Multinational Denmark Arla Foods and the largest DMK group cooperative in Germany should merge, subject to approvals.
The new Mega Dairy – which should overshadow the attachment size of Frieslandcampina -MilcoBel offered – has a combined turnover of just under 19 billion euros (around $ 20 billion).
The combined company would include 12,200 dairies – 7,600 for ARLA and 4,600 DMK – which produce around 25 million metric tonnes of milk in total.
The detailed merger proposal will be discussed with the members of the cooperatives as well as the representatives of the relevant employees in the coming months. He will then be submitted for approval to cooperative advice in June 2025.
Finally, the agreement would require the approval of regulators.
The agreement should appear before the boards of directors of the two cooperatives for approval and would also require regulatory approval.
What leadership said
Jan Toft Nørgaard, president of Arla Foods, said: “The basis of this partnership is formed by our shared values, and I am extremely proud of this proposed merger, which is a win-win for our cooperatives.
“The strength of the ARLA and DMK group lies in our shared commitment to quality and innovation, and I consider DMK Group as the perfect partner to shape a new reinforced, ready to lead in the dairy industry.”
Heinz Kort, president of the DMK group, added: “We are proud of the merger planned with Arla, a cooperative that shares our commitment to innovation and the creation of optimal value.
“This partnership strengthens the resilience of our cooperatives and considerably contributes to strengthening the competitiveness of our farmers.
“Together, we can expand our scope of our dairy products, thus improving our offer and jointly leading the development of innovative products for the benefit of our members.”
Peder Tuborgh, CEO of Arla Foods, said: “DMK Group is the largest dairy cooperative in Germany and a very attractive partner that shares our fundamental values. Our solid market posts and product portfolios are completed very well and our solid partnership in recent years has proven that the DMK group is an ideal partner for the ARLA.
“Our joint presence on the market in Europe and in the world will allow us to protect our production of healthy dairy products, guaranteeing stable food production in Europe, as well as bringing even more nutritious products to the world and our customers.
“This merger is a natural continuation of our strong collaboration for the benefit of consumers, our farmers and their milk price.”
Ingo Müller, CEO of DMK Group, added: “Arla was established as a key player in the dairy industry, and by associating ourselves, we will have a solid and attractive private brand portfolio for all our customers.
“Thanks to the global scope of Arla, we can access consumers and customers beyond our current geographic scope as well as the strengthening of our commercial resilience. Our complementary forces, both in business and in mind, will allow us to continue to advance in dairy technology and innovation, while offering a strong house to farmers. ”
Consolidation clashes
The proposed merger is the last sign that the consolidation activity in the European dairy sector clashes. This occurs at a time when European milk production stagnates when the world’s opposite winds such as American prices on European dairy products – currently pending – threaten the long -term sustainability of industry.
The proposed merger follows the announcement of Frieslandcampina and Milcobel in December 2024. The two cooperatives resume details on the merger currently proposed. There is a signed executive merger agreement and a detailed proposal should be finalized in H1 2025. The agreement will then be brought to the vote by the stakeholders of the two cooperatives and, finally submitted for regulatory approval.
During the announcement for the first time, the attachment of Frieslandcampina and Milcobel proposed would have resulted in the largest European dairy cooperative, with 11,000 farmers, a combined turnover of 14 billion euros and a volume of total milk of 10 million metric tonnes.
But if Arla and DMK merge, their combined dairy activity would be the leader in terms of income, the number of suppliers and the volume of milk production.
DMK has more than 20 centers across Germany, the Netherlands, Italy and in certain international poles.
Arla has sources of most of its milk from seven European countries: Denmark, Sweden, the United Kingdom, Germany, Belgium, the Netherlands and Luxembourg. The cooperative has hubs in many countries in the world and also operates the ingredients of Arla Foods, a Division of B2B oriented ingredients which is present in the lucrative, active and performance nutrition segments.
ARLA and DMK also have a joint venture project, Arnoco, which deals with the lactrum of the production of DMK cheese in the lactrum protein concentrate and lactose for the ingredients of ARLA.
In its annual report for the 201024 fiscal year, the Danish cooperative said that it provided for an increase in geopolitical turbulence and continuous market volatility. “Navigation will require strategic planning and meticulous adaptive measures,” said Arla.
Would the EU be agitating the agreement?
Before the ARLA-DMK agreement is formalized, the European Commission should assess its potential impact on competition in the block.
As such, the Commission should decide whether the combined company “would considerably hinder” effective competition in the EU.
According to EU merger regulations, “the proposed mergers can be prohibited … If the merger parties are major competitors or if the merger would otherwise weaken effective competition on the market, in particular by creating or strengthening a dominant player”.
In a word, a company would occupy a dominant position if it has substantial market power, for example more than 40%, or if there is a low level of constraints on its ability to set prices, or other similar actions which could limit competition.
Read also → Archives: consolidation in American dairy
How much is 24.3 billion liters of milk?
Combined, the milk produced by the ARLA and DMK group is equivalent to almost a quarter (23.68%) from the entire American fluid milk production for 2024 (102.66 million metric tonnes).
This volume would also fill 9,720 Piscines of Olympic size – and is almost sufficient to fill Lake Elsinore from California.
