DMK and Arla consider further cooperation in milk powder

DMK and Arla have established a task force to develop a business case for the joint manufacture of milk powder. The task force has been commissioned to examine the usefulness of sharing and expanding the capacities of both businesses in light of the increasing supply of milk in the north German state of Schleswig-Holstein and in Denmark.

DMK has been looking for suitable partners in the northern region of Germany over the the past months. Dr. Josef Schwaiger, CEO and spokesman for the Management Board, explains:

“We have an efficient production operation at  our Hohenwestedt site for milk powder and butter, which we could build up even more efficiently with other dairy companies. The necessary investments would amount to only 30 per cent of the cost of building an entirely new facility. We have presented this offer to the dairies in Schleswig-Holstein, but the response from the industry has been rather modest.”

Now, after a first phase of collaboration with Arla in the area of whey processing, the companies are taking the next step together. Both DMK and Arla have proven experience in the field of milk powder production and are leaders in the areas of quality and costs. With their knowledge of attractive target markets and their well-established sales channels, the companies also complement each other in terms of distribution.

Both companies have experienced specialists, who are experts in the global trade of products with a long shelf life. Well-developed sales channels are essential in the highly competitive milk powder sector, in order to participate in the growing markets and to generate added value.

“Our goal is to create a platform from which we can supply the expected growing demand for dairy products worldwide, especially in emerging markets. This is a big investment and by building this plant together we can work more efficiently and minimise the risk of the two companies,” said Peder Tuborgh, CEO of Arla Foods.

Since northern Germany and Denmark are favourable locations for milk production, the amount of milk produced will continue to increase.

“After 2015, the rate of increase will exceed the 1 per cent annual increase of past years. We must evaluate the possibility of cooperating and thus processing these additional amounts more cost-efficiently, as well as expanding the existing processing capacities. We are very serious about our goal to market our shareholders’ milk in the most profitable way in order to generate an above-average payout,” Schwaiger adds.