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FrieslandCampina and Arla investigate merger
The boards of FrieslandCampina and Arla are investigating the possibility of a merger. Those directly involved first called stories about this "speculation", Arla went into vehement denial after publication, but reliable sources report to Foodbusiness.nl that Sybren Attema, chairman of FrieslandCampina, (photo) has been talking to colleague Jan Toft Nørgaard for several weeks. According to the sources, the management of both concerns is also involved.
A possible merger will lead to the largest dairy company in the world with a combined turnover of €22,7 billion, slightly more than that of the current number 1, Lactalis. Seventeen years ago, a merger between Arla and then Campina was investigated, which backfired on Danish resistance. Once again, the members of both cooperatives have the last word, but this time there are different considerations.
Global Dairy Top 20
When publishing this year's Global Dairy Top 20, Rabobank expressed the expectation that FrieslandCampina will probably be overtaken by competitor Arla next year in terms of turnover. The Scandinavian company has recently been performing stronger and more stable than its Dutch counterpart. In addition, it is better positioned for further growth. FrieslandCampina is attached to the Netherlands in terms of supply base, with an edge in Germany and Belgium. There are not many opportunities to strengthen the raw material supply. On the contrary, the Dutch supply base is under increasing pressure, mainly because of the nitrogen problem. The scenario outlined by Rabobank is still possible, but there is a good chance that it will turn out very differently
No Chefsache, but chairman's job
In cooperatives, such conversations always start between the chairmen. That's how it went this time, according to reports. Sybren Attema must have realized fairly quickly that a merger with another dairy cooperative is the only sensible way forward and that Arla is the logical interlocutor. This has been hinted at in the past, but the need was not there then.
Beacons are being moved
FrieslandCampina has been busy changing the course since Attema took office, among other things by indicating that it is again looking for new members. Which is a completely different signal than was broadcast in previous years. The implementation of the intentions is not going well yet, because first the towering financial wall around FrieslandCampina has to be lowered. Only a few dairy farmers are now prepared to buy in for €15 or €21 per 100 kilos of milk, while there is also sufficient 'free' supply. Moreover, the prospect of sufficient return is not great.
In addition to the changing expressions, the cooperative's attitude towards members with a more intensive business is also changing. "For a long time we felt like second-class members," says a dairy farmer from Brabant. "That changes something again." Nevertheless, FrieslandCampina continues to lose members and milk. The question is whether the company will exceed 9 billion kilos of member milk this year. This volume has been stated as the lower limit to be able to implement the Strategy 2030. Otherwise, the fixed costs will become too high, for example, and the guaranteed price will then become even more difficult to pay.
No FC Arla
For FrieslandCampina there seems to be a greater need to take a new step forward than for Arla. The possible merger company is certainly not called FC Arla, but a merger can have many advantages for both companies. Simply in the form of synergy, market power and as a party in export markets. Moreover, cooperatives in particular are having an extra hard time these days and both are faced with major climate challenges. Standing stronger together is always a legitimate reason. Arla has a strong strategy and execution, FrieslandCampina has the technology and dairy knowledge. In this regard, the head office in Århus and the innovation center in Wageningen are discussed.
A possible merger does require the approval of the European Commission. And if this is agreed, 'remedies' can be expected again. Business units must be divested or markets shared to counteract too much dominance.
Reactions, from calm to piqued
Arla initially said not to respond to speculation, just like FrieslandCampina did. The Scandinavian company is more vehement after publication and says that the 'speculation about a merger between Arla and FrieslandCampina is 100% inaccurate,' citing a statement by Peter Tuborgh. By the way, without further explanation. In a message to members and employees in the Netherlands, Arla repeats this, but people are also warned not to talk to journalists themselves. To other publications, both companies have ceased to engage in speculation.
Klaas van der Horst
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