Arla to invest DKK 615 million in cheese production

Arla's yellow cheese production is to be rationalised to counter international competition and declining milk volumes in Sweden. Yesterday, Arla's Board of Directors approved a structure plan aimed at consolidating part of the yellow cheese production at the 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 Hjørring dairies.

As a result of the tough competition in international markets for yellow cheese, Arla's Board of Directors yesterday approved a DKK 615 million investment in the dairies at Nr. Vium and Taulov. This decision results in a closure of the Swedish dairy Falkenberg, while it is expected to eventually lead to the closure of the two Danish dairies, Klovborg and Hjørring. The measures will 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 Executive Vice President Jais Valeur. "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."

Swedish milk balance to be restored
Milk volumes have been declining in Sweden since 2003 and to avoid empty plants, Arla has to react to the over capacity problem at the 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 has to be closed.

Falkenberg's cheese production will be transferred to the Danish dairy in Nr. Vium which will benefit from an expansion programme amounting to DKK 125 millions over the next twelve months.

"The challenge in Sweden is to fill our dairies,” says Jais Valeur. "To avoid empty plants a few years down the line, we have to react now. If we don't, production costs will be higher and the milk price paid to our owners will fall. And that's not in our interests."

Long-term plan
Over a three period, Arla will expand the dairy in Taulov, which will result in more efficient production, improved competitiveness and, therefore, secure employment in Denmark and Sweden in the future.

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 with more than 60 per cent. At the same time the capacity at Nr. Vium will go up to 59,000 tonnes, which is equivalent to a 34 per cent increase. Thereby it will be possible for Arla to produce cheeses at lower costs, improving the international competitiveness.

The plans to close the dairies in Hjørring and Klovborg should be seen within the context of the expansion programme at Taulov. However, this is to be decided by Arla’s Board of Directors at a later meeting.

”These changes will create a sound future for Arla's yellow cheese production," says Jais Valeur. "Around 25 per cent 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.”

Facts:

• Number of jobs at Hjørring: 106
• Number of jobs at Klovborg: 37
• Number of jobs at Falkenberg: 150
• Number of new jobs at Nr. Vium: 10
• Number of new jobs at Taulov: 43