March 24, 2016

Denmark-based dairy cooperative, Arla, and Missouri-based Dairy Farmers of America (DFA) have entered into a joint venture agreement for the production of high quality cheddar cheese and the construction of a dairy plant in New York State. The $58 million venture will be 70% owned by DFA, which will also manage operations, and 20% owned by Arla, with the remaining 10% owned by the eight farmers who will be supplying milk for processing.

“Together with Dairy Farmers of America and eight of their farmers, who will supply the raw milk, we will explore the opportunities in building premium quality standards into the cheddar category through the Arla® brand. Adding cheddar to our US portfolio will make us more attractive to the retailers and help increase the sales of our European products made from owner milk,” says Peder Tuborgh, CEO of Arla Foods.

Arla’s corporate strategy, ‘Good Growth 2020’ has identified the U.S. as one of its six strategic growth regions. Within this market, one third of the cheese bought by consumers is cheddar cheese. However, the two cooperatives are aiming to disrupt the market by offering cheddar made from the highest quality milk without the use of hormones or artificial ingredients. Additionally, through expanding the business from the deli counter into the dairy aisle where 92% of U.S. cheese purchases happen, the partnership is aiming to become a top ten retail brand in the U.S. cheese market.

“US families are increasingly looking for food products that they can feel good about serving and consuming from a better-for-you standpoint,” said head of Arla Foods USA Don Stohrer Jr. “This is exactly the position we have created for the Arla® brand with its authenticity, transparency and great taste. It’s an attractive position that currently doesn’t exist in the US dairy aisle or the cheddar segment. Our expectation is that the new cheddar products will create a halo effect for the cream cheese and other Arla® branded products.”

Arla states that because the U.S. has restrictive imports quotas for cheddar cheese, the opportunity for the company to ship European cheese to the U.S. is limited, therefore domestic production is a logical move. Toward this end, the partnership has also agreed upon the construction of a dairy processing plant to be located in western New York State in proximity to the farmers who will be supplying the 70,000 tons of raw milk per year. Construction of the facility is expected to begin this fall with production expected to start in the fall of 2017.

This latest venture is one of many in the past 12 months for Arla. The European cooperative took 100% control of Westbury Dairies in January after its partner, First Milk, left the joint ventiure.  Arla also entered into several deals around the globe in 2015, including joint ventures with Tolaram Group in Nigeria, Attieh Group in Senegal, and Juhayna Food Industries in Egypt, as well as an investment in its own facility in Pronsfeld, Germany.