A-ware keeps focus on growth in corona time

While many dairy companies in Northwest Europe are consolidating or even shrinking, A-ware has grown considerably in recent years. You can conclude against the current. Meanwhile, the company collects and processes about 12% of the Dutch milk pool, which amounts to about 1,7 billion kilos annually. Most of this is processed into cheese in Heerenveen. "We process about 210.000 liters per hour here," says De Jong with due pride. That milk mainly comes from dairy farmers who have switched to A-ware in large numbers in recent years.

Until more than 5 years ago, A-ware did not collect a drop of milk. Although the company has been active in the dairy industry for almost 130 years, it has focused on the cheese trade all this time. "We have consciously made a backward integration to have more control over the production process. This way we can better serve our customers in more than 70 countries," De Jong explains. The complex in Heerenveen is impressive. And although there is a lot of stainless steel on display, De Jong certainly does not want to call it a factory. "We talk about our cheese dairies, after all we produce a traditional product."

Corona crisis hit hard
In the summer of 2015, A-ware started producing cheese in Heerenveen. This location was not yet ready when plans were made for a mozzarella cheese factory and cream factory right next to it. Initially in collaboration with Fonterra, but that contract was taken over by FrieslandCampina last year. The production of mozzarella started on January 1, 2020. Just when the cheeses were rolling off the production line, the corona crisis arrived in March. "The crisis has hit the dairy market hard." During the first wave, cheese prices soared because demand from food service dropped. Milk prices also fell sharply shortly afterwards.

"The moment was unfortunate, because the dairy market was in a good flow at the beginning of 2020. Without corona, the milk price might now have been €0,05 higher." But 'if' doesn't count, De Jong realizes. In these challenging times, our milk prices (depending on each milk flow) have held up well compared to the competition, says Koen Veldman. "We have been back at March levels since October and pay between €35 and €40 per 100 kilos in December."

In December, A-ware dairy farmers receive an 'end-of-year bonus' of €1,50 per 100 kilos delivered. Including this premium, the actual payment price for 2020 is on average €0,40 higher for our various milk flows this year than last year, while there was a declining market due to corona. According to both gentlemen, it remains to be seen whether the milk price can recover further next year. The factors that influence the dairy market cannot be controlled by anything or anyone. "Take, for example, the lockdowns, currency exchange rates or the oil price. These are aspects that can make or break the market," says De Jong.  

Freedom of choice appeals
Something that grows quickly can experience growing pains. A-ware says it is not affected by this. "Our dairy farmers have the space to produce within a certain milk flow and we have the impression that this is generally appreciated." Within the flow of farm milk, mandatory grazing is not sufficient. Dairy farmers who participate in the Albert Heijn concept have additional requirements, but this is offset by a higher premium of €0,05," says Veldman. "This freedom of choice appeals to dairy farmers," adds De Jong.

Although A-ware is a private processor, we consciously seek connections with dairy farmers. "We speak with the sounding board group of dairy farmers once every 6 weeks." According to De Jong, these are interesting conversations about various topics, such as factories, markets and politics. This way A-ware knows what is going on on the farms and vice versa. Dairy farmers also gain insight into the results and can thus better determine the milk price. “The feedback we receive during these conversations is educational and keeps us sharp,” says De Jong.

The Dairy Academy has set up A-ware as a knowledge platform for dairy farmers. "Together with our partners ForFarmers, GEA, SSCL, Denkavit, BP, Semex, Bles Dairy and Rabobank, we provide training that our dairy farmers can benefit from. These are, for example, about having a grip on the cost price," Veldman explains. Since the corona pandemic, the sessions have taken place online.

Cost point of concern
Speaking of the cost, this is a concern according to De Jong and Veldman. They believe that the cost price of Dutch dairy farming is increasingly out of step with the rest of Europe, as a result of nationally imposed legislation and regulations. This affects the earning capacity of dairy farmers and therefore also the investment opportunities for modernization or growth. "Healthy growth is good for any company, including a dairy farm. We do not impose any growth restrictions internally, but due to the expensive phosphate rights, additional cows require significant investments. And the nitrogen crisis with all the uncertainty that entails has been overcome."

The management of A-ware understands very well that this has resulted in various farmer protests. They think the call for fewer livestock in our country is naive and ill-considered, because the climate does not stop at the border. Dairy consumption is still rising considerably worldwide, so production will continue in less efficient places. "We shouldn't want that, should we?" said De Jong. In the Netherlands we have a mild climate and very fertile soil at our disposal. According to him, this also requires responsibility to make good use of that land with regard to the global food issue. "Dutch milk has a low, if not the lowest, CO2 footprint and don't forget the country's contribution to the economy. Hopefully that idea will also penetrate into politics and society."

Future sector
How many dairy farmers there will be in our country in, say, 10 years' time is a topic that is alive and well in the sector. Both gentlemen do not mention specific numbers of quitters, but they recognize the trend whereby the number of companies is decreasing by several hundred at the same time. On the other hand, the stayers are getting bigger. "In this way, the Dutch milk pool will probably remain at the same level," De Jong expects. Whether A-ware plans to introduce new milk flows? "We do not introduce milk flows for fun, but apply strict criteria. There must be demand from the market, so that the additional costs in the chain are covered. And a milk flow must obviously add something for dairy farmers in the short and long term," says Veldman .

A-ware is currently less active in recruiting new dairy farmers. The cheesemaker will start a conversation when a dairy farmer presents himself. Dairy farmers also sometimes want to switch internally to a different milk flow. That is also possible, although there is a queue for VLOG milk and the Albert Heijn concept. Just like introducing new milk flows, growth is not a goal in itself for us. "But if the market allows it, we will certainly not refrain from doing so," De Jong concludes.