FDBusiness.com

European dairy co-operative Arla Foods has reached an agreement with US-based international confectionery, food, and beverage company Mondeléz International to acquire its processed cheese business in the Middle East region, which is currently licensed under the Kraft brand. The acquisition also gives Arla full ownership of a state-of-the-art cheese production site in Bahrain, which provides the opportunity to further expand Arla’s 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 & North Africa (MENA), which is the company’s largest market outside Europe, through strong positions in 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 retail and foodservice sales in MENA to reach approx. Eur560 million this year.

“This acquisition is a game-changer 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,” says Peder Tuborgh, chief executive of Arla Foods.

Until now, most of Arla’s products sold in the MENA region have been produced in Europe, with some local production also placed in Riyadh, Saudi Arabia. However, with Arla’s capacity nearly maximized for processed cheese, the deal with Mondeléz International delivers much-needed capacity and gives Arla a strong regional supply chain footprint that enables it to secure long-term competitiveness in the region through scale and efficiency.

Tim Ørting Jørgensen, executive vice president of Arla’s International business says: “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 move enables Mondelēz International to focus on its newly-announced strategic plan to drive top-line growth and generate attractive returns, centred around three priorities: accelerate consumer-centric growth, drive operational excellence and build a winning growth culture. Under this plan, the company will continue to focus on faster-growing snacks categories, including its core Chocolate, Biscuits, and Gum & Candy offerings.

The deal is expected to take effect by end of May 2019. Further details about the terms of the agreement were not disclosed.