Arla invests US$43.34M in Danish capacity expansion to meet demand for on-the-go coffee drinks

DENMARK – Danish multinational dairy cooperative, Arla Foods is investing €41 million (US$43.34M) to expand the production capacity of its Esbjerg, Denmark, dairy to meet “increased global demand” for on-the-go, chilled coffee drinks.

Arla produces the milk-based coffee products at its manufacturing site in Esbjerg, Denmark, and they are made from milk from Arla Foods’ farmer-owners as well as 100% Arabica coffee from the Starbucks Coffee Company.

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The partnership with Starbucks dates back to 2010 and was aimed at launching new products in more than 43 countries across the EMEA region.

In 2018, Arla claimed that Starbucks’ RTD business had grown by an average of 40% per year across EMEA since the initial agreement was signed.

That same year, Arla Foods and coffee chain Starbucks signed a new 21-year strategic licensing agreement, which saw Arla Foods manufacture, distribute and market ready-to-drink (RTD) Starbucks products in Europe, the Middle East, and Africa (EMEA).

The expansion is timely as the ready-to-drink coffee beverage category has grown with an average of 20% every year and with a record growth of almost 34% in 2021, according to a spokesperson from Arla.

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 Arla’s spokesperson in a statement revealed that the expansion, which will start in the coming months and be complete by the end of next year, will increase the company’s capacity by around 20%.

“We are investing EUR41m (US$43.1m) in the dairy to expand production, packaging lines and cooling areas as the demand has outgrown the dairy’s capacity,” the spokesperson revealed.

Starbucks also has a similar agreement with Swiss food group Nestlé. Known as the “global coffee alliance,” the US$7.15bn distribution deal was struck just a month before the one with Arla took effect.

The world’s largest food and beverage company agreed to the global license of Starbucks consumer and foodservice products allowing it to market them outside of the company’s coffee shops.

According to Nestlé this transaction gives it a strong platform for continued growth in North America with leadership positions in the premium roast and ground and portioned coffee businesses.

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