Arla plant closure to up cheese margins

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Related tags: Arla foods, Denmark

Danish-Swedish dairy co-operative Arla Foods has announced it is to
cease operations at one of its Danish cheese warehouses as a result
of flagging sales of its hard and semi-hard yellow cheeses,
reports Tom Armitage.

According to Arla Foods, the decision to close the Vejle packaging facility, which will come into effect by May 2006, has been taken in an attempt to improve efficiency and lower costs at a time of heightened competition across the Danish multiple retail sector.

The closure of the packaging plant will result in the shedding of an estimated three hundred jobs, although some work will be transferred to Arla's Taulov and Hjørring dairies. The closure will also allow the company to consolidate investment across its operations in Viby, near århus, where it co-ordinates its sales and distribution activities to the Danish multiple retailers.

The closure of the site is due to the fast pace of consolidation in the Danish market which has reduced the need for smaller, less profitable distribution hubs. "The packing function in Vejle dates back to the time when our dairy structure was characterised by many small dairies,"​ said Arla's production director Niels Lange Jørgensen.

"Our dairies are now so large that it makes more sense to pack cheese on the spot," a spokesperson for Arla Foods told DairyReporter.com​, adding that "by closing the Vejle packaging facility, we are able to produce, package and distribute our cheese products directly to the Danish retailers' warehouses."

Currently Arla's cheese division accounts for 25 per cent of its total turnover, with its core markets across Denmark (for which it supplies most Danish multiple retailers, including Dansk Supermarked), Germany and Sweden as well as substantial business activities across Saudi Arabia, Japan and the US.

The Vejle site packages around 26,000 tonnes of hard and semi-hard yellow cheeses per year, including Arla's successful Rosenborg brand.

Arla Foods said that it "expects to break even in two and a half years,"​ in Denmark and although it declined to give an exact indication as to how much the plant closure would save in the long term, it estimates it to be "a two digit million figure per year."

A spokesperson also denied suggestions that the move was in preparation for the proposed merger later this year with Dutch dairy co-operative Campina, hinting that the closure was partly due to lower sales volumes of its cheese products.

Related topics: Manufacturers, Arla Foods, Cheese

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