Danish dairy firm Arla Foods invests in Saudi Arabia's new production lines

The European farmers’ co-operative will invest more than $17m to expand and diversify its product range

Arla Foods has invested a total of 127 million riyals in the last five years in Saudi Arabia's dairy business. Photo: Arla

Farmers’ co-operative Arla Foods, one of the world’s biggest dairy firms, said it had invested in new production lines in Saudi Arabia as it seeks to further diversify the product range it exports to the Middle East region.

The Danish company, which owns brands such as Lurpak, Puck, Kraft and The Three Cows, invested more than 64 million Saudi riyals ($17m) in the production lines that have been operational in the kingdom since September 2021, Arla Foods said on Sunday.

The new lines will be producing ready-to-drink products from Starbucks as well as Puck sauces, soups and cooking cream.

Arla Foods' production capacity in Saudi Arabia is projected to increase by 10 per cent in 2022 compared to 2021, with additional production lines allowing the company to further increase the product range it exports to the region, it said.

"Saudi Arabia is one of the leading markets for dairy products in the region and has become a focal point for our production expansion goals," Henrik Lilballe Hansen, vice president and managing director of Arla Foods Saudi Arabia, said.

"Serving as a gateway for us to tap into the country and neighbouring markets, Arla Foods is aligning its operations with the kingdom’s long-term goals for the sector to support the Saudi economy and seize the opportunities presented by the ever-growing market."

The Middle East is sharpening its focus on food security, resulting in the expansion of food and beverage companies in countries such as Saudi Arabia and the UAE.

In June, Saudi Arabia's Almarai, the biggest dairy company in the Middle East, purchased Binghatti Beverages Manufacturing's production facility in the UAE for Dh215m ($58.54m) to expand its product range. Following the Covid-19 pandemic, the region is also focused on diversifying supply chains and investing in local manufacturing for the production of essential goods.

Food and beverage companies in the region are also increasingly evaluating acquisitions to drive growth, diversify their product range and expand their footprint to better deal with challenges arising from the pandemic. In July, Saudi Arabia's Savola Group, through its subsidiary Savola Foods Company, agreed to acquire nuts company Bayara Holding for $260m.

Arla Foods, owned by about 10,000 farmers in Denmark, Sweden, Germany, Britain, Luxembourg, the Netherlands and Belgium, recorded half-year revenue of €5.4 billion in 2021, up 1.2 per cent from €5.37bn in the same period a year ago, according to its latest investor report. Half-yearly profit rose to €172m, up from €166m in the corresponding period last year.

Arla Foods introduced the two production lines in September 2021, which reduced transit times, increased the average shelf life of dairy products and became more easily accessible to customers in a number of regions of Saudi Arabia. The addition of the new lines is also helping the growth of these product categories in the region, the company said.

“The Ministry of investment is always committed to extend its support to domestic and foreign investors to establish and expand their investments in the kingdom," Adnan Al Sharqi, deputy of Integrated Investors Services in the Ministry of Investment, said.

"It is encouraging to see Arla Foods Company take the initiative with the introduction of new production lines and show their interest further to expand their presence in Saudi Arabia."