Arla and DMK form new €44m whey joint venture

DMK is the company that will be born out of the merger between dairy giants Nordmilch and Humana, announced in July 2010. The 50-50 joint venture this new company will form with Arla will be called ArNoCo.

ArNoCo will purchase over 700,000 tonnes of whey – a by-product – from DMK each year, which it will transform into WPC and lactose. The WPC will then be dried at Arla’s plant Danmark Protein, and Arla Food Ingredients will then market, distribute and sell the ingredients.

DMK and Arla are investing a total of €44m in the joint venture, of which €35m will be used to build a new whey processing plant at DMK’s cheese plant in Northern Germany and €9m will be spent on upgrades at the Danmark Protein plant.

The JV is subject to competition approval, but the plan is to start building the new processing plant in October 2011, for completion by the end of 2012. Some 24 new jobs will be created, and the two parent companies will put up a co-managing director each: Finn Simonsen from Arla Foods Ingredients and B. v. Borstel from DMK.

Growth market​

Arla already has whey partnerships with dairy companies in Argentina, Germany, France, Norway and Sweden. However it sees whey protein as an important growth market, due to growing demand for its use in healthy and functional foods, such as sports recovery beverages.

“We have identified the whey business as an important part of Arla Foods’ 2015 strategy and we are set to double the turnover of our whey business. This is an important step forward in achieving that goal,”​ said Peder Tuborgh, CEO, Arla Foods.

Arla’s whey business falls under its ‘other’ business activities reporting line, and was the biggest contributor to that line’s DKK2213m revenues in 2010.

As for DMK, future CEO Dr. Josef Schwaiger, said:

“Expanding the ingredients business is one of DMK’s strategic growth areas. Its alliance with Arla in ArNoCo is therefore an important step towards higher value added and will strengthen the Nordhackstedt location’s position for the long term.”​

The operational merger between Nordmilch and Humana is planned for April 2011, following the green light from Humana’s farmer members in February; 98.5 per cent voted in favour. The rationale behind the merger is to provide greater resilience in the face of volatile dairy prices, retailer concentration, and progressive consolidation in the European dairy sector.

The post-merger company will process 6.7 billion kilos of milk per year, supplied by 11,100 active milk producers who are members of the parent companies. It will have 5,500 employees and will have a turnover of around €4.8bn, based on 2008 figures.

The joint venture is subject to approval by the competent Competition Authorities.

Directors of Germany’s largest dairy company, Nordmilch, and Humana MilchIndustrie have proposed a merger to aid survival in a competitive international market.

Nordmilch​ said the joint operation should be given the go ahead in January 2010 after approval from the German Federal Cartel Office​ and consent of the parent cooperatives’ representatives.

“The application is to be filed soon,”​ it said and “the decision will be passed no later than the end of the year.” ​

Consolidation​

A company spokesperson told DairyReporter.com: "Strong units are one of the main preconditions for the successful competition in the European market and world market." ​

"Against the background of volatile markets, according to unstable prices paid to milk producers, the increasing concentration in food retailing and the progressive consolidation of the dairy industry in Europe leeds Nordmilch and Humana​ to shape actively the future together."​

The decision builds upon Nordmilch’s strategic step last year to incorporate its sales activities with those of Humana Milchindustrie​ to form Nord-Contor Milch​.

“A comparison of the development of the dairy industry in Germany with that in neighbouring European countries clearly reveals that Germany needs further consolidation to survive in international competition in the long term,”​ said CEO Dr Josef Schwaiger.

Nordmilch in buoyant 2009 ​

Nordmilch announced profits of €29m in 2009 and said it processed the same volume of milk as in the last financial year, in spite of consumer uncertainty amid the economic crises.

“It proved possible to keep volumes stable despite adversity in the markets – not least through strong growth in the profitable cheese sector,”​ said Schwaiger. Cheese sales were found to be up six per cent on the previous year.

Sales may have been boosted by the company’s merger​ with Pommernmilch, which saw the addition of an extra cheese factory serving to expand the company’s cheese capacity and secure a foothold in the Mecklenburg-Vorpommern region.