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FrieslandCampina buys Fabrelac, amid dairy move upmarket

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Dutch dairy co-operative FrieslandCampina acquired mozzarella business Fabrelac, extending a move by diary producers from moribund milk commodities into higher value markets.

Fabrelac, a Belgian company, has a maximum annual production capacity of 30,000 tonnes of mozzarella from cow milk, as well as the capacity to produce salad cheese, whey ingredients and cream.

FreislandCampina acquired the company, which has a turnover of E46m, for an undisclosed fee, heralding an entry into the "fast growing" mozzarella market.

Chinese demand

Dairy producers are focusing their attention to more specialised products, and moving up the value chain, in an attempt to improve margins as the price of commodity dairy slumps.

Global dairy prices found new 13-year lows in auctions held this month, as Chinese demand for commodity milk products, such as whole milk powder, remain very low.

Chinese demand has fallen off due to thick inventories, and domestic dairy industry is consolidating to meet growing demand.

This falloff in Chinese imports, combined with disruptions to Russian demand due to sanctions, and ample global supply, means producers are struggling to find value in producing dried milk.

Appetite for mozzarella

But with appetites developing, and consumer spending growing, developing-world demand is rising for cheese products, including mozzarella.

In May, New Zealand dairy co-operative Fonterra completed an expansion of its Clandboye mozzarella factory, which will come online in August with capacity to produce 34,000 tonnes of cheese a year, targeted at growing Asian demand.

Last month food company GEA completed the acquisition of CMT, which provides technology for mozzarella with revenues of E11m, citing an "attractive" market in mozzarella production.

And this week speciality milk product company A2 milk rebuffed takeover interest, and updated its earnings expectations citing growing sales of its speciality infant formula is Australasia and China.

Meanwhile the Canadian milk giant Saputo, which last year bought Australian cheese producer Warrnambool Cheese and Butter for A$450m is reported to be on the prowl for further acquisitions in Australasia.

By Agrimoney.com

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