Adds quotes in paragraphs 3-4, details in 8-11

By Louise Rasmussen

COPENHAGEN, Feb 18 (Reuters) - Denmark-based Arla expects a global milk surplus to drive down dairy prices this year, giving a fresh boost to demand for high-protein products such as whey and cottage cheese that are benefitting from the growing use of weight-loss drugs.

The producer of Lurpak butter and Castello cheese made the forecast on Wednesday after reporting record 2025 revenue and a sharp rise in global milk output.

"What we see in the market right now is still a firm underlying trend and focus on health and healthy nutritious products," Chief Financial Officer Torben Dahl Nyholm told reporters.

High-protein products were in high demand, "because of the general effect, but probably also because of some of the GLP-1 trends that we see," he said, referring to weight-loss drugs such as Novo Nordisk's Wegovy and Eli Lilly's Zepbound.

PREMIUM PRODUCTS

The cooperative, which competes with the likes of Danone DANO.PA and Nestle NESN.S, attributed a 2025 surge in milk production to favourable weather and strong forage harvests across Europe, which led to one of the sharpest increases in milk volumes in recent history.

Its total milk production rose to 14.3 billion kilograms in 2025 versus 13.7 billion kg in 2024, with raw milk prices hitting a record 0.56 euros per kg.

"The large increase in supply that occurred in the fourth quarter is expected to continue to affect the market in early 2026 and put pressure on global dairy prices," Arla said in a statement, while projecting "partial normalization" of market dynamics later in the year.

Revenue rose 9% to a record 15.1 billion euros ($17.9 billion) in 2025, driven partly by a global increase in dairy prices. However, the cooperative forecast revenue to decline to between 13.3 billion and 14.1 billion euros in 2026, citing elevated milk supply and continued market volatility.

Lower prices could reinvigorate consumer demand, CEO Peder Tuborgh said, particularly for Arla's premium products, as seen in Denmark, where consumers increasingly opted for higher-priced food items.

"When prices adjust, we expect consumers to return to dairy products with renewed purchasing power, which should drive growth for our strategic brands," he added.

Arla expects its strategic brands segment to grow by 1.0% to 3.0% in 2026 despite challenges to overall revenue, underscoring a consumer shift towards branded, health-focused products.

($1 = 0.8450 euros)

(Reporting by Louise Rasmussen and Soren Jeppesen. Editing by Jacob Gronholt-Pedersen and Mark Potter)

((soren.jeppesen@thomsonreuters.com; Mobile: +45 2332 5113))