14 Dec 2018 --- Arla Foods of Denmark has acquired Mondelēz International’s Kraft-branded Cheese Business in the Middle East and Africa (MEA). The region’s cheese consumption per capita is still lower than that of Europe, but it is growing, an Arla spokesperson tells FoodIngredientsFirst. The region is Arla’s largest market outside of Europe, with sales expected to reach €560 million (US$638 million) this year. The move will reportedly enable Mondelēz to focus on faster-growing snack categories, including its core Chocolate, Biscuits and Gum & Candy offerings.

“This acquisition is a gamechanger for our Middle East North Africa (MENA) business,” says Arla CEO Peder Tuborgh. “We have an established and growing business in the Middle East and know our consumers and customers well in this part of the world. As such, this deal is an excellent strategic fit for us as it enables us to both expand our branded presence in the cheese category and secure the local production capacity we have been looking for to continue to grow our business.” 

All Kraft-branded cheese products in the MEA markets are included in the deal, besides the cream cheese brand Philadelphia and Jocca cottage. These brands will remain under the ownership of Mondelēz International. 

The acquisition will give Arla full ownership of a “state-of-the-art” cheese production site in Bahrain and will allow the company to expand its branded presence in the cheese category, says Executive Vice President of Arla Foods’ International business, Tim Ørting Jørgensen. It will also “secure the local production capacity we have been looking for to continue to grow.”

“Over time, the site in Bahrain will also allow us to base the production on high-quality milk from our farmer-owners in Europe,” he adds.

Until now, Arla Foods explains, most of its products sold in the Middle East and North Africa (MENA) region have been produced in Europe, with some local production also placed in Riyadh, Saudi Arabia. However, with Arla’s capacity nearly maximized for processed cheese, today’s announced deal delivers much-needed capacity and gives the company a strong regional supply chain footprint that enables us to secure long-term competitiveness in the region through scale and efficiency.

“Shelf life is a difference as it’s easier to keep cheese chilled in Europe, but we are seeing a growing interest for cheese products, such as our strategic brand Puck,” an Arla Foods spokesperson tells FoodIngredientsFirst.

Since 2010, Arla has reportedly more than doubled its sales organically across MENA, through strong positions in cheese under the Puck brand, butter under the Lurpak brand as well as milk powder and UHT milk under the Dano and Arla brands. 

The company is seeing an increased interested on its recent Puck Less Fat and Puck Less Salt processed cream cheese products and it expects growth in this segment, the spokesperson adds.

The production site is located in Manama, Bahrain, and has a capacity exceeding 66,000 tons. Built in 2008, it includes an on-site innovation pilot plant and has won multiple awards for manufacturing excellence within core cheese categories.

The transaction is expected to close in the next few months and take effect by the end of May 2019.

By Laxmi Haigh

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