Interview with Peder Tuborgh, CEO, Arla Foods

04 Nov Interview with Peder Tuborgh, CEO, Arla Foods

A prominent player in the global dairy industry, Arla Foods has grown into Europe’s largest dairy group over the last 23 years and has a central role in Denmark’s food and dairy sector. What is your strategic vision and goals for Arla Foods and the company’s main priorities heading into 2024?

I have served as CEO for the past 18 years and throughout a significant part of that period, and still to this day; we have been propelled by a vision that declares Arla Foods as the creator of the future of dairy, aiming to bring health and inspiration to consumers in a natural way. This encapsulates our identity. We are deeply rooted in nature and committed to natural principles — the two are inherently intertwined. This commitment extends to our belief in green labels, non-GMO products and a focus on health and nutrition.

We firmly believe that we, and the dairy industry as a whole, play a crucial role in nourishing the world. Considering the prevalent issue of malnutrition, with close to a billion people not receiving adequate nourishment and many others consuming inappropriate nutrition, we see ourselves as contributors. Looking ahead to 2050, when the global population is expected to grow by a billion, we anticipate a shortage of protein. Dairy, being an excellent source of protein, places a responsibility on our company to play a role in addressing this global challenge, extending our impact beyond Scandinavia and northern Europe to contribute to feeding the world.

Our commitment is centered on creating the future of dairy, an ethos I instilled in the company years ago in collaboration with my board. This ethos allows and encourages our employees, regardless of location, to consistently innovate. Innovation for us is not confined to product development; it encompasses technological advancements, new ideas and novel concepts, spanning even into the realms of finance. We continuously scout the landscape, anticipating what’s new and noteworthy, crucial for our success and the entire sector. This is the essence of creating the future of dairy.

Please share some insights into crucial development policies, growth areas and supporting data points guiding Arla’s trajectory.

The strategic period we are currently navigating is termed Future 26. While the connection to our vision is somewhat coincidental, we firmly believe that the fate of dairy, within the global context of climate change, sustainability and broader ESG considerations, hinges on our success in guiding our farmers through their climate journey.

Farmers worldwide are grappling with the methane issue related to cows and the imperative to find sustainable solutions. Over the years, we have actively engaged in robust scientific programs. We are implementing what could be one of the largest verified climate databases at the farm level. This database, which expands annually, is among the most extensive in the world. Each of our nearly 10,000 farmers in Northern Europe undergoes a Climate Check twice a year, providing insights into their climate impact and whether they are leveraging this data to reduce emissions.

Recently, we introduced a substantial incentive program, currently the world’s largest, compensating farmers for adopting climate-friendly practices. With around 50 to 60 actions available to farmers concerning animals, land and manure, we have initiated a program that could pay farmers up to €500 million annually based on their climate journey.

Additionally, we have deployed over 300 advisers to work with individual farmers across seven Northern European countries, offering financial and climate-related guidance. Early feedback indicates a positive trend in farmers reducing their climate impact, aligning with our cooperative goals.

This comprehensive initiative, encompassing both the Climate Check and the incentive program, is known as Farm Ahead. The substantial investment in this program reflects our conviction that the future and destiny of dairy will be shaped in the coming years. The imminent formulation of policies, particularly at the EU and national levels in Europe, will delineate possibilities and constraints for farms. Our fundamental objective is to equip our farmers to steer their destiny in the face of these upcoming policy changes. Establishing control over their climate journey is paramount in ensuring their viability as farmers in the evolving landscape.

In shifting international markets, what factors influence Danish agriculture’s global competitiveness, responsibility and innovation? What affects your competitiveness on the global scale?

Despite being a Danish company, we consider ourselves a Northern European entity. Over many generations, farmers in our hemisphere have consistently elevated their quality standards. Focusing on Denmark, the birthplace of our operations, we can trace back to years ago when the country implemented stringent legislation, particularly in food production and dairy, setting high-quality benchmarks. This legacy has extended beyond to encompass sustainability and climate considerations, marking a path toward the future.

As a nation, Denmark possesses an inherent DNA, reflected in its legislation, demanding elevated standards across sectors, including food and dairy. This has prompted individuals on farms, in dairies, or within various operations to seek financially viable solutions that align with these rigorous standards. Notably, Denmark stands out as a country quick to implement EU legislation, a characteristic deeply ingrained in its DNA and upheld through generations.

