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May 30th, 2012

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The proposed merger of the Denmark-based dairy company Arla Foods and two other major milk producers is getting mixed reviews in the dairy world. Arla has announced plans to acquire two co-operatives, Germany’s Milch-Union Hocheifel (MUH) and British Milk Link, Ltd.

Following the acquisition, Arla will have a total of 12,300 co-operative owners in Denmark, Sweden, Germany, Belgium, Luxembourg and the UK.  If Arla completes the takeovers, it will become Britain’s biggest dairy company and will be the third largest in Germany.

Although Arla and its proposed partners say the move will benefit employees, partners and consumers, some analysts have predicted that the merger could spell doom for some smaller dairy companies across Europe. They say that the large milk producers are already able to drive market prices low enough that smaller dairies cannot compete.

Dairy Crest, a UK-based company, was already considering closing some of its operations and sticking to its profitable cheese businesses after a poor performance in the liquid milk arena last year. Experts now predict that the merger between Arla and Milk Link will virtually guarantee the demise of at least part of Dairy Quest’s milk division. The company employs about 6,000 workers in the UK, with nearly 4,000 of those in the dairy section.

Per Olsen, the director of Bornholms Andelsmejeri, a small Danish dairy located on the island of Bornholm, said he isn’t concerned at all about the pending Arla monolith.

“I don’t see that it should concern us," Olsen told Bornholm-based news site tidende.dk.

Olsen said things were going well at his dairy and they were busy producing koldskål (a buttermilk and vanilla desert, often flavoured with lemon) and other national summer favourites.

The parties involved in the merger expect to decide on whether to implement the transactions on June 26, and will still need regulatory clearance if they decide to move forward.