As part of the deal, DMK will rebuild its Nordhackstedt site in Germany, to focus on mozzarella production.
This will increase the supply of whey for the two companies’ joint venture ArNoCo, which produces whey protein and lactose at a neighbouring site and at Arla’s site Denmark Protein in western Denmark.
“We are re-shaping our footprint for our German plants to produce in a more efficient way,” said Ingo Müller, CEO, DMK.
“Next to this, we are optimizing our portfolio towards more value-creating products.
“This contract manufacturing agreement will enable us, to make a next step forward and to weatherproof DMK for the future.”
The collaboration comes as a result of an increased global demand for mozzarella cheese from both consumers and the foodservice industry.
Arla Foods expects the European mozzarella cheese market to increase from 600.000 tonnes in 2017 to 720.000 tonnes by 2022.
DMK’s cheese site in Nordhackstedt has a capacity of approx. 70,000 tons, of which half is dedicated to mozzarella cheese.
DMK will invest €15m to transform its capacity on mozzarella cheese by late 2018, after which they will initiate third party manufacturing for Arla.
ArNoCo was established in 2011 at the Nordhackstedt site and established a whey processing facility there in 2015.
Peder Tuborgh, CEO, Arla Foods, said the agreement secures access to profitable raw material for its joint venture production at ArNoCo.
He added it will also expand Arla’s mozzarella business and its production of whey protein ingredients as it continues to add more value to farmer-owners’ milk.