In the dairy context, this proactive approach has kept us on our toes. As new legislation surfaces, whether at the farm level or elsewhere, Denmark has consistently adapted, enhancing our standards. This commitment has earned us a global reputation for maintaining high-quality standards across all operations, serving as the cornerstone of our export success.

The dairy industry is being transformed and driven by shifts in consumer behavior, like the rise in online grocery shopping and a preference for on-the-go meals. In tandem, Arla Foods is strategically expanding into new markets like China, Southeast Asia and West Africa. How are you going to address the increasing global demand for dairy products?

While consumers vary culturally worldwide, the differences are less substantial when examining the consumption and perception of dairy, especially as a healthful and nutritious staple one aspires to have from infancy through life. While there may be a cherished preference for yogurt in Denmark that differs from China, the fundamental approach to understanding and adapting to consumers, regardless of their location, is a core aspect defining our company.

Are there any other collaborative initiatives, perhaps with like-minded partners, that you’re doing to promote sustainable practices within the sector?

In 2005-2006, when I assumed the role of CEO, I actively participated in an initiative that held significant importance. Arla Foods was among the founding members of the Global Dairy Platform, a consortium comprising major and medium-sized dairy companies globally. This platform serves as a hub where we collectively instigate and engage in discussions about dairy research, consumer insights and, presently, the crucial sustainability and ESG aspects shaping our future in the dairy sector. I have been a continuous contributor to the Global Dairy Platform, serving on the board for years, with periodic rotations among board members. This collaborative effort, initiated alongside three other companies, remains a noteworthy part of our journey.

Arla US is integral to Arla Foods’ global network and is crucial in bringing high-quality dairy products under the Arla brand to the American market. Considering the new Arla offices in Jersey, what is the company’s strategy for growing its brands in the US market?

Compared to other dairy providers in the US, we consider ourselves a niche player. The larger American dairies excel in serving the domestic market, which is substantial. Our presence in the US has been marked by a focus on speciality cheese products, particularly within the high-end brand segment. Notably, we feature the Arla and Castello brand, renowned for its Havarti production in Hollandtown, Wisconsin where we also maintain local production facilities.

It’s essential to note that our approach in the US is characterized by a degree of caution. We specialize in a narrow range of highly specialized products. Our target consumers are those seeking distinctive and innovative offerings. We do not venture into everyday milk and cheddar products; that is not our market segment.

Unlike our prominent role in Europe, our position in the US market is more centered around delicacies. The domestic players in the US possess considerable strength in this realm, rendering our unique offerings more aligned with consumers’ preferences, seeking distinct and novel products.

In collaboration with product development teams across the globe, Arla Innovation Center is at the forefront of driving innovation in the dairy industry. With cutting-edge facilities, Arla excels at delivering quality dairy to consumers worldwide. How does Arla actively engage across the dairy value chain to drive R&D and enhance productivity and output?

Here, I need to return to the Global Dairy Platform as it serves as a meeting ground for advancing technologies, cultivating research-based insights into dairy, understanding the nutritional aspects of dairy, and delving deep into the significance of dairy’s protein and fat components. We invest substantial resources in this area and dedicate significant time to it.

As you approach two decades of leadership at Arla Foods, what are the most significant accomplishments you and your team will reflect on?

We recognize that we can’t accomplish this goal in isolation but must join forces to provide nutrition for a world with an increasing demand for healthy sustenance, both today and in the future. Moreover, we emphasize the importance of producing food sustainably. This stands out as one of the most critical considerations for a dairy company, guiding how we structure our research and development, innovation, and technology endeavors.

Our commitment extends beyond merely catering to the population in Scandinavia or the UK; we are focused on nourishing people in rapidly growing regions worldwide. This involves the intricate challenge of creating affordable nutrition — a complexity we willingly embrace as a responsibility.

Is there anything else you would like to highlight to those readers considering investing in Denmark and/or partnering with strong Danish companies like Arla Foods?

As a company and representative of Denmark, we inherently embody a collaborative and open-minded spirit. Hailing from a small country of around five million people, our historical and future outlook emphasizes the necessity of collaboration and a deep understanding of the global landscape. We acknowledge our small size and recognize that isolating ourselves on a figurative “small island” named Denmark is not a viable approach.

Observing numerous successful Danish companies and aspiring to be perceived similarly, you’ll find a common thread of collaboration, open-mindedness and a commitment to building relationships founded on trust — an indispensable element in the business world.