Arla is strengthening its presence in the Brazilian market by announcing a shared ownership with its long time partner, Brazil’s largest dairy company, Vigor Alimentos S.A.
Since 1986, Arla has been in a 50/50 joint venture with Vigor under the name Dan Vigor. In 2013, Dan Vigor made a gross revenue of €36 million. Under the new agreement Arla will exchange the joint ownership of Dan Vigor for an eight per cent share ownership of Vigor, Brazil’s largest dairy company. Arla will become a voting member and an observer in Vigor’s Board of Directors.
“The new agreement with Vigor is similar to the one we have with Mengniu in China – only this time it hasn’t been necessary for us to find additional funding. Vigor is one of Brazil’s leading dairy producers with a first class distribution network. We have a history of excellent cooperation and it’s a natural step for us to further build on this partnership to explore the great potential in Brazil,” says Finn Hansen, Head of Arla’s international markets.
Latin America is a growth region, within which Arla has had a strategic focus over the past year. Brazil is not only the most significant market in the region, but also the world’s fourth largest dairy market with an overall annual growth of five per cent. With a population of 200 million and a growing middle class, Brazil holds significant dairy consumption potential. Arla’s ambition is to accelerate its export of products to Brazil to get a share of the growing demand for imported brands in the dairy market.
“Brazil is an attractive dairy market, especially within branded cheese and butter. Lurpak is the first Arla brand we are marketing in Brazil and test results are looking promising. We also launched feta, brie and camembert cheese. Together with Vigor, we see a great opportunity to create leading positions for our global brands Arla®, Lurpak® and Castello®,” says Steffen Ander-sen, who is responsible for Arla’s value markets.
Part of the agreement with Vigor is for Arla to drive the creation of a new business unit within its operation, with a new commercial executive officer. The unit’s focus will be on the marketing and sales of imported products and brands, which will be distributed through Vigor’s channels.
When the EU milk quotas are abolished in 2015 and milk production increases, Arla and other European international dairy companies will have to look to growth markets outside the EU. The agreement with Vigor will accelerate Arla’s export to Brazil over the coming years and in the long term contribute to the cooperative owner’s milk price.
Fact about Vigor
- Vigor is listed on the Brazilian stock exchange and had an annual revenue of 6.2 billion DKK (R$2.7 billion) in 2013.
- It has more than 6.000 employees and 14 factories in Brazil.
- It has 18 large distribution centres covering +40,000 retailers
- in the most attractive regions in Brazil (e.g. Rio, Sao Paulo).
- Vigor’s main product categories are powdered and condensed milk (36 per cent), dairy (36 per cent) and spreads (14 per cent).
- Vigor is partly owned by the world’s largest food processing company, JBS S.A.
Brazil and Arla’s 2017 strategy
In line with Arla’s 2017 strategy, its growth markets are China, Russia, Middle East and Africa, where it is investing heavily in establishing a presence and increasing its market shares. In the past year, Latin America’s large population, growing middle classes and increasing dairy con-sumption has opened up new opportunities for Arla as potential growth markets. Other regions that have similar potential include South East Asia and Australia.
Arla Foods is a global dairy company and co-operative owned by 13,500 dairy farmers circa 3,000 of whom are British.
Dating back to 1881, Arla’s purpose is to secure the highest value for its farmers’ milk, while creating opportunities for their growth. With production facilities in 11 countries and sales offices in a further 30, Arla is the world’s sixth largest dairy company and largest supplier of organic dairy products. Arla has a total of more than 18,000 colleagues and its products are sold under the well-known brands Arla®, Lurpak® and Castello® in more than 100 countries.
Arla Foods UK is the largest dairy company in the country and is home to leading dairy brands Anchor, Cravendale, and Lactofree. It processes 3.5 billion litres of milk a year and has a turnover of £2.2 billion. As well as being number one in fresh liquid milk, butter, spreads and cream, Arla is the UK’s largest cheese manufacturer. It has also built the world’s largest fresh milk facility located at Aylesbury and has plans for it to be the first zero carbon site of its kind. The UK business has a team of approximately 4,000 colleagues located at its dairies, distribution centres and head office.