European dairy cooperative Arla Foods has agreed with Mondeléz International to acquire its processed cheese business in the Middle East region, which is currently licensed under the Kraft brand.

Financial details of the transaction have not been divulged by both companies.

Arla will have complete ownership of the cheese production site in Bahrain and will expand the company’s branded cheese production in the Middle East and North Africa (MENA) region.

Built in 2008, the production facility is located in Manama, Bahrain, and features an on-site innovation pilot plant. It has a production capacity exceeding 66,000t.

Arla CEO Peder Tuborgh said: “This acquisition is a gamechanger for our MENA business. We have an established and growing business in the Middle East and know our consumers and customers well in this part of the world.

“As such, this deal is an excellent strategic fit for us as it enables us to both expand our branded presence in the cheese category and secure the local production capacity we have been looking for to continue to grow our business.”

Since 2010, Arla has more than doubled its sales organically across the MENA region. It sells cheese under the Puck brand and butter under the Lurpak brand, as well as milk powder and UHT milk under the Dano and Arla brands.

MENA is reported to be the company’s largest market outside of Europe and is an important geographical region in Arla’s strategy, Good Growth 2020.

Until now, the majority of the products sold in the MENA region have been produced in Europe, with some local production in Riyadh, Saudi Arabia.

The company anticipates that the deal will provide much-needed capacity and help in establishing a supply chain footprint to secure long-term competitiveness in the region through scale and efficiency.

Arla International executive vice-president Tim Ørting Jørgensen said: “By expanding our branded portfolio and local supply chain in one go, we will be able to bring new commercial opportunities to our customers quicker and better.

“Over time, the site in Bahrain will also allow us to base the production on high-quality milk from our farmer-owners in Europe.”

The deal is expected to become effective by end of May.