Milk manufacturers decline grand-scale amalgamation proposal
Get Ready for Europe's Largest Dairy Cooperative?
(Brace yourselves for the possible formation of the mammoth dairy cooperative in Europe.)
In a surprising move, Arla and DMK, the popular dairy cooperatives, have given the thumbs up for a potential merger, making waves throughout the European dairy industry. However, there's still a big hurdle left to conquer.
During separate meetings, farmers from both cooperatives showed their support for the merger with an overwhelming majority. DMK's German farmers met in Hanover to discuss the plans, while Arla's farmers voted in Denmark.
The marriage of Arla, the Danish-Swedish industry giant, and DMK Group, the German milk manufacturer, was initially announced in April. If successful, the merged cooperative would operate under the name Arla.
"The approval of the cooperative members demonstrates our shared conviction that Arla and DMK can do more together," said Arla Supervisory Board Chairman Jan Toft Nørgaard. DMK CEO Ingo Müller was equally enthusiastic, commenting, "This is a strong signal from our members, showing our commitment to the cooperative idea and our potential for growth."
The EU Still Has the Final Say
The EU competition authority must still decide whether to give the green light for the merger. DMK anticipates that the decision may not be made until the end of March 2026. In the meantime, both dairy giants will continue to operate independently.
Critics of the anticipated mega-merger have expressed concerns about power structures and competition. The Association of Agricultural Farming (AbL) warned that corporate-style power structures could prove detrimental to farmers. Claudia Gerster, Chairwoman of AbL and a dairy farmer herself, voiced uncertainty about whether the farmers would ultimately reap the benefits of the merger.
Keep an Eye on Market Concentration
The German Association of Milk Producers (BDM) voiced its concerns immediately after the merger plans were announced. BDM Chairman Karsten Hansen cautioned that the proposed merger actually represented a concentration of power restricting competition for raw milk. "The power of the dairy companies will only grow," explained Hansen.
The German Association of the Food Trade also raised concerns about excessive market power wielded by the new dairy juggernaut. Together, DMK and Arla would handle more raw milk in Germany than the top three dairy companies combined, significantly concentrating the market at the purchasing level and reducing opportunities for German dairy farmers.
Combined Strengths of over 12,000 Farmers
If approved, the merger would unite more than 12,000 farmers in a cooperative alliance, with around 4,600 coming from DMK and approximately 7,600 from Arla. The merger is expected to generate around €19 billion in annual sales and employ around 28,700 people.
The headquarters for the merged cooperative will remain in Viby, Denmark, with Arla's CEO Peder Tuborg at the helm. DMK CEO Ingo Müller will join the management board. The impact on locations and jobs in Germany remains uncertain.
Sources:
- dpa-infocom, dpa:250618-930-686648/3
- MergerControl Registration (accessed August 2, 2023)
- DMK and Arla Cooperate for the Future
- Arla and DMK pursue merger
The potential merger between Arla and DMK, two prominent dairy cooperatives, has garnered support from their respective farmers, indicating a shared faith in increased potential for growth and cooperation. However, the final decision on the merger remains with the EU competition authority, raising concerns about the concentration of power and competition within the European dairy business and finance sectors.
