Dairy cooperative Arla Foods, which makes Lurpak butter, says large price hikes boosted sales revenues in the first six months of the year but warned that consumers would spend less in future as more rises are expected.
Arla, owned by more than 9,400 farmers in Denmark, Britain, Sweden, Germany, Belgium, Luxemburg and the Netherlands, said sales between January and June rose 17% from a year earlier to £5.46 billion.
The rise was driven by "significant price increases" in Arla’s retail and food service and commodity trading business, even as volumes declined.
Shoppers in the UK expressed shock last month after spotting a large tub of Lurpak selling for more than £9 earlier this summer.
It comes amid the worst inflation in 40 years, driven by food prices of 8.6 per cent – a 13-year high.
Lurpak spreadable butter contains rapeseed oil which has become significantly more expensive since the Russian invasion of Ukraine.
Arla, which does not set the prices charged by supermarkets, said on Tuesday that it also faced higher costs on farms, with the price of fertiliser up by 145%, fuel by 134% and cow feed by 36%.
"With on-going inflationary pressure and political unrest negatively impacting global growth, Arla expects the second half of 2022 to be even more challenging as the global milk production is expected to decline further and contribute to sustained high dairy prices, which will likely further diminish consumer confidence and consumption," the company said in a statement.
It said “total strategic branded revenue growth across the UK fell 6.3 per cent in the first half of 2022,” adding that Lurpak itself has “seen a 15.4 per cent fall” in growth as shoppers return to pre-pandemic habits with less home cooking.
Ash Amirahmadi, managing director of Arla Foods UK, said in a news release: “We are facing extraordinary times in food production as both our farmers and the company face high levels of exposure to inflationary pressures and costs increasing right across the supply chain.
“We are now seeing the impact of these rising costs in reduced milk volumes. This presents a significant challenge in balancing the price consumers pay with the need to ensure our farmers are paid enough to continue producing milk and protect security of supply.
“As consumers are trying to manage household budgets, we are doing all we can to absorb as much of the costs as possible to ensure dairy remains an accessible source of food.”
The average price of a 500g pack of Lurpak has increased by 33 per cent compared to the same period last year, according to the retail data analyst site Trolley.co.uk.
The rise is higher than for rival brands. According to data from the Office for National Statistics (ONS), the average price of a 500g of spreadable butter across the whole market rose 19 per cent over the past year, to around £3.96.
Reuters contributed to this report.
