Partnership in Brazil to be strengthened

Arla is strengthening its presence in the Brazilian market by announcing a shared ownership with its longtime partner, Brazil’s largest dairy company, Vigor Alimentos S.A.

Since 1986, Arla has been in a 50/50 joint venture with Vigor under the name Dan Vigor. In 2013, Dan Vigor reached a gross revenue of €36 million. Under the new agreement Arla will exchange the joint ownership of Dan Vigor for an eight per cent share ownership of Vigor, Brazil’s largest dairy company. Arla will become a voting member and an observer in Vigor’s Board of Directors.

“The new agreement with Vigor is similar to the one we have with Mengniu in China – only this time it hasn’t been necessary for us to find additional funding. Vigor is one of Brazil’s leading dairy producers with a first class distribution network. We have a history of excellent cooperation and it’s a natural step for us to further build on this partnership to explore the great potential in Brazil,” says Finn Hansen, Head of Arla’s international markets.

Latin America is a growth region, within which Arla has had a strategic focus over the past year. Brazil is not only the most significant market in the region, but also the world’s fourth largest dairy market with an overall annual growth of five per cent. With a population of 200 million and a growing middle class, Brazil holds significant dairy consumption potential. Arla’s ambition is to accelerate its export of products to Brazil to get a share of the growing demand for imported brands in the dairy market.

“Brazil is an attractive dairy market, especially within branded cheese and butter. Lurpak is the first Arla brand we are marketing in Brazil and test results are looking promising. We also launched feta, brie and camembert cheese. Together with Vigor, we see a great opportunity to create leading positions for our global brands Arla®, Lurpak® and Castello®,” says Steffen Ander-sen, who is responsible for Arla’s value markets.

Part of the agreement with Vigor is for Arla to drive the creation of a new business unit within its operation, with a new commercial executive officer. The unit’s focus will be on the marketing and sales of imported products and brands, which will be distributed through Vigor’s channels.

When the EU milk quotas are abolished in 2015 and milk production increases, Arla and other European international dairy companies will have to look to growth markets outside the EU. The agreement with Vigor will accelerate Arla’s export to Brazil over the coming years and in the long term contribute to the cooperative owner’s milk price.

Fact about Vigor

Vigor is listed on the Brazilian stock exchange and had an annual revenue of 6.2 billion DKK (R$2.7 billion) in 2013. It has more than 6.000 employees and 14 factories in Brazil. It has 18 large distribution centres covering +40,000 retailers in the most attractive regions in Brazil (e.g. Rio, Sao Paulo). Vigor’s main product categories are powdered and condensed milk (36 per cent), dairy (36 per cent) and spreads (14 per cent). Vigor is partly owned by the world’s largest food processing company, JBS S.A.

Brazil and Arla’s 2017 strategy

In line with Arla’s 2017 strategy, its growth markets are China, Russia, Middle East and Africa, where it is investing heavily in establishing a presence and increasing its market shares. In the past year, Latin America’s large population, growing middle classes and increasing dairy con-sumption has opened up new opportunities for Arla as potential growth markets. Other regions that have similar potential include South East Asia and Australia.