FDBusiness.com

Arla Foods and the Egypt-based dairy company Juhayna have agreed to form a joint venture which will sell Arla’s products across Egypt. Juhayna Food Industries is Egypt’s leading manufacturer of UHT-milk, yoghurt and juice. However, the company has a very limited production of butter, cheese and cream, which Arla has specialised in across the Middle East and Africa. Therefore the two companies will now form a joint venture company that will sell Arla’s products in Egypt.

“It is a very good match for both parties. Juhayna has a nationwide distribution network, and we are not competing within the same product categories. Together we now get a broader product portfolio, which strengthens the business of both parties,” says Arla’s senior director of the Middle East & Africa, Rasmus Malmbak Kjeldsen.

Juhayna owns 51% of the new joint venture company, while Arla owns 49%. However, Arla will be in charge of the daily management of the joint venture. The ambition is for the company to also start up local production in Egypt.

“We have built our entire business in the Middle East through co-operation with local partners. In Arla we excel at making joint ventures succeed, and that is a business model we will use to establish ourselves in other African markets as well,” says Rasmus Malmbak Kjeldsen.

He estimates that the new joint ventures company will have 40-50 employees, and he predicts that the work force will exceed 100 employees within the next year or two.

Egypt is experiencing economic growth with a population of nearly 90 million people, and much like the population the purchasing power among consumers is increasing. Consumers are currently going from eating less and less homemade dairy products produced in their own neighbourhood to eating more and more products that are processed and packaged at a dairy and purchased in a store.

The retail structure in Egypt is characterised by a limited amount of supermarket chains and countless small one-man shops that need goods delivered straight to the door. Consequently, Juhayna has developed a neatly-masked distribution net, which covers the entire country.

“Our products will now be able to reach all corners of Egypt. Today our business is merely scraping the surface, but now we will be able to drastically expand our distribution to reach millions of new consumers,” says Rasmus Malmbak Kjeldsen.

The new company, to be named ArJu Food Industries, will target an October 2015 start of sales operations. With the new joint venture company in place, Arla expects its revenue in Egypt to exceed Eur90 million in 2020.