Arla Foods is kicking off skyr production in Sweden for the first time with a €34.5m ($39.3m) investment in its existing dairy facility in Jönköping.

Arla will establish a skyr production line at the plant in the city of Jönköping, Småland province, to meet “the growing demand for skyr” in Sweden, the dairy cooperative said in a statement today (5 June).

The site will mainly focus on supplying the local market in Sweden, primarily producing 1kg "buckets" of skyr, alongside other formats. Arla said the new production line is expected to become operational in the first quarter of 2028.

A spokesperson for Arla told Just Food that the co-op had previously only been producing skyr at its Hobro dairy in Denmark, along with its Upahl site in Germany and the Sipoo facility in Finland.

Supply chain executive vice-president David Boulanger said in the statement: “Consumer demand for skyr is high and growing, our Swedish cooperative members are dedicated to producing with a lower climate footprint, and Arla has particular expertise in transforming their milk into protein-rich and tasty skyr products.

“With this investment, we secure future growth in the category.”

The Jönköping dairy currently produces more than 280 products, including yoghurt, sour cream, crème fraîche, and various lactose-free and organic items.

It is Sweden’s “largest specialist dairy” and has approximately 290 employees.

Boulanger added: “We are now placing the investment in Linköping due to the availability of milk and the existing infrastructure at the dairy – but also to meet Swedish demand and create a strong production network for skyr, spread across several markets in Europe.”

While no immediate job creation is expected from the investment, Arla's spokesperson said it could help secure employment at the site in the longer term, declining to disclose the initial production capacity of skyr at Linköping.

In April, Arla Foods announced plans to merge with German dairy cooperative DMK Group, forming an entity of more than 12,000 farmers across seven countries.

The pair said in a joint statement that the deal would create “the largest dairy cooperative in Europe”, with members in Denmark, Sweden, the UK, Germany, Belgium, Luxembourg and the Netherlands.

However, in February Arla Foods forecast a decline in a closely-watched volume metric after a year of growth. The co-op projected revenue would range between €14.5bn and €15.3bn in 2025, “driven by the high dairy price level”.

The Lurpak owner said those prices and “consumer uncertainty” are expected to put pressure on its branded, volume-driven, revenue growth. Arla projected that metric would be down 1-2%, although the group underlined it is “subject to the balance of supply and demand dynamics throughout the year”.