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Arla Foods Moves into Cheese Production in Russia

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Arla Foods Moves into Cheese Production in Russia

Arla Foods Moves into Cheese Production in Russia
January 19
18:33 2012

Arla Foods has taken another significant strategic step into Russia by agreeing a joint venture for the production of yellow cheese with Molvest Group, the country’s third largest dairy company. The agreement is in keeping with Arla Foods’ ambitions to become one of Russia’s leading dairy companies within yellow cheese.

Following several years of growing exports to the Russian market, Arla Foods now intends to set up local production in Russia for the first time. Production will be centered on the city of Kalacheevsky in south-west Russia, where Arla Foods’ Russian subsidiary – Arla Foods Artis – in partnership with the Molvest Group will be converting one of  Molvest’s existing dairies to yellow cheese production. The two parties have agreed on terms for joint production at the dairy. The terms and conditions are subject to approval from the Russian Federal Antimonopoly Service (FAS).

Peder Tuborgh, chief executive of Arla Foods.

Molvest will be responsible for collecting the milk from farms in the area as well as weighing-in and processing the milk at the dairy. Arla Foods will subsequently buy the milk and with its experience and expertise from its Scandinavian operations will be responsible for the production of yellow cheese at the dairy. The finished products will be distributed and sold by Arla Foods. For Arla Food, the conversion of the dairy represents an investment of DKr25 million (Eur3.4 million).

Arla Foods and Molvest anticipate joint production will begin in early 2013. Initially, the aim is to produce approximately 6,000 tons in 2014, with a subsequent annual volume increase of 10%.

”As Russia is one of our strategic growth markets this agreement is important because it provides us with the opportunity to combine our export business to Russia with local production,” says Peder Tuborgh, chief executive of Arla Foods. “This is unlikely to be our final expansion into the Russian market but this agreement alone is expected to double our turnover in Russia before the end of 2015.” Arla Foods’ Russian business grew by about 30% in 2011 to DKr500 million – growth that was largely driven by exports of Lurpak butter, Castello speciality cheese and cream cheese under the Arla Natura brand.

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