Dairy giant Arla Foods is aiming to “further drive organic penetration of the milk market” through acquiring part of UK business Yeo Valley.
The transaction, for an undisclosed sum, will give the Denmark-headquartered, farmer-owned dairy cooperative the rights to use the Yeo Valley brand in milk, butter, spreads and cheese under an intellectual property licence.
The Yeo Valley yogurt, ice cream, cream and desserts business will continue to be run independently through Yeo Valley Group, which remains under the ownership of the Mead family.
Financial details were not disclosed.
Tomas Pietrangeli, the managing director of Arla’s UK arm, said: “The potential for future investment in range through this licensing agreement with Yeo Valley provides a significant opportunity to offer a greater choice to consumers at attractive prices.
“Our ambition is to encourage customers to trade up from standard to organic milk, butter and cheese, driving overall growth for organic across dairy categories.
“Arla Organic Free Range milk has driven 60% of all the growth within the organic milk category in the last 12 months, with 70% of all Arla Organic Free Range milk sales attributable to customers who would have not previously purchased organic milk. Through the licence to use the Yeo Valley brand, we believe that we can further drive organic penetration of the milk market.”
Tim Mead, who runs Yeo Valley on behalf of his family, said: “Arla’s farmer-owned credentials are aligned to the values and ethos that the Yeo Valley brand is based on – ‘supporting British family farms’. We have a long-held ambition to grow organic dairy in the UK because at Yeo Valley we believe that organic dairy is better for the planet, for the cows and for health.”
Arla said in the UK, only 4% of milk sold in the fresh milk market is organic, which compares with 10% in Germany 16% in Sweden and 29% in Denmark.
“This is a great chance for us to catch up with our European neighbours,” said Pietrangeli. “Organic milk has a key role to play as consumers increasingly look for ways to make their diets healthier. Its production without the use of artificial or manufactured herbicides and fertilisers and with high standards of animal welfare are key reasons it is in growth, especially with younger consumers. Arla is working with industry bodies to continue to help consumers understand the additional benefits that come with organic milk.”
The deal fits in with Pietrangeli’s plans to make dairy products attractive to a wider audience.
Speaking at the International Dairy Federation World Dairy Summit in Belfast last year, Pietrangeli said the dairy industry faced an “existential threat” as it was seen as outdated, industrial, with doubtful health and welfare claims.
His solution was for the dairy sector to market the positives of milk more proactively, make use of the industry’s strengths and to focus on young women who are “key influencers”. Growing its organic offering can be seen as a move in that direction.
Completion of the transaction will take place following merger approval by the UK Competition and Markets Authority.
Yeo Valley was founded by Roger and Mary Mead, who began making yogurt, using milk from their dairy herd, in 1974. Tim Mead, took over in 1990 when his father, Roger, died in a farming accident.