Monday, February 06, 2006

Danish dairy firm hit by cartoons row

Trade between Denmark and the Middle East may take years to recover from the row resulting from the Danish newspaper Jyllands-Posten publishing cartoons featuring the prophet Mohammed. This has sparked a boycott of Arla's products in Muslim countries.

The boycott is reported to have cost Arla Foods £1 million a day and by the end of last week it was reported to have lost between £40m and £50m. Some 170 employees across Denmark have been sent home due to the impact of reduced sales. Arla Foods is also a big player in the UK dairy market, but no effects have reported there.

The widespread boycott of Danish goods by Muslim consumers led to an almost complete halt in sales in the region leading Arla to suspend production at its Saudi Arabian plant. Arla products have been removed from shelves completely in Kuwait, Qatar and the United Arab Emirates. The company describes the situation as 'critical' in Yemen, Egypt and Lebanon and notes that there have been demonstrations in Algeria.

Arla's executive director Finn Hansen said it would take a long time for the Danish dairy giant to re-establish the business and good trading relations it had in the Middle East which was its main market outside Europe. Establishing a presence in such markets is an essential part of the EU dairy industry's strategy to survive the phasing out of export subsidies and likely tariff reductions as a result of eventual agreement in the Doha Round.

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