Schumacher closes a turbulent era nicely

Turnover increased last year to an all-time high of €14,1 billion. This is not very surprising, because dairy prices rose far above existing records last year. Net profit exploded by almost 70% to €292 million, the highest level since 2016. To top it all off, the performance price for 2022 rose to an all-time high of €58,69 per 100 kilos of milk. With these figures, CEO Schumacher can confidently transfer to Unilever, where he will take over as CEO in July. Yet Schumacher would get far too many credits to attribute the strong profit increase.

Success in the bulk market
Like many other dairy companies, FrieslandCampina had the wind at its back in 2022. The end of the corona measures, in combination with the war in Ukraine, led to an extreme bullish sentiment in the market. In addition, milk production was tight in the first half of the year. The result of this is that the prices for butter, cheese and milk powder did not go overboard. The bulk market in particular did surprisingly well, fueled by rapidly rising (food) inflation, which made consumers pay more attention to the small ones. Ironically, this is exactly the segment that FrieslandCampina has wanted to escape from in recent years. Recognizable and sustainable branded dairy would yield better returns, was the thought of the management in Amersfoort in recent years.

Major challenges for successor
Although Schumacher leaves with a neat final report, FrieslandCampina is left with plenty of challenges. The new CEO - who has yet to be found - can already make waves in this regard. Perhaps the biggest challenge, especially for the longer term, is safeguarding the raw material position in the form of milk. Due to the shrinking dairy herd in the Netherlands and Northwestern Europe, the milk supply to the factories is declining. For years this was almost a desirable development internally, because the supply was structurally too large in relation to sales.

In the meantime, the shrinking milk puddle starts to strain more and more. The search for new members and suppliers started last year, although a positive membership balance is still miles away. The approach is mainly to maintain the relative scale, although that is also likely to be a tough challenge. After all, the leavers are not only quitters, but often also switchers. In the short term, inflation must primarily be managed. To maintain market share, margin losses must be incurred, especially in the consumer division. The figures for the first half of 2023 will be considerably lower, because the guaranteed price is lagging behind the facts in the market. Schumacher is thus creating a disclaimer for the presentation of the half-year results in July, when he is no longer on board.  

Growing on thin ice
With his approaching departure, Schumacher's era at FrieslandCampina ends. In 2014 he took over as finance man and has been CEO for the past five years. Although the market was on his side in 2022, these were turbulent tropical years in which profits were sometimes under considerable pressure. Schumacher said he mainly had to reorganize the production apparatus and scale up sustainability. He was able to grow almost exclusively in vegetable dairy. This put him on thin ice with the supporters. With Schumacher, a fast calculator who is aware of the spirit of the times will leave FrieslandCampina at the end of April, although he was sometimes inimitable for some members.