 million euros from 3,179 million euros for the first half of this year compared to the same period last year.

($1 = 3.6726 UAE dirhams; $1 = 0.849 euros)

(Additional reporting by Rachel McArthur)

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