Arla signs organic milk deal with Lidl

Dairy group Arla Foods has signed an organic dairy supply deal with discount retailer Lidl, as big food firms increasingly move in on rising consumer demand for organic food.

Arla will use some of its 347m kg of organic milk it handles in Denmark to supply private label organic milk and butter to Lidl’s 3,500 domestic stores in Germany.

The deal, worth several million Danish Kroner and a piece of good news for Arla after boycotts and a court fine in recent weeks, means the firm will now supply Lidl in Denmark, Sweden, Finland and Germany.

It is the first time Arla has been contracted to supply organic dairy products to the German market; something that may help the group offset money lost in Denmark due to an influx of cheap, German milk.

The deal is also another step in the development Europe’s organic dairy sector.

A recent report by Organic Monitor highlighted how multinational food firms were increasingly buying into organic food sectors as consumer demand grew.

It said the likes of Heinz, Danone and PepsiCo had all moved in, while America’s biggest dairy company, Dean Foods, had just bought up the country’s biggest organic food company, Horizon Organic.

Arla has followed suit, setting up organic milk partnerships will smaller dairies in Denmark.

Its deal with Lidl in Germany will now establish the group on Europe’s fastest growing organic food market. “After a long and slow start, more German consumers now seem ready to go organic,” said Arla.

Organic food sectors have grown at high rates in Europe generally over the last few years. The British, for example, spent a collective £1.25bn on organic food in 2005; a far cry from the £100m in sales made by the sector a decade ago, according to a recent report by the Organic Milk Suppliers Co-operative (OMSC).

The report predicted Britain would face organic milk shortages over the next couple of years, reversing problems of organic milk surpluses that have plagued the industry since 2000.

Spain is Europe’s top organic food market, with Germany, Italy and the UK following close behind.

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