Arla will invest €12 million in an upgrade to its Akafa infant formula plant in northern Denmark, strengthening its positioning in the infant formula category.
The investment will allow the company to add infant milk formula production to its existing powdered milk capacity, without requiring an expansion to the site. The €12 million investment consists of an upgrade of relevant sections of the site – near Aalborg – to produce high-quality infant milk formula.
“We are seeing double-digit growth in our global infant milk formula sales, and we expect the growth to continue in the coming years due to rising demand in the category worldwide,” said Arla group vice-president Henrik Andersen, who heads up Arla Foods Ingredients and is also responsible for Arla’s third-party manufacturing business.
“By upgrading AKAFA to include infant milk formula production, Arla will be able to meet the growing demand with high-quality production. Having a strong capacity with the highest quality is essential in a category like IMF, where quality is the key differentiator in the market.”
The company already owns brands like Arla Baby & Me and Milex, as well as being a preferred supplier to a number of third-party brands, but Arla has set its sights on a larger slice of the infant formula market. Relative to the rest of its business, the cooperative has traditionally underperformed in infant formula – particularly when compared with rivals like Yashili, Danone and Fonterra, and given the increased competition following Reckitt Benckiser’s takeover of Mead Johnson.
Arla’s strongest markets for infant formula are China, southeast Asia, Latin America and Europe.
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Approximately 80% of production at the Akafa plant is powdered milk for family nutrition, and 20% is sterilised cream. The site’s products are sold in markets within Latin America, Africa, Middle East and Asia.
The new infant formula milk production is expected to begin in August 2018, with investment approved by Arla’s board this week.
In February, Arla announced full-year revenue for 2016 of €9.57 billion – down 6.8% on 2015, though its group profit increased by more than 20%.
It was enough to secure the cooperative’s farmer-owners an annual supplementary payment of €124 million, an average of around €9,750 each.
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