Dutch co-operative Campina said the merger would create a new company named Consumer Products Europe (CPE), focusing on brand-building and innovation across the continent.
Ria Feldman, Campina spokesperson, told www.DairyReporter.com that the move was "not a cost-cutting operation", but was intended to combat growing competition from retailers' private label products and acknowledge the emergence of international trends in the dairy sector.
"We will have one marketing organisation for the whole of Europe, but with specialists still working in different countries to make sure we respect different tastes," she said, adding that the group was especially looking to build up its Campina brand.
Branding has developed as a major buzz-word for firms operating in mature dairy markets.
A recent report by Euromonitor said distinctive brands have been crucial in the struggle to revive large categories made up of traditionally staple items that have often become viewed as commodities by consumers.
The report said the global dairy products market was undergoing a large transformation from such traditional staples to "the brand-building strategies of major manufacturers, underpinned by product innovation and aggressive marketing activity".
The key behind this brand-building has been value-added versions of everyday products, mainly inspired by ever growing consumer demands for health and convenience products.
Feldman said branding was helping Campina to develop value-added products that were harder, or even impossible, for supermarkets to copy and sell as private label.
She said Campina, which also supplies some private label dairy to retailers, had invested a lot of money in research and development in the last few years.
Recent products to emerge from this investment include Campina fresh milk that stays fresh for a week as well as Campina Optiwell low-fat and low-calorie dairy and yoghurt drinks.
The company even launched Valess, a meat substitute made from fresh dairy produce and fibre, earlier this year.
Arla UK, subsidiary of Dutch dairy Arla Foods, also announced strong half-year growth for its Cravendale fresh milk brand. Cravendale contains only one per cent fat and Arla said it was planning to launch flavoured and 'one-shot' varieties later this year.
The brand is set to benefit from Arla's new factory in Stourton and a new £12m plant in Ashby-de-la-Zouch, which should be ready this summer and mid-2006 respectively.