Arla Foods invests millions in speciality cheeses

Investing approx. DKK 430 million in the expansion of two Danish dairies, Arla Foods prepares to increase its production of feta and mozzarella cheese to match growing sales in Europe.

Arla Foods’ feta and mozzarella sales are rising well above expectations throughout the European markets. Consequently, the Supervisory Board has decided to expand the feta production at Bov Dairy as well as the mozzarella production at Rødkærsbro Dairy.

The capacity at Bov Dairy was recently expanded to 16,000 tons per year, however new predictions suggest that the dairy will be unable to keep up with European demand by 2008. Thus the dairy’s capacity will now be further increased to 26,000 tons per year, which is likely to be fully utilised by 2012. The new expansion programme will cost approx. DKK 300 million.

Work is now beginning on Bov Dairy’s expansion, which is scheduled to be completed in January 1, 2009. The dairy currently employs 200 people. So far no precise figures are available for how many new jobs the expansion programme will create.
Booming feta sales in Europe
As all forecasts for growth in the market have been exceeded, Arla Foods has adjusted its expectations for feta sales over the next few years.
”In general, the European feta market increases by around 15% per annum,” says Group Executive Director Mikael Sternberg Christiansen, who has overall responsibility for Arla Foods’ international markets.
”This means that feta is one of the fastest growing dairy products. For many years, our Apetina brand has been market leader in a number of European countries.”

Arla Foods’ strategy is to become the leading supplier of selected speciality cheeses in European markets by focusing on a few strong brands. Some years ago, Apetina was designated as Arla Foods’ European feta brand and has now replaced all local brands. The Apetina brand is currently being launched in the UK and has been well received by all the major multiples. In Poland, Apetina has been so successful that the brand will now be launched in the other Eastern European country, including Russia.

The aim is for consumers to see Apetina as synonymous with feta, once the EU’s ban against using the feta name for cheese produced outside Greece become effective in October 2007.
”We have invested substantial sums in raising awareness of the Apetina name with consumers and we seem to have succeeded,” says Mikael Sternberg Christiansen.
”We’re confident that Apetina can stand alone, even when we can no longer use the feta name.”

Facts about Arla’s feta production in Europe

Sales this year: approx. 13,000 tons
The current capacity of 16,000 tons is expected to be fully utilised in 2008

Market breakdown
The Nordic countries: 40%
Germany: 30%
UK: 10%
Rest of Europe: 20%

The profitable Apetina brand is big in the Nordic countries, UK, Poland, Holland, Belgium and is gaining ground in Spain.
In Germany and France, Arla Foods is the leading supplier of own label feta.

Mozzarella is performing well, too
Another speciality cheese which is currently doing well on the European markets is mozzarella. Pizza sales across Europe continue to rise, and consequently Arla Foods will now begin work to expand the production of mozzarella and shredded cheese at Rødkærsbro Dairy. The capacity will be increased from 37,000 tons to 50,000 tons.
”Mozzarella is a growth area in Europe and our type of mozzarella is particularly popular on pizzas,” says Mikael Sternberg Christiansen.
”Arla Foods supplies several of the leading pizza producers and pizza chains in Europe, and all of them are seeing increased sales. Rødkærsbro is currently running at full capacity, so the expansion is a natural step if we are to remain competitive.”

The expansion of Rødkærsbro Dairy is a DKK 130 million investment, and the full effect is expected to come into force by early 2008.