Arla Foods is in talks to acquire a factory Switzerland’s Hero Group plans to close in Sweden.

The two companies are in discussions over Hero’s Semper facility in Götene in the south of the country.

Denmark-based dairy giant Arla, which has a dairy in the same town, wants to buy the factory buildings, parts of the equipment and the land itself.

Arla has a cheese and spreadable butter factory in Götene, next to the Semper site, and the two companies share facilities.

In August, Hero sold its Semper gluten-free business in the Nordics to Dr. Schär. That deal involved Hero’s gluten-free crisp bread factory in the Swedish town of Korsnäs but not the site in Götene.

According to Hero, the plant in Götene employs 190 people. It produces “gruel, infant formula, and gluten-free mixes for the group’s different companies, including Semper, and third-party business partners”.

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By GlobalData

The company’s decision to cease production at the site “follows changing market conditions”. It pointed to a fall in consumption of baby milk, reduced demand from China and a lower birth rate that has led to a decreasing demand for baby and toddler milk.

“The group has also shifted its strategic focus away from this category, and also gluten-free and B2B production, prioritising a smaller number of core categories,” it added.

Jim Frandsen, the general manager of Hero’s northern European business, said the company has launched talks with unions because “changing market forces and strategic focus have resulted in far lower than expected production at [the] Götene plant, meaning that we are not able to operate efficiently and competitively”.

Arla is interested in “buying the equipment needed to produce milk powder for the industrial markets”, Marika Lifbom, the manager of Arla’s dairy in Götene, said in a statement.

According to an Arla spokesperson, the company already has two powdered milk facilities in Sweden and exports the product to markets including the Middle East and China.

The spokesperson told Just Food Arla has surplus milk and the “opportunity” to buy the assets has “arisen”.

“Hero Group was thinking of closing the plants down and we already share lots of facilities,” the spokesperson added.

With the additional site, Arla would have three milk powder sites and increased [production] capacity would “smooth [its] operations within the powder production sites”, the spokesperson explained.

“In Sweden, as well in other European countries we have a surplus of milk, (…) we export it. So, with another powder facility, we would be able to increase our capacity to produce powder,” he said.

The employees at Arla and Semper were informed of the plans yesterday (23 January) and negotiations with union officials have begun.

Hero’s Semper business has operations in Denmark, Norway, Finland and Sweden, employing 300 staff. It manufactures some of its baby food products with local ingredients in Spain.

Semper also produces food under the Corny and Organix brand names.