Arla Foods is now the sole owner of the Westbury Dairies milk powder and butter plant in Wiltshire, following the acquisition of its joint venture partner First Milk’s share of the equity. The nature of any financial transaction is not clear at this stage.
Westbury, one of the UK’s newest milk processing plants, came on stream in 2003 as a joint venture between the UK’s then three milk co-operatives, Dairy Farmers of Britain (DFoB), First Milk and Milk Link. Its role was to balance the annual spring flush of milk by processing surplus liquid milk to powder which could be stored and exported more efficiently than liquid milk.
The ill-fated DFoB exited the business just before the milk group went into receivership in 2009. Arla first acquired a minority stake in Westbury in 2010, followed by joint control when it bought Milk Link in 2012, and then purchased the freehold of the Westbury site in December 2013. It has added an Anchor butter making facility.
Arla says taking full ownership of the joint venture is a strategic move and a natural step to optimise its manufacturing footprint in the UK.
“Arla aims to grow its business in eight global dairy categories and six market regions around the world,” says Peter Giørtz-Carlsen, executive vice president Arla Foods UK. “The Westbury site is now an integral part of that global network of Arla production sites and will benefit from being so, further helping the UK to play an even more significant role in our global strategy.”
First Milk chief executive Mike Gallacher says the move is another significant step in reshaping the troubled business around its core cheese and liquid milk activities. First Milk will continue to have access to the powder drying capacity at Westbury during peak milk production and at other pre-defined times of the year.
“While the dairy industry remains exceptionally tough, the progress we have made over the last nine months gives us the platform to focus this year on improving the relative returns to our members,” he says. “We have worked very closely with Arla to reach this agreement and continue to see this as an important trading relationship for First Milk.”
AHDB Dairy believes First Milk’s exit will allow Arla to invest freely in Westbury and match its growing UK milk volume, as agreeing investment priorities within a joint venture can be difficult. “Now Arla will be able to independently invest in efficiency improvements as well as potentially extending the product range into added value areas,” it adds.
First Milk is likely to make a multi-million annual saving, depending on whether it has paid an exit fee and how often it needs to use the site. “First Milk is a smaller organisation than it was when the Westbury joint venture was agreed, and as such, has a lower requirement for space at Westbury,” notes the AHDB.