News Milk
FrieslandCampina continues to struggle in the German market
FrieslandCampina said it made a new start in Germany in 2017. The German division had to be profitable again within 3 years, that was the objective at the time. There are no green figures for the time being.
Although FrieslandCampina does not want to make any official statements about profitability in Germany, the announced round of layoffs does point in that direction. Of the 1.000 layoffs announced earlier this month, some 200 jobs will disappear in Germany. Jan Willem ter Avest, spokesman for the dairy cooperative, says that this concerns both production employees in the factories in Heilbronn and Cologne and management positions at the German headquarters in Düsseldorf.
Germany has been a market full of obstacles for the Dutch dairy cooperative for years. Geographically, the market is extremely interesting, because of the Western population, which lives in a fairly concentrated manner and traditionally consumes plenty of dairy. At the same time, competition from other dairy companies is fierce. Not only from the large German dairy cooperative DMK, but certainly also from the regional dairy cooperatives. The margins in bulk dairy are razor thin, or even negative.
'one more way to go'
Three years ago, FrieslandCampina therefore decided to focus in Germany on branded dairy products such as Landliebe, Tuffi and Frico, which offer a higher margin than bulk. The production site in Gütersloh was also closed at that time. FrieslandCampina now has 4 processing locations for consumer products and 2 factories for ingredients in Germany. However, the reorganization 3 years ago has not yet borne the desired fruit. "Since then we have certainly taken steps, but there is still a way to go," said the spokesperson.
That is why jobs will be cut again in the coming months. Of the 1.200 employees, 1.000 will remain. For the more than 700 German member dairy farmers, the announced reorganization will not have major consequences for the time being. The supply volume remains intact. What does change is the focus in sales. It will be even more on branded dairy products. Partly due to corona (extra home consumption), branded dairy sales grew by 7% this year. There are therefore opportunities for FrieslandCampina there, although it will probably remain a challenge to press large volumes of milk into branded dairy products.
VLOG milk no success
With VLOG cheese (non-GMO), FrieslandCampina thought it had come up with a success in 2017 to conquer market share in Germany. In the meantime, VLOG milk has more or less become the standard in Germany, which has lost its distinctive character. At the beginning of this year, FrieslandCampina therefore terminated the agreement with 84 members for the supply of VLOG milk, destined for the German market.
FrieslandCampina previously stated that closing processing locations is part of the reorganization. The Dutch cheese factory in Rijkevoort will therefore be divested. The spokesperson does not want to say whether the management of the dairy group is also targeting processing locations in Germany for this.
Wouter Job
© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.
