Merger in the pipeline for German dairy giants

- Last updated on GMT

Related tags: Dairy giant arla, Arla foods, Denmark

The boards of Germany's two largest dairy companies, Bremer
Nordmilch and Humana Milchunione, have announced plans they are to
merge. The proposal is due to come into effect as of January 2005
and will allow them to overtake the Campina group as the EU's third
largest dairy co-operative, behind Arla Foods and France's
Lactalis. Tom Armitage reports.

According to research from the Netherlands Institute for Cooperative Entrepreneurship (NICE) and the Norwegian Agricultural Economics Research Institute (NILF), the merged companies would have an estimated annual turnover of €4.9 billion. Last year Humana posted turnover at €2.6 billion - up slightly on Nordmilch, which registered €2.3 billion.

The two companies have already signed a declaration of intent to merge, and will inform the Bundeskartellamt - the German competition authorities - within the next few weeks. Analysts and board members at Nordmilch and Humana do not envisage any future objections to the proposal.

This move comes as no surprise to the dairy industry, as both companies had already signaled their intentions to merge a number of months previously. Increasing competition in the domestic €20.2 billion German dairy market, and frequent price skirmishes in the retail liquid milk sector have left producers with diminished profit margins.

But the impact of the move on the EU dairy sector still remains to be seen. Following a number of reports in the German press, it is widely anticipated that Danish-Swedish dairy giant Arla Foods will be examining future strategic alliances with a number of European dairy companies - which have so far been rumoured to include Dutch dairy companies Campina and Friesland - in a bid to consolidate its position as EU market leader.

According to managing director of Arla Foods, åke Modig, "the trend in Europe's dairy industry points towards two blocks - one driven by the French dairies and one led by the German, Dutch or Scandinavian dairy industries, where we'll play an active role".

At present, Bremer Nordmilch and Humana Milchunione are owned collectively by 18,000 German farmers, and a merger would leave the new alliance with a company of over 7,000 employees.

The company's management would be spearheaded by Stephan Tomat of Nordmilch, and Albert Große Frie of Humana, and the company's executive headquarters would be in Everswinkel, near Munster - where Humana is currently based.

Related topics: Manufacturers, Consolidation

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