Arla Foods bumps up Middle East expansion with relocation of processed cheese businesses to Bahrain

05 Jun 2019 --- Danish dairy cooperative Arla Foods has formally completed the acquisition – announced in December 2018 – of Mondeléz International’s processed cheese business operations in the Middle East region, which is currently licensed under the Kraft brand. Arla Foods has announced that three of its processed cheese and sterilized cream production lines, from Denmark and Saudi Arabia, will be moved to a newly acquired site in the Manama, Bahrain, with an expressed production capacity exceeding 66,000 tons.

The acquisition gives Arla Foods full ownership of a state-of-the-art cheese production site in Bahrain and further expands the company’s branded cheese production in the Middle East and North Africa region (“MENA”). The company also hopes that the move will improve overall supply chain efficiencies. MENA is one of the key geographical regions in Arla Foods’s growth strategy, coined Good Growth 2020. By moving the production of processed cheese and sterilized cream to this site, Arla Foods also expects to improve the shelf-life of these products by 4 weeks as transport time to customers in MENA is reduced significantly.

“It makes a lot of sense for us to place the production of these exact products at the newly acquired site in Bahrain, since these products are primarily made for the Middle East and North Africa and in lesser degree for other markets,” says Head of Supply Chain in Arla Foods, Executive Vice President Sami Naffakh. 

“It gives us a strong regional supply chain footprint that enables us to secure long-term competitiveness in the region through scale and efficiency, and the pilot plant at our new Bahrain site will allow us to innovate in new ways within this category,” he adds. 

Built in 2008, the newly acquired site includes an on-site innovation pilot plant and “has won multiple awards for manufacturing excellence within core cheese categories.”

Since 2010, the company has doubled its organic sales across the MENA region, which is its largest market outside Europe, through strong positions in cheese under the Puck brand, butter and spreads under the Lurpak brand, as well as milk powder and UHT milk under the Dano and Arla brands.

In 2018, Arla Foods’s retail and foodservice revenue in the MENA region reached €560 million.

Moving selected production lines to new site
Following the acquisition, Arla Foods has announced the relocation of its processed cheese and sterilized cream production lines at the company’s Bislev and AKAFA sites in Denmark, and from its Riyadh site in Saudi Arabia – all to the newly acquired site located in Manama, Bahrain. The move is not expected to take place until late 2020 and mid-2021, but Arla Foods is announcing the change in advance to ensure a smooth and transparent transition as well as timely solutions for affected staff.

While the company notes there are still a number of factors that can change its final numbers, Arla Foods currently estimates that the following volumes will be moved:

• An estimated 26,000 tons (annually) of processed cheese from Bislev, potentially impacting approximately 40 jobs.
• An estimated 18,000 tons (annually) of sterilized cream from AKAFA, potentially impacting approximately 35 jobs.
• The volumes of processed cheese to be moved from Riyadh are still to be confirmed.

Helping employees with the transition
While the changes will not be fully implemented until late 2020 to mid-2021, Arla Foods has chosen to inform employees at the three affected sites now and they were notified about the decision earlier today.

“It is important for us to be as open about the future as we can be with our employees, and since the coming months will require a high degree of involvement of staff at each affected site we have decided to inform our employees now about the decision to move parts of our production to the new site in Bahrain,” says Sami Naffakh.

“As soon as we are able to confirm the exact volumes that will be moved, we will engage with affected employees to ensure they are supported to move on in a good way, either to jobs at other Arla Foods production sites or outside Arla Foods. We have a good track record of finding ways to help people into new job opportunities, especially when there is a relatively long time period of time in which to work this out. They can bring valuable production expertise to our other sites, which is an opportunity we do not want to miss,” concludes Sami Naffakh.