TURNING A CRISIS INTO £10M INCREMENTAL PROFIT

THE PROBLEM:

In 2016 there was widespread outrage at what farmers were being paid for their milk as the commodity price across Europe had crashed to such an extent that farmers were struggling to make enough money to cover their costs.

THE SOLUTION:

Give shoppers an opportunity to pay more.

The insight was that 63% of shoppers in a YouGov survey said that they wanted to pay more for their milk if that money went to the farmers.

But there wasn’t a product on the market that offered them a chance to do that.  As a farmer owned cooperative Arla was in a perfect position to give shoppers an easy way to make a tangible difference to farmers up and down the country.

In a bold move Arla created a brand called “Farmers Milk” where the price was proudly 25p per bottle more expensive than the own label equivalent.  The milk was exactly the same.  But importantly, this premium went straight back to the farmer owners of Arla.

Arla partnered with Asda & Morrisons to create the right commercial agreements to ensure that happened, combined with a compelling category story to secure the right facings in store.

THE RESULTS:

So, for the cost of a new label design Arla switched 100m litres of own label standard fresh milk into Arla Farmers Milk and generated £10m additional profit in the first 12 months.

Not bad.