ZURICH - Dairy cooperative Arla Foods on Thursday raised its full-year sales outlook citing strong demand for products such as Starbucks ready-to-drink coffee beverages but warned that cost inflation would weigh on margins.
Arla Foods said first-half sales volumes under a long-term agreement to make and distribute Starbucks' pre-packed products such as canned coffee in Europe, the Middle East and Africa grew 43%.
The rise was driven by the launch of new products as well as fewer coronavirus restrictions boosting on-the-go consumption, CEO Peder Tuborgh said.
"It's partly because of the recovery," Tuborgh told Reuters in an interview. "But we actually saw through the complete lockdown that the Starbucks brand was a brand people bought and took back home."
Arla Foods, owned by over 9,400 farmers in Denmark, the UK, Sweden, Germany, Belgium, Luxemburg and the Netherlands, now expects full-year revenue in the range of 10.6-11.0 billion euros, up from 10.3-10.6 billion previously, and maintained its net profit forecast at 2.8-3.2% of revenue.
"The inflationary environment is coming very forcefully and fast," Tuborgh said, citing energy, feed and packaging prices and bottlenecks for some ingredients due to the pandemic.
"It hasn't been seen in consumer prices yet, but we will see it in consumer prices, not only in our sector," he said, adding it was not yet clear by how much prices for dairy products would rise.
Arla Foods' first-half group revenue rose by 1.2% to 5.44 billion euros ($6.40 billion).
The company was also impacted by supply chain issues in Britain, where Arla generates around a quarter of its sales.
"There are issues due to a lack of truck drivers in the UK, that hit Arla and the industry, our retailers have issues in their distribution ... we could sell more if we had that sorted out," Tuborgh said.
Arla is a supplier to McDonald's, which had to take milkshakes off the menu in Britain this week due to supply chain issues.
($1 = 0.8504 euros)
(Reporting by Silke Koltrowitz; editing by Jacob Gronholt-Pedersen and Jason Neely) ((email@example.com; +41 41 528 3638;))