Arla Foods Limited will acquire Yeo Valley Dairies Limited, a subsidiary of the Yeo Valley Group Limited. The transaction will give the farmer-owned dairy cooperative the rights to use the Yeo Valley brand in milk, butter, spreads and cheese under an intellectual property licence with Yeo Valley.

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The Yeo Valley yogurt, ice cream, cream and desserts business will continue to be run independently through Yeo Valley Group, which remains under the ownership of the Mead family.

Commenting on the deal, Tomas Pietrangeli, Managing Director, Arla Foods Limited said: "The potential for future investment in range through this licensing agreement with Yeo Valley provides a significant opportunity to offer a greater choice to consumers at attractive prices.Our ambition is to encourage customers to trade up from standard to organic milk, butter and cheese, driving overall growth for organic across dairy categories.”

With one in four households now purchasing organic products, there is opportunity for the dairy sector to convert more of its customers from standard to organic dairy. To fuel this growth and meet the growing needs of consumers requires investment in innovation and range and under both the Yeo Valley brand and Arla brand.

Pietrangeli continues: “Arla Organic Free Range milk has driven 60 per cent of all the growth within the organic milk category in the last 12 months, with 70 per cent of all Arla Organic Free Range milk sales attributable to customers who would have not previously purchased organic milk.Through the licence to use the Yeo Valley brand, we believe that we can further drive organic penetration of the milk market.”

The announcement is a milestone in the journey of Yeo Valley and organic dairy in the UK. Tim Mead, organic farmer and custodian of the family business comments: “Arla’s farmer-owned credentials are aligned to the values and ethos that the Yeo Valley brand is based on – “Supporting British Family Farms”.We have a long-held ambition to grow organic dairy in the UK, because at Yeo Valley, we believe that organic dairy is better for the planet, for the cows and for health.”

Currently in the UK, only four per cent of milk sold in the UK fresh milk market is organic, which compares with far greater shares of organic in the milk market in Germany (10 per cent), Sweden (16 per cent) and Denmark (29 per cent). “This is a great chance for us to catch up with our European neighbours” said Tim Pietrangeli

“Organic milk has a key role to play as consumers increasingly look for ways to make their diets healthier. Its production without the use of artificial or manufactured herbicides and fertilisers and with high standards of animal welfare are key reasons it is in growth, especially with younger consumers. Arla is working with industry bodies to continue to help consumers understand the additional benefits that come with organic milk."

The agreement means that Yeo Valley will be well placed to continue its focus on strengthening its core business of yogurt, desserts and ice cream whilst remaining independent and family-owned.

Completion of the transaction will take place following merger approval by the UK Competition and Markets Authority.