The company said the decision is part of the company’s aim to bring new commercial opportunities to customers as well as to make its supply chain more efficient.
Arla said its current estimate is that production of approximately 26,000 tons of processed cheese annually will move from its Bislev site in Denmark, potentially impacting around 40 jobs; while 35 positions will be impacted at the AKAFA site in northern Denmark, as production of approximately 18,000 tons annually of sterilized cream will move to Bahrain. The volumes of processed cheese to be moved from Riyadh is still to be confirmed.
The move is expected to take place in late 2020 and mid-2021.
In December 2018, Arla announced an agreement with American multinational confectionery, food and beverage company Mondelēz International to acquire its processed cheese business in the Middle East region, which is currently licensed under the Kraft brand.
The deal was formally completed on May 28, and Arla has now taken over the acquired operations.
The acquisition also gives Arla full ownership of a cheese production site in Bahrain, which Arla said gives it the opportunity to further expand its branded cheese production in the Middle East and North Africa region and to further improve overall efficiency in its supply chain.
Moving production to new site
Sami Naffakh, head of supply chain in Arla, executive vice president, said, “It makes a lot of sense for us to place the production of these exact products at the newly acquired site in Bahrain, since these products are primarily made for the Middle East and North Africa and in lesser degree for other markets. It gives us a strong regional supply chain footprint that enables us to secure long-term competitiveness in the region through scale and efficiency, and the pilot plant at our new Bahrain site will allow us to innovate in new ways within this category.”
The Bahrain site currently has a capacity of more than 66,000 tons. Built in 2008, it includes an on-site innovation pilot plant. By moving the production of processed cheese and sterilized cream to this site, Arla also expects to improve the shelf-life of these products by four weeks as transport time to customers in MENA is reduced significantly.
“As soon as we are able to confirm the exact volumes that will be moved, we will engage with affected employees to ensure they are supported to move on in a good way, either to jobs at other Arla production sites or outside Arla,” Naffakh added.
“We have a good track record of finding ways to help people into new job opportunities, especially when there is a relatively long time period of time in which to work this out. They can bring valuable production expertise to our other sites, which is an opportunity we do not want to miss.”
Since 2010, Arla has more than doubled its sales organically across the MENA region, which is the company’s largest market outside Europe, through strong positions in cheese under the Puck brand, butter and spreads under the Lurpak brand as well as milk powder and UHT milk under the Dano and Arla brands.
In 2018, Arla’s retail and foodservice revenue in the MENA region reached €560m ($630m).