Finland's Ingman sells dairies to Swedish-Danish giant Arla

print this

The Danish-Swedish dairy giant Arla Foods is acquiring 30 per cent of the shares in the Finnish dairy company Ingman Foods Oy Ab, with the option of buying the remaining 70 per cent in the course of the next three years. The purchase price has not been made public.
      The deal does not include Ingman's ice cream business, which will remain with the Ingman family.
     
The transaction will neither reduce Ingman's own production, nor the joint production with its current dairy partners, nor even its purchases from milk producers, stated the Head of Nordic markets at Arla Foods Hans-Åke Hammarström in Helsinki on Wednesday. On the contrary, the aim of the deal is to seek more growth.
      Currently, the Ingman Foods Group - including the ice cream business - employs around 900 people, and it has production units in Sipoo, Lapinjärvi, Kuusamo, Kitee, and Urjala. The head office and the main production units are situated in Sipoo, east of Helsinki.
      The turnover of Ingman's dairy production was in excess of EUR 200 million in 2005. In comparison, Arla Foods is about 30 times bigger, while Finland's largest milk processor Valio in turn accounts for just about one-fourth of Arla's net sales.
     
Arla has been operating in the Finnish market already for a long while, and has established its position as an importer of cheese products. The market share of Arla's cheeses in Finland is close to 15 per cent. Ingman, in turn, supplies one-fourth of the packed milk and yogurt products and some 10 per cent of all cheese products sold in Finland.
      Previously Arla tried to penetrate the Finnish market with its yogurt range, but the company was forced to retreat. Furthermore, the negotiations between the Nordic dairies - including Valio - to establish a joint venture also failed.
      Arla and Valio are also in direct competition in Sweden, where Valio has cooperation with some dairies and runs a substantial cheese business. However, Arla has not got any foothold in Russia, where Valio has traditionally enjoyed a strong presence.
     
The new company Arla Ingman will be formed by Arla's current subsidiary in Finland, Oy Arla Foods Ab, and the Finnish Ingman Foods. Managing Director Robert Ingman of Ingman Foods will also take the top job in the new organisation.
      "The two companies complement each other well," said Managing Director Ingman, adding that in the long run Ingman alone would not have been big enough to manage in the globalising and growing market.
      According to Ingman, the family wanted to make sure that they will be able to focus on the production of ice cream. Their aim is to break into the neighbouring market areas, for example by acquiring some small enterprises.
     
Competitive pricing regarding milk production will be of the utmost importance to Arla Ingman, Hans-Åke Hammarström from Arla Foods admitted.
      He believed that the Finnish milk producers will appreciate two optional buyers, and that they will accept the Swedish newcomer once the price is right.
     
According to Hammarström's analysis the European dairies are experiencing strong price pressures, following consolidation in the retail trade and the rise of in-house brands, as well as some political changes including the reform of the European Union agricultural policy, and finally the new needs of the end-customers.
      In Hammarström's view, the dairy companies aim at market leadership, a target that Arla Foods has already achieved in Sweden and Denmark. In Finland, the goal is to obtain a strong position as number two. Ingman had suffered somewhat from being appreciably smaller than Valio in the domestic market, with a subsequent need to undercut on prices.
      The new company Arla Ingman will have a turnover of EUR 300 million and will employ around 500 people, after the deal has been approved by the EU competition authorities.


Previously in HS International Edition:
  Finnish dairy industry threatened by cheap imports from new EU countries(16.3.2005)

Links:
  Press release: Arla Foods increases focus on Finland
  Ingman Foods Group

Helsingin Sanomat