Speculation is mounting that Arla is planning to move production of Anchor butter from New Zealand to the UK.

Butter imports into the European Union - the vast majority of which come from New Zealand - slumped 47% to 29,000 tonnes ­between January and November last year on 2009 levels.

With further decline expected in 2011, it would make sense for Anchor to switch production from New Zealand to the UK and reposition it as a UK butter, said experts.

The move, which would further heat up competition between Anchor and the likes of Dairy Crest’s Country Life, would also fit in with Arla’s investment in a state-of-the-art butter plant at Westbury, alongside Milk Link and First Milk, as well as its acquisition of Fonterra’s 25% stake in Anchor in 2009.

An Arla insider admitted that UK production could be on the cards but stressed nothing was imminent.

“That is something that could happen in the future but we’re not saying if it will or it won’t,” he said. “As far as we’re aware, we’ve got to get Westbury up and running and it’s going to produce own-label butter. But it doesn’t take a genius to put two and two together and make four.”

A company spokeswoman added that it had signed an agreement with New Zealand-based dairy giant and key butter exporter Fonterra to supply it with bulk butter from New Zealand, and “that agreement is still in place”.

However, surging prices for butter on the global commodity markets have made markets other than the EU more attractive to New Zealand exporters, especially as butter coming into the EU also faced import levies, said Michael Bessey, dairy analyst at the Provision Trade Federation. “On the basis that Anchor will continue to be for sale in the UK, it seems possible that it will in the future consist of EU or UK origin,” he said.

Anchor is the UK’s third-biggest BSM brand, after Lurpak and Flora, and is worth £96.2m [Nielsen 22 January 2011].

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