Chinese contract causes Arinco expansion

In June Arla entered a ten-year contract with Chinese food company Biostime to produce up to 20,000 tons of Danish milk powder for the infant formula market pr. year. Consequently, Arla now looks to expand its milk powder facility Arinco in Denmark.

In June, Biostime International Holdings Limited, which sells high-quality products for the infant formula and baby care sector in China, chose Arla to supply milk powder produced from Danish milk.

The order is for about 20,000 tons a year for the next ten years and involves an investment of about 165 million DKK to expand Arla’s Arinco milk powder facility in Denmark, of which Biostime will finance half.

Creates new jobs

Arla’s Board of Directors has now approved the investment in Arinco, and expansion will be under way from as early as October.

“We expect that this increased production for the Chinese market will create about 30 new jobs at our facility between now and 2014. The investment also means that we can introduce more automated processes and thus make production at Arinco even more efficient. So we will produce more, and in a more efficient manner,” says Mogens Bøgh Pedersen, Arinco site director.

A profitable agreement

Arla already exports very refined milk powder and infant nutrition products to China and the high quality of the Scandinavian products was one of the main reasons that Arla was chosen as supplier.

“We are proud to supply the Chinese market with our high-quality Scandinavian products, which have an excellent food safety record. The agreement rubber-stamps Arla’s outstanding skills in producing dairy products, and the agreement is a good one for us because these products are at the more profitable end of our product range,” says Senior Vice President Frede Juulsen, who is responsible for Arla’s business in China and globally responsible for milk powder in Arla.

The contract with Biostime came in the wake of Arla’s strategic agreement with the leading Chinese food company, COFCO, on joint ownership of China’s largest dairy company, Mengniu Dairy Group. The agreements are intended to strengthen Arla’s presence and long-term profitability in the Chinese market, which is defines as a strategic growth market in the Arla Group strategy.