Arla Foods is to produce cheese in Russia in the first time through a partnership with local cheese maker Molvest Group.
The dairy giant is to team up with Molvest and convert one of the Russian firm’s production sites to produce yellow cheese.
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Arla CEO Peder Tuborgh said the deal was likely to double its sales in Russia within three years.
“As Russia is one of our strategic growth markets this agreement is important because it provides us with the opportunity to combine our export business to Russia with local production,” Tuborgh said. “This is unlikely to be our final expansion into the Russian market but this agreement alone is expected to double our turnover in Russia before the end of 2015.”
Molvest will collect milk from farmers around its plant in the south-western city of Kalacheevsky to be processed at the site. Arla will then be responsible for the production of yellow cheese at the facility.
Arla, which is investing DKK25m in the dairy, said today (16 January) that joint production will start next year. The two companies are aiming to produce 6,000 tonnes of cheese at the site in 2014. The target is to then increase volumes by 6% a year.
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By GlobalDataAt present, Arla exports products from Scandinavia to Russia. In 2011, its sales in Russia grew by 30% to around DKK500m due to sales of Lurpak butter, Castello cheese and Arla Natura cream cheese. Arla said those brands would benefit from its decision to set up local production.
“The new venture in Russia means that we can offer a broader range and supply larger volumes,” said Arla senior vice president Hans Christensen, who is responsible for the co-operative’s operations in Russia, Poland and North America. “This, in turn, will strengthen our position vis-a-vis the Russian retail sector and grow our exports from Scandinavia to Russia.”
Molvest has eight sites in Russia and one in UKraine. Its annual turnover is around $250m. Arla said Molvest is “considered Russia’s third-largest dairy company within traditional dairy products”.
