Boycott costs Arla 500 million

Swedish-Danish dairy company Arla says it will lose 507 million kronor due to a boycott of its products in the Middle East, and has indicated that the figure could rise further.

The company has suffered due to anti-Danish sentiment in many Middle Eastern countries following the publication of the controversial Muhammad cartoons in Danish newspaper Jyllands Posten. The losses were compounded by the fact that Arla has been selling surplus milk at a loss as industrial butter and milk powder.

Arla, which is owned by Swedish and Danish farmers, says that its loss will cost each farmer an average of 40,000 Danish kroner, or 50,700 Swedish kronor.

Arla’s income from the Middle East was more than 4 billion Swedish kronor in 2005.

The company indicated that the losses could rise further. The projected losses are based in the assumption that Arla’s cheese and butter products will return to store shelves in the Middle East “reasonably soon”, and that Arla’s sales will be at 50 percent of their pre-boycott volumes by the end of 2006.

“Despite the difficult situation, we believe that Arla has a future in the Middle East,” said managing director Peter Tuborgh at a meeting of cooperative members and staff representatives at a meeting in the Danish city of Ålborg on Thursday.

“Over 40 years we have worked hard to build our brands in the Middle East in order to provide our cooperative members with a stable income. As a result, we have an intimate knowledge of the market and we will not give up easily,” Tuborgh added.