Partnership potential between MD and Arla to be explored

The future relationship with the Swedish dairy company, Arla, was a key subject when MD Foods' Board of Representatives met at an extraordinary meeting on August 16.

Although no conclusions were reached, delegates were strongly in favour of exploring the options for further co-operation with the large Swedish dairy company.

The current partnership currently comprises Functional Foods (within the joint venture Scandairy) as well as vending machine products (within AM Foods).

In his report, Chairman Knud Erik Jensen, emphasised that MD Foods' co-operative members could expect falling milk prices - because milk was outside the EU's agricultural reforms and also as a consequence of the WTO negotiations on free trade. The extension of the EU by East European countries is also likely to lead to downward pressure on milk prices.

Knud Erik Jensen announced that the Board will now assess feedback from the meeting.

"This is not the first time that Arla has been discussed at MD Foods' Board of Representatives' meeting. But it's the first time that we've had a membership debate on how co-operation with a co-operative outside Denmark could work," said the Chairman who expressed his hopes that the situation could be clarified before the end of the year.

Arla's Managing Director, Åke Modig, has declared himself delighted at MD Foods' Board of Representative's positive attitude. For some considerable time, Åke Modig has been in favour of a merger between the two companies.

A strategic window is open

In a presentation of MD Foods' international position and strategic opportunities in Europe, Jens Bigum, Group Managing Director, MD Foods, opened the discussion on the partnership with Arla. Having described developments within the retail and dairy sectors and listed similarities and dissimilarities between MD Foods and Arla, Jens Bigum said: "There's no doubt that a strategic window is now wide open."

In view of the existing partnership between the two companies, Jens Bigum expressed the view that the time had come to explore pooling the two companies' resources in one way or another.

"We want to secure MD Foods' position as one of Europe's greatest dairy companies - a company which provides some of the best milk prices in Europe and which will also service the next generation of milk producers."

Arla receives 2.1 billion kg milk, i.e. 65 per cent of the total Swedish milk production. The group has an annual turnover of DKK 11 billion, making it Scandinavia's second largest dairy group after MD Foods. MD Foods receives 4.9 billion kg milk per year and has an annual turnover of DKK 25 billion.