Arla proposes relocation and streamlining of production in Sweden

Arla wishes to streamline and future proof production in Sweden. Therefore, the Board of Directors has taken the decision in principle, which proposes the closure of two dairies and investment in existing dairies. The result will – in line with Arla’s Strategy 2017 – be an efficient and modern dairy structure, with reduced environmental and climate impact.

“We wish to strengthen our competitiveness by adapting Arla’s structure and production capability, which is fully in line with Arla’s strategy. The markets are changing rapidly, just as in other industries. Own label products are gaining market share and international players are increasing their presence in the dairy fixture. We want to secure profitable sales of our owners’ milk in a timely fashion,” says Jorgen Greve, Production Director at Arla Sweden.

Europe’s largest cottage cheese dairy in Falkenberg

The intention behind the decision in principle is that the Gothenburg dairy will close by the end of 2014, and it is proposed that most of the production of fresh products at Gothenburg will move to Jönköping, where investment will take place and more employees recruited. The rest of the production will be moved to the dairies at Linköping and Stockholm.

Another major proposal concerns Skövde dairy, where Arla produces cottage cheese. The capacity and town centre location prevent the necessary long-term expansion. The intention is, therefore, for Arla to invest instead in Falkenberg dairy, which closed in the spring. The aim is for Falkenberg to reopen at the end of 2014 as Europe’s largest cottage cheese dairy. It is proposed that Skövde will close by the end of 2015.

“Arla Sweden has unique expertise in the production of cottage cheese and, by focusing on establishing Europe’s largest cottage cheese dairy in Falkenberg, we can take advantage of new market opportunities, both in Sweden and in other countries, and thereby add value for Arla’s owners,” says Mats Hedlund, head of fresh products at Arla in Sweden.

A third element of the structural package is that production at Visby dairy will be streamlined: fermented products and butter, as well as refrigerated storage will move to Stockholm (Kallhäll) and Götene respectively. Production of milk powder, fresh milk and cream will return to Visby.

Negotiations with the union on a national level has begun

When the Board of Directors takes the final decision regarding the structure, negotiations concerning the local impact can take place. Therefore, it is too early to say exactly how many employees will be affected by the proposed structural changes, but currently around 360 people work at the dairies in question (250 at Gothenburg, 90 at Skövde and 20 at Visby).

Production will be moved to other facilities and it is anticipated that 110-130 additional roles will be required : 60-80 in Falkenberg and 50 in Jönköping.

In line with Group strategy

The structural package is in line with Arla’s Group Strategy 2017, where an important element is to create an efficient operation with focus on cost control and new ways of working. The aim is for savings of DKK 2.5 billion before the end of 2015.

“It’s important to our dairy farmer owners that they ensure continued efficiency. Therefore, in recent years, we have improved the efficiency of the dairy infrastructure in Denmark, Germany and the UK . Now efficiencies are also being introduced into Sweden to ensure that Arla continues to be strong,” says Åke Hantoft, Chairman of Arla Foods.

Lower carbon footprint

The proposed changes will result in less energy and reduce the carbon footprint, reduce the use of chemicals and lower product waste. The reason is that Arla wants to move production from older dairies (Gothenburg and Skövde) with a high climate impact from production to dairies (Jönköping and Falkenberg) with a substantially lower environmental impact.

The relocation of production from Skövde to Falkenberg will mean no significant change in transport. In the best case scenario it will be slightly less because there is a large amount of milk in the area around Falkenberg, which currently is transported over long distances to the other dairies. According to the proposal, transport to and from the dairy in Jönköping will increase, but the net effect is still positive, because production there is more modern and energy efficient. The structural changes will also offer better economic conditions to make essential improvements that reduce the environmental impact of the remaining dairies: for example by changing from fossil fuels to biofuels.

The process going forward:
The Board of Directors has made a decision in principle and union negotiations have begun. When the Board of Directors has made a final decision, local impact negotiations at the dairies concerned will follow.

Facts about Arla’s structural package:

Arla currently has 13 dairies in Sweden. If the plan is implemented, this figure will reduce by two dairies (Gothenburg and Skövde).

Relocation of production:
– It is proposed that the production of fresh products, as well as the refrigeration storage in Gothenburg will move to Jönköping. A trans-shipment hub will remain in Gothenburg.

– It is proposed that the production of cottage cheese will be moved from Skövde to Falkenberg, where Europe’s largest dairy cottage cheese dairy will be established.

– Production in Visby to be streamlined to milk powder, fresh milk and cream, while the rest of production (fermented products and butter) as well as the refrigerated storage will move to Stockholm and Götene respectively.

Timetable: It is proposed that the various measures in the infrastructure package will be implemented between 2014 to 2015. Gothenburg dairy will close, in line with the proposal, by the end of 2014, Skövde by the end of 2015 and Falkenberg is proposed to open by the end of 2014.

Number of jobs: Exactly how many employees will be affected by the proposal will only become clear when the union negotiations are complete. At present approximately 360 people will be affected at the dairies concerned (250 at Gothenburg, 90 at Skövde and 20 at Visby). At the same time, the proposal to move production to other facilities will result in recruitment of a total of 110-130 people in (60-80 at Falkenberg and 50 at Jönköping).

Investments: A total of SEK 250-350 million, most of which will be in Falkenberg (SEK 150-200 million) and Jönköping and Stockholm (SEK 100 million).

Environmental impact: The changes will reduce energy consumption and climate impact, chemical usage and product waste. Arla is investing in modern dairies and further improvements will be achieved through investments in renewable energy.