FDBusiness.com

Arla Foods is to rationalise its yellow cheese production to counter international competition and declining milk volumes in Sweden. The Scandinavian dairy group’s restructuring plan aims at consolidating part of the yellow cheese production at its plants at Nr Vium and Taulov in Denmark, which will be significantly upgraded. The investment will have implications for Sweden’s Falkenberg Dairy and possibly the Danish Klovborg and Hjorring dairies.

As a result of the tough competition in international markets for yellow cheese, Arla’s board of directors has approved a DKr615m (Eur82m) investment in the dairies at Nr Vium and Taulov. The Swedish dairy at Falkenberg will be closed and it is expected that two Danish dairies at Klovborg and Hjorring will also eventually be shut. The measures are designed to secure Arla’s future production of a broad range of yellow cheeses at competitive prices.

“Market conditions are tough and if we don’t act now even more jobs will be lost within a few years,” explains Jais Valeur, executive vice president of Arla Foods. “Of course, it’s sad for the many colleagues who may lose their jobs but we hope that we’ll be able to maintain other jobs at Arla’s dairies going forward. An added benefit is that we’ll be able to use Swedish milk more efficiently – for the benefit of both milk producers and consumers.”

Milk volumes have been declining in Sweden since 2003 and to avoid empty plants, Arla has to react to the over capacity problem at its Swedish dairies, which has contributed to increased production costs. To keep costs under control and maximise the milk price paid to the co-operative owners, Falkenberg dairy is being closed.

Falkenberg’s cheese production will be transferred to the Danish dairy in Nr Vium, which will benefit from an expansion programme amounting to DKr125m over the next twelve months.

Over a three period, Arla will expand the dairy in Taulov. With the planned investment, the Taulov dairy will reach production of up to 45,000 tonnes of cheese per year. This will increase the capacity at the dairy by more than 60%. At the same time the capacity at Nr Vium will go up to 59,000 tonnes, which is equivalent to a 34% increase, allowing Arla to produce cheese at lower costs and improving its international competitiveness.

”These changes will create a sound future for Arla’s yellow cheese production,” says Jais Valeur. “Around 25% of Arla’s milk is currently used for cheese-making so this is an important business area for us which we will have to develop – and be competitive in.”