The ArNoCo plant in Nordhackstedt, near the Danish border, was officially unveiled by Arla and German dairy cooperative DMK this week - four years after the companies first announced plans for the joint venture.
Test production began at the plant - built parallel to a DMK cheese factory - in August 2014. But since the end of February, the plant has been operating at full capacity.
Around 700,000 tonnes of whey from the neighbouring DMK mozzarella and Gouda cheese plant will be converted into 25,000 tonnes of lactose and 12,000 tonnes of whey protein concentrate (WPC) each year.
Arla Foods Ingredients (AFI), Arla's ingredients arm, will market lactose and WPC produced by ArNoCo.
Arla CEO, Peder Tuborgh, who attended the official opening of the ArNoCo plant, said the joint venture will "enhance Arla Foods Ingredients' position as one of the world's leading suppliers of high quality whey protein and lactose ingredients."
"The market for these products is growing fast, so we are pleased to get started on this new production," he said.
DMK believes the joint venture will allow it and Arla to exploit synergies between the companies "to optimum effect."
"The international ingredients business is one of our strategic growth areas," said Dr Josef Schwaiger, spokesperson, DMK. "The production facility at the Nordhackstedt site is in a logistically ideal location for processing the whey obtained from the neighbouring DMK factory."
North of the border from Nordhackstedt, AFI has doubled Alpha-lactalbumin production at its plant in Jutland, Denmark.
Alpha-lactalbumin is the dominant protein in human, but is also found naturally in cows' milk. Incorporating it into infant formula produces a product that more closely resembles breast milk, says AFI.
In line with growing global demand for infant formula, AFI has added a second production line at its Jutland plant - increasing output of Alpha-lactalbumin by 100%.
"Human milk will always be the gold-standard for infants but commercial production of Alpha-lactalbumin means babies fed with formula can benefit from similar levels of protein composition," said Anne Staudt Kvistgaard, head of paediatric, AFI.
"In recognition of this, worldwide demand for Alpha-lactalbumin is growing fast - especially in China and we're delighted that this increase in our production capacity will help secure further supplies for our customers in line with our 'Quality starts here' commitments," she added.