EGYPT - Arla Foods, the Danish dairy company, has announced a bid to purchase a majority stake in the Egyptian cheese manufacturer Arabian Food Industries Company, known as Domty. 

If the US$183 million acquisition moves forward, it will bolster Arla's foothold in the Middle East and North Africa, a region the company considers its most vital market outside Europe. 

The non-binding offer, submitted on October 15, will now undergo a thorough due diligence process and regulatory review by Egyptian competition authorities.

Domty is a prominent name in Egypt's food and beverage sector, with cheese accounting for nearly 90% of its total revenue. 

In the 2023 financial year, Domty recorded revenues of US$154.5 million (E£7.5 billion), marking it as a significant player in Egypt’s dairy industry. 

In addition to its primary cheese offerings, the company produces bakery items and fruit juices, operating with a workforce of approximately 4,000 employees across two production facilities.

Arla’s strategy in MENA and Egypt’s appeal

Kim Villadsen, Arla's Senior Vice President for Middle East and North Africa (MENA), remarked on the alignment between Domty’s business and Arla’s regional strategy. 

“The dairy market in Egypt is substantial, and Domty is a leading player in that market,” Villadsen stated. “Expanding into Egypt is a natural step in our journey to better serve MENA consumers, reinforcing our commitment to regional production and delivering dairy products tailored to local preferences.”

Arla, owned by over 8,400 farmers from Denmark, Sweden, the UK, Germany, Belgium, Luxembourg, and the Netherlands, has been deepening its presence in the MENA region for years, with operations in Côte d’Ivoire, Senegal, Nigeria, and Saudi Arabia. 

In 2023, Arla’s revenue in MENA reached US$1.09 billion (€996 million), marking a 3.2% increase from the previous year. 

The company’s Puck brand, popular in the region, saw a nearly 7% rise in volume sales. By contrast, in West Africa, Arla experienced a significant 18.8% drop in revenue to US$138.3 million (€127 million), primarily due to the devaluation of the Nigerian naira.

Egypt’s growing FMCG Sector 

Egypt’s consumer goods manufacturing sector has seen marked growth in 2023 and 2024, driven by the country’s import restrictions and a devalued Egyptian pound, which has made local production increasingly cost-effective. 

Several investments have flowed into the Egyptian food and beverage sector; for example, Baladna, the Qatari dairy company, invested in Juhayna Food Industries, an Egyptian dairy and juice company. 

However, the presence of Egypt’s military-led government in various sectors, including manufacturing, has sometimes tempered foreign investment due to its influence over industrial companies.

In Arla’s offer, valued at US$183 million (E£8.9 billion), the dairy producer is offering E£31.48 (US$0.64) per share for Domty. 

If the acquisition proceeds, Arla intends to delist Domty from the Egyptian stock exchange, while the founding El Damaty family is expected to retain a shareholding. Current CEO Mohamed El Damaty would continue to lead the company.

Arla’s broader global strategy

This potential acquisition in Egypt aligns with Arla’s recent global expansion initiatives. In August, the dairy giant announced plans to enhance its production of early life nutrition (ELN) ingredients, though the restructure will involve closing certain B2B divisions, resulting in expected job losses.

Arla's brands, including Arla, Lurpak, Puck, and Castello, are well-established in global markets. As the world’s largest producer of organic dairy products, Arla has prioritized sustainable farming and operations, which the company says aligns with its long-term strategic vision.