Arla eyes processing opportunities in the new EU
in Poland headed for Finland last week, as all export quotas and
customs levies were finally lifted between existing and new EU
Member States, writes Anthony Fletcher.
On the first working day after the EU enlargement, the two lorries carrying 40 tons of Edam cheese produced at the dairy in Poland were able to cross the Polish border. For Arla and other food producers that have moved production facilities to the new EU member states, the lack of customs formalities will mean cheaper costs and much faster border-crossings. This could herald an influx of western producers into the east, attracted by lower labour and production overheads.
"Arla Foods' Polish production provides the group with new opportunities," said executive director Torben Olsen from the Europe Division.
"Our retail customers are looking towards using fewer suppliers and the fact that we can offer cheese at the low end of the price scale will make us a more attractive partner. The lower end of the market is huge and, up to now, we've not been very active in this segment. Our intention is to take a greater share of it."
Under the old trade rules, the company was only allowed to export 10 per cent of Poland's overall cheese export quota to the old EU countries out of a total of 10,000 tons. This, of course, all changed on 1 May.
Arla Foods is certainly confident that Poland represents fertile grounds for investment. The firm has poured DKK15 million into a new mozzarella plant at the company's dairy in Poland, with the specific objective of supplying the product to a unified Europe.
"Mozzarella consumption is on the increase in Europe and we want to take a greater share of the market," said Frede Juulsen, Arla's regional director. "With our large mozzarella production in Denmark and the expansion in Poland, we will considerably strengthen our position as a mozzarella supplier in the new, enlarged EU."
Although the EU enlargement provides immediate opportunities for the older member countries, Olsen believes that the real potential will only materialise in the longer-term. He is confident that the domestic markets in the new accession states will become lucrative, and that the firm will be well positioned to take advantage of this.
"As consumers in the former East European nations haven't become wealthier overnight, not much will change in the short term," he said. "The benefits however, will show further down the road. Moreover, the fact that the retail chains which we service will be active in these markets is bound to make things easier for us."
But Kleiveuker Joop Kleiveuker, secretary general of the European Dairy Association questions whether producing goods in the new states will really provide processors with an advantage over the old Member States.
"At the moment, there is a lower milk price in the east," he said. "But this will be phased out relatively quickly. And if you look at the high number of employees in the dairy industry over there, you have to ask whether there is a price advantage at all. What producers need to do is improve the efficiency of their production."
"Take Poland for example. You have about 1.2 million of what you could call dairy farms, and only 380,000 of these deliver to the dairy industry. The others all produce milk that is consumed locally. This is totally different to the situation in the old Member States."
