Danish dairy giant Arla Foods has announced plans to increase the production of early life nutrition (ELN) ingredients.

But the ensuing reorganisation, which will see a B2B operation closed down, will likely lead to job losses, the company said.

Its Arla Foods Ingredients (AFI) subsidiary is projected to outgrow capacity at two domestic sites, Danmark Protein and Arinco, according to the cooperative.

The Lurpak, Arla and Catello brands owner now plans to transform Arinco, located in Videbæk, into a dedicated ingredients production site. Currently, besides ingredients, Arinco produces milk powder for AFI’s B2B sales of ELN and Arla’s branded Early Life Nutrition business.

Arla has revealed the AFI B2B business of ELN will discontinue in around 19 months’ time but said it will continue to expand the branded ELN business.

It said the reorganisation will have an impact on around 170 jobs at Arinco and AFI’s headquarters in Aarhus.

The business has also announced it has entered a partnership with French cooperative and ELN producer, Sodiaal. Arla and Sodiaal will work together to accelerate the China ELN business of the two companies and Sodiaal will produce all of Arla’s ELN products in China, as well as other Arla markets.

Arla suggested its branded ELN business will benefit from Sodiaal's strong production capabilities.

Both companies are farmer-owned, both have integrated supply chains, and the companies’ production technologies are very similar, it said.

On the totality of its plans, Luis Cubel, group vice president and managing director of AFI, said: “We see a very bright future for ingredients and a world of opportunities. This new strategic direction will accelerate our ambitious growth plans for our ingredients production and enable Arla Foods Ingredients to further strengthen our position as a leading global player in the ingredients market.”

On the likely job losses, he said: “It goes without saying that this is a difficult situation and a tough day for our employees. The changes will not be fully implemented for another 19 months and, until then, we will do everything we can to retrain and find internal job opportunities for those affected.”

Arla said that during the 19-month transition period, it will work closely with customers to meet their demands before discontinuing the ELN production at Arinco by the end of Q1, 2026.

Last month, Arla announced a round of capital investment in Denmark to support the growth of its Starbucks and Cocio milk drinks.

It said it was spending DKr20m ($2.9m at the time) on projects at its factory in the city of Esbjerg “to accommodate growth” for the brands in Europe, the Middle East and Africa (EMEA).

The dairy major is owned by 8,000 farmers from Denmark, Sweden, the UK, Germany, Belgium, Luxembourg and the Netherlands.