Arla continues African expansion

3 Sep 2015

Arla is continuing its expansion in Africa through two new joint ventures in Nigeria and Senegal. Two local partners, Tolaram in Nigeria and Attieh Group in Senegal, will provide the distribution backbone that the company says will help Arla grow and develop its business in West Africa. The move is part of Arla’s strategy to […]

Arla continues African expansion

6a00d8341bf67c53ef01538f574218970b-800wiArla is continuing its expansion in Africa through two new joint ventures in Nigeria and Senegal. Two local partners, Tolaram in Nigeria and Attieh Group in Senegal, will provide the distribution backbone that the company says will help Arla grow and develop its business in West Africa.

The move is part of Arla’s strategy to develop new markets outside the EU to ensure that Arla can create as much value as possible from the farmer-owners’ milk.

The two new joint ventures are, the company says, another step towards fulfilling Arla’s ambition in sub-Saharan Africa, where Arla aims to grow its annual revenue from approx. €90 million to approx. €460 million in 2020. This is to be achieved initially, it says, through sales of powdered milk and liquid milk, which is in high demand among the rapidly growing middle class in and around the big cities, and eventually also butter and cheese.

“With the improved living standards, families are increasingly demanding safe and affordable nutrition,” said Steen Hadsbjerg, head of Arla’s business region in Sub Saharan Africa. “West Africa faces a milk deficit, which gives Arla an opportunity to provide milk powder and other dairy products that meet the consumers’ needs. We are here to build a long-term business, and that requires strong local partners. We are therefore pleased to join with two experienced partners in Senegal and Nigeria,”

Arla’s powdered milk products in Africa are sold under the Arla Dano brand.

In Nigeria, Arla already has an established business with annual revenue of approx. €80 million, but so far it has been based on various distribution agreements. Now, by placing all its current and future business in the new joint venture company with Tolaram Group, Arla says it expects to grow its revenue to €240 million by 2020.

“Nigeria is one of the biggest markets for dairy products in Africa. For Arla to succeed in Africa we must succeed in Nigeria. The population is growing at a rate of two to three per cent per year, and people are young, ambitious and increasingly well educated. This makes Nigeria a perfect market for Arla’s Africa strategy, and we expect the new joint venture to start up its sales in the market in September,” said Hadsbjerg.

The new joint venture in Nigeria will carry the name TG Arla Dairy Products LFTZ Entreprise and is owned 50% by Arla Foods and 50% by Tolaram Group. The company will handle packaging, marketing, sales and distribution of Arla products in Nigeria. Mads Burmester has been appointed as managing director of the company.

Arla notes that it does not have any sales today in Senegal, but by forming a joint venture company with the Attieh Group, it expects to build annual revenue of €32 million by 2020.

The new joint venture company in Senegal is called Arla Senegal S.A. and is owned 75 per cent by Arla Foods and 25 per cent by Attieh Group. The joint venture will handle packaging, marketing, sales and distribution of Arla products in Senegal, and is expected to be operational before the end of this year.

As Arla Foods continues to expand its presence and business in African markets, the company says that it is essential to the long-term success of Arla’s business that the company’s growth must be achieved in a responsible way that does not bring unintentional consequences for the local farming industry and its related communities.

For that reason Arla has conducted an in-depth “Assessment of the Potential for Human Rights Impact related to the Market Effects of Milk Powder Export”. Arla is also introducing due diligence procedures complying with the UNGPs and the OECD guidelines, ensuring that Arla is well placed to manage the human rights impacts of its global business activities in accordance with international human rights guidelines.

Human Rights Assessments have been conducted in regards to the new joint ventures in Nigeria and Senegal.