Arla Foods Partners with Dairy Farmers of America on Cheddar Cheese Venture

Arla Foods, a global dairy cooperative based in Aarhus, Denmark, and the fifth largest dairy company in the world, and Dairy Farmers of America (DFA) has entered into an agreement to form a joint venture in the United States for the development and production of premium cheddar cheese. The joint venture will include construction of a dairy facility for cheddar cheese production in western New York state. 

The United States ranks as the world’s largest cheese market, and cheddar cheese represents approximately one third of all cheese bought by U.S. consumers. The Arla brand offers cheese products without artificial preservatives or flavors, produced under a high level of sustainability and traceability, and with milk from farmers who don’t use artificial growth hormones, say company officials. 

“Together with Dairy Farmers of America and eight of their farmers, who will supply the raw milk, we will explore opportunities to bring premium quality standards to the cheddar category through the Arla brand. Adding cheddar to our U.S. portfolio will allow us to expand our offerings to retailers and help increase the sales of our European products made from owner milk,” says Peder Tuborgh, CEO of Arla Foods.

“We are pleased to be entering into this partnership with Arla. Arla and DFA share the same passion for providing the highest quality products to consumers and are even more committed to sourcing these products from dairy farmers who employ sustainable and transparent farm practices,” says Rick Smith, president and CEO of DFA.

Construction on the new production facility is expected to begin in the fall of this year, and production is expected to start in the fall of 2017. The facility will be located in western New York state, near the eight farms supplying the raw milk. The farmers are members of DFA and will annually supply approximately 70,000 tons of raw milk, which will meet quality standards similar to Arla’s proprietary farm quality program Arlagarden. Given U.S. import quotas, local production capabilities provide a more optimal solution to expand in the market.

The U.S. market is one of six focus regions identified in Arla’s corporate strategy, “Good Growth 2020.” The goal is to become a top 10 retail cheese player by expanding the business beyond the deli section into the dairy aisle, where the majority of U.S. cheese sales take place. Recently, the company launched its new Arla branded cream cheese, with no artificial growth hormones, ingredients or flavors, in the U.S. dairy aisle.

“As U.S. shoppers continue to look for better-for-you food products that they can feel good about serving and consuming, Arla’s new cheddar cheese products will help to satisfy an unmet consumer need from the current offerings in the dairy aisle.  Our expectation is that the new cheddar products will also create a halo effect for our new Arla Cream Cheese and other Arla^® branded products,” said Don Stohrer, Jr., head of Arla Foods U.S.

The joint venture will be 70 percent owned by DFA, which also will manage the operation, 20 percent owned by Arla and 10 percent by the eight farmers who supply the milk. The investment in the joint venture is expected to be $58 million (€53m), of which Arla will cover 20 percent or $11.6 million (€10.3m). The joint venture is expected to employ 30 people.