Arla looks to merge with distressed Swedish dairy

The boards of Milko and Arla are proposing a merger of the two co-operatives that will make the Milko farmers members and owners of Arla on an equal footing with existing Arla farmers.

Farmer numbers plummet ​

Milko has seen its member numbers fall from 1945 to 636 over the past 11 years. Spokesperson Robbin Grönstedt said that some farmers had gone on to other co-ops but that most quit the industry completely.

“In the long run it is not possible to have a dairy based on that,”​ said Grönstedt.

Milko had sought to adapt and stopped production at two of its four dairies – one of which is being sold to Arla in a separate deal to the merger.

With the plant closures came a major round of job cuts, reducing staff numbers by more than half to 336.

Grönstedt said the cost-cutting worked initially but a slump in sales at the start of the year forced the board to dramatically reduce the milk settlement price.

Finally, Milko decided to approach Arla to investigate the possibility of a merger.

The board at Arla has agreed and has committed to take on the Milko farmers and give them the Arla milk settlement price from the outset.

But that moment is only likely to arrive much later in the year as Milko members need to vote twice on the proposals and the Swedish Competition Authority has to give its approval.

Declining milk consumption ​

Arla is confident that it can develop the Milko business even if milk consumption in Sweden is on the decline. Milk consumption has been falling for some time as Swedes drink less and less milk with meals, preferring water or juice like other Europeans.

“Arla has the strength and the structure required to develop the Milko company and to receive milk from the dairy farmers who will transfer to Arla as a result of the merger, regardless of the volume of milk they supply,”​ said the chairman of Arla Foods’ board of directors, Åke Hantoft.