A division of Danish dairy giant Arla Foods is investing in an existing factory in Argentina for proteins and infant-formula applications.

Arla Foods Ingredients plans to add a new drying tower to the site in the city of Porteña in what the company describes as a “significant upgrade”, without disclosing the amount of capital to be invested.

The addition of a new tower – set to be completed in 2026 – will “more than double” production of so-called permeate powder, a high-lactose ingredient produced through the removal of proteins from milk for use by food manufacturers.

Arla Foods said the Porteña plant upgrade is intended to cater to the “growing demand for high-quality whey ingredients both in Latin America and globally” and has also been given approval to produce dairy proteins for infant-formula products.

Argentina is attracting the investment even as the country battles with hyperinflation, with prices rising at a pace exceeding 100% amid the devaluation of the local currency, the peso.

Henrik Andersen, the CEO of Arla Foods Ingredients, referenced the economic strife in a statement today (9 October) announcing the investment.

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“We have been in Argentina since 2000, and over the years, and regardless of the economic situation in the country, we have achieved some very satisfactory results, which means that we can now invest in future growth.”

Arla Foods did not provide a breakdown of its revenues and profits generated in Argentina in the dairy company’s 2022 annual report, either by the group as a whole or Arla Foods Ingredients.

Issuing first-half results in August for 2023, inflationary pressures and volume declines were evident at the group level as parent company Arla Foods lowered its guidance for the year.

“As expected, the first half of 2023 was characterised by continued inflationary pressures, falling market prices for dairy products and a shift in consumer behaviour towards discount channels and private-label products,” the company said.

The sales outlook for the full year was cut to a range of €13.2bn (then $14.2bn) to €13.7bn, compared to the prospects delivered in February of €13.6-14.2bn. Profit as a percentage of revenue was expected to come in at 2.8% to 3%, versus 2.8% to 3.2% previously.

To accommodate the production of infant-formula ingredients at the Porteña facility, Arla Foods Ingredients said it has had to meet “strict global standards in nutritional value and hygiene”.

A permit was granted in June, with the business expecting that a “significant portion of the Porteña plant’s total production will go to infant-nutrition ingredients within the first year and grow further thereafter”.

Arla Foods Ingredients will source the base products locally after entering agreements with dairy suppliers and offered training to “ensure that the raw materials meet the required quality”.

Andersen added: “We are proud that we can now produce for the infant sector from Latin America. Getting here has required time, resources and a high degree of cooperation – not only between our Danish and Argentinian departments, but also with local dairies. Everyone has effectively contributed to us now being able to lift our business further.”