Arla Foods has entered into a joint venture agreement with D.F.A. to develop and produce premium cheddar cheese in the U.S.

AARHUS, DENMARK — Arla Foods, a global dairy cooperative based in Denmark and the fifth largest dairy company in the world, has entered into a joint venture agreement with Dairy Farmers of America (D.F.A.) to develop and produce premium cheddar cheese in the United States. The joint venture will include construction of a dairy facility for cheddar cheese production in western New York state.

D.F.A. will manage the operation and control 70% of the joint venture, while Arla will own 20%, and 10% will be owned by the eight farmers who supply the milk. The investment in the joint venture is expected to be $58 million, of which Arla will cover 20%, or $11.6 million. The joint venture is expected to employ 30 people.

Peder Tuborgh,c.e.o. of Arla Foods

“Together with Dairy Farmers of America and eight of their farmers, who will supply the raw milk, we will explore opportunities to bring premium quality standards to the cheddar category through the Arla brand,” said Peder Tuborgh, chief executive officer of Arla Foods. “Adding cheddar to our U.S. portfolio will allow us to expand our offerings to retailers and help increase the sales of our European products made from owner milk.”

Rick Smith, president and c.e.o. of D.F.A., said the dairy marketing cooperative is pleased to be entering into the partnership with Arla, noting the two groups share the same passion “for providing the highest quality products to consumers.” He added the companies also are committed to sourcing products from dairy farmers who employ sustainable and transparent farm practices.

Construction on the new facility is expected to begin this fall, with production expected to start in the fall of 2017. The facility will be located in western New York, near the eight farms supplying the raw milk. The farmers are members of D.F.A. and will supply approximately 70,000 tons of raw milk per year, which will meet quality standards similar to Arla’s proprietary farm quality program Arlagarden, the company said.

Arla’s current Arla branded products in the U.S. include Havarti, Gouda, Muenster and Fontina cheeses.

The U.S. market is one of six focus regions identified in Arla’s corporate strategy, “Good Growth 2020.” In forming the joint venture, Arla and D.F.A. have set a goal to become a top 10 dairy cheese brand. The companies plan to achieve this goal by expanding the business beyond the deli section into the dairy aisle, where the majority of U.S. cheese sales take place. Recently, the company launched its new Arla branded cream cheese, with no artificial growth hormones, ingredients or flavors, in the U.S. dairy aisle.

Don Stohrer Jr., head of Arla Foods U.S.

“As U.S. shoppers continue to look for better-for-you food products that they can feel good about serving and consuming, Arla’s new cheddar cheese products will help to satisfy an unmet consumer need from the current offerings in the dairy aisle,” said Don Stohrer Jr., head of Arla Foods U.S. “Our expectation is that the new cheddar products will also create a halo effect for our new Arla cream cheese and other Arla branded products.”

Arla’s current Arla branded products in the United States include Havarti, Gouda, Muenster and Fontina cheeses produced locally at Arla’s U.S. dairy in Hollandtown, Wis., and imported cream cheese produced in Holstebro, Denmark, from owners’ milk. The new Arla cream cheese launched in the market at the end of 2015. Also part of Arla Foods’ U.S. imported portfolio is Castello cheeses, which include authentic Danish Havarti, Danish Blue Cheese, and U.K.-produced premium cheddar for the deli section.