Danish dairy co-op Arla has announced a new partnership agreement with German dairy co-op DMK for the manufacture of mozzarella cheese. Under the terms of the agreement, DMK will invest €15m to retrofit its Nordhackstedt cheese plant to manufacture only mozzarella.

Arla will supply DMK with between 300m and 350m litres of milk every year and pay the German company to process this milk into 35,000t of mozzarella. The global market for mozzarella is currently 600,000t per annum. However, Arla and DMK expect global demand for mozzarella to grow by 20% over the next five years to reach 720,000t by 2022.

This new agreement between Arla and DMK is also strategic as it will have the added benefit of increasing the supply of whey (a by-product of cheese production) available to ArNoCo, a joint venture whey protein business created by Arla and DMK in 2011.

“We are optimising our portfolio towards more value-creating products. This contract manufacturing agreement will enable us to make the next step forward and to weatherproof DMK for the future,” said Ingo Müller, chief executive of DMK.

Processing up to 7.5bn litres every year, DMK is the largest dairy co-op in Germany with annual sales of more than €5.1bn.