The acquisition also gives Arla full ownership of a cheese production site in Bahrain, which Arla said gives the company the opportunity to further expand its branded cheese production in the region.
The Middle East and North Africa (MENA) is one of the key geographical regions in Arla’s strategy, Good Growth 2020.
Since 2010, Arla has more than doubled its sales organically across the Middle East and North Africa (MENA), which is the company’s largest market outside Europe, through cheese under the Puck brand, butter under the Lurpak brand as well as milk powder and UHT milk under the Dano and Arla brands. The company expects its MENA retail and foodservice sales to reach approximately €560m ($637m) this year.
Arla CEO Peder Tuborgh, said, “This acquisition is a gamechanger for our MENA business. We have an established and growing business in the Middle East and know our consumers and customers well in this part of the world. As such, this deal is an excellent strategic fit for us as it enables us to both expand our branded presence in the cheese category and secure the local production capacity we have been looking for to continue to grow our business.”
New commercial opportunities
Until now, most of Arla’s products sold in the MENA region have been produced in Europe, with some local production in Riyadh, Saudi Arabia. However, with Arla’s capacity nearly maximized for processed cheese, Arla said this deal delivers much-needed capacity and creates a strong regional supply chain footprint to secure long-term competitiveness in the region through scale and efficiency.
Executive vice president of Arla’s International business, Tim Ørting Jørgensen, said, “By expanding our branded portfolio and local supply chain in one go, we will be able to bring new commercial opportunities to our customers quicker and better. Over time, the site in Bahrain will also allow us to base the production on high-quality milk from our farmer owners in Europe.”
The production site is located in Manama, Bahrain, and has a capacity exceeding 66,000 tons. Built in 2008, it includes an on-site innovation pilot plant and has won multiple awards for manufacturing excellence within core cheese categories.
The deal, the terms of which were not disclosed, is expected to take effect by end of May 2019.