The alliance is driven by changes in the dairy industry's operating environment, due to reform of the EU's common agricultural policy (CAP). Also taken into consideration by the two companies was the possible impact of the WTO conference in Hong Kong in December.
The agreement is to be highly beneficial to both parties as they develop common areas in special items and product concepts, and enhance their marketing and sales operations both domestically and internationally.
Harry Salanoha, president and CEO of Valio, said that the Nordmilch was interested in Valio's functional and value-added products such as lactose free milk drink, Evolus fermented milk for controlling blood pressure, and probiotic Gefilus products.
Andreas Strunk, executive office of production and logistics for Nordmilch, agreed that Valio's special product and R&D expertise would be of benefit in the German market.
The strong product and production expertise of Nordmilch, a company with an average yearly turnover over €2.1bn, would benefit Valio, Salanoha said.
The news comes hot on the heels of moves by Valio in Russia with the announcement that it would be working with Galaktika to construct the premises in Gatchina, situated south of St Petersburg, scheduled for completion in late 2007, and provide the machinery and equipment released from its plants that closed in Finland.
The company currently operates 15 production plants in Finland, two in Estonia and one in Belgium. And in 2004 the company's turnover was €1.6bn.
Fresh dairy products account for 40.3 per cent of the Group's net turnover, cheeses 28.4 per cent, butter and spreads 12.6 per cent, milk- and whey based powders 6.4 per cent, ice cream 3 per cent and other products 9.3 per cent.