Food group Glanbia will embark on a $170 million (€150 million) joint venture with two of America's biggest milk suppliers that will make it the number one producer of cheddar cheese in the US.
The Dublin-listed company yesterday announced plans to build a cheese and whey production plant in the west Texas/New Mexico region of the US.
The development will be a joint venture with the Dairy Farmers of America (DFA) co-op and Select Milk Producers, a supplier based in the southwestern United States.
Glanbia and DFA/Select will put up $35 million each, while a separate joint venture entity will provide the remaining $100 million.
The plant will produce 115,000 tonnes of cheese and 7,500 tonnes of whey proteins. It will position Glanbia as the largest producer of cheddar cheese in the US, a company statement said yesterday.
The facility is expected to be up and running in the second half of 2005. According to group managing director Mr John Moloney, it should generate between $340 million and $350 million in sales at full capacity. "We would expect the margins to be just north of 5 per cent," he told The Irish Times.
Mr Moloney said the partners had agreed to divide revenues on a 50-50 basis. He added that Glanbia would take an above-the-line commission on sales, giving it a slightly larger share of the profit than its partners.
He explained that DFA/Select would supply the milk, while Glanbia would take responsibility for processing, sales and distribution.
Glanbia has a 20-year relationship with DFA. It is headquartered in Kansas City, Missouri, and is the largest dairy co-op in the US. Last year it sold 21.7 billion litres or 28.2 per cent of the country's total milk production. It had sales last year of $6.4 billion.
Select sold 1.4 billion litres of milk last year and had revenues of $400 million. That company has been trading since 1994, when a group of large dairy producers in New Mexico started the business.
New Mexico is America's fastest growing milk production region. Mr Moloney said yesterday that Glanbia had been seeking large-scale, high-growth partners for a US project for more than a year.
DFA chief executive Mr Gary Hanman and his opposite number in Select, Mr Mike McCloskey, both said they were looking forward to working with a partner of Glanbia's calibre.
Glanbia's share price yesterday closed one cent up at $1.66.
