Arla and FrieslandCampina are growing further apart

Arla is performing stable, with a turnover in 2023 (€13,7 billion) that differs little from that in 2022. Profit is also stable, leaving room for a fairly substantial additional payment. Everything else is also fine financially. There are challenges in the market, but Arla knows how to deal with them. And the climate challenge doesn't seem to be killing the Scandinavian cooperative either.

Two to twelve
At FrieslandCampina things are a little different. The turnover for 2023, at €13 billion, is about a billion lower than in 2022, the company is writing red figures and there is no additional payment. Power has also taken a hit. However, FrieslandCampina can still handle it, he also believes credit rating agency Fitch, but it is two to twelve. Profit margins must increase and there must also be a little more fat on the bones. About 20% equity compared to 36% at Arla is quite a difference. Fortunately, solvency is in order at a good 30%. 

Bare and lean company
FrieslandCampina may now deliberately look a bit bare and thin. CEO Jan Dