Friesland Foods this week announced plans to scale down its production facilities in the Netherlands in a bid to brace itself for wide scale changes within the EU's dairy market.
The group will shift production from its Groningen plant to its sister site in Nijkerk. The consolidation will allow the company to focus on fresh dairy goods, the company said.
The announcement comes as the EU's agreements on subsidies, made through the World Trade Organisation (WTO), are set to increase cost and competitive pressures on the bloc's processors.
With the changes in place, the European dairy market is expected to be more competitive, with less protection against imports from outside the bloc.
The changes has forced the group into developing a new long term strategy, entitled Vision 2015, in a bid to increase profitability within its operations.
As part of this focus, Friesland will spend €5m on expanding production and distribution capacity at the Nijkerk site to deal with demand formerly catered for over two plants.
From 1 November this year, the operations will be run by Friesland Foods Fresh, a new operating company, before production at Gronigen is fully phased out by mid-2008.
By adopting this new strategy the company said it expected to increase efficiency within dairy production, while reducing overheads related to the segment.
It added that it will also maintain its ambitions to continue to supply fresh dairy products through Friesche Vlag and private labels brands.
Friesland's Vision 2015 long-term strategy identifies three key areas of its operations it will to focus on improving.
These include the extension of its fresh and long life cheese production, a greater focus on emerging markets like Asia, and the creation of a viable long-term ingredient business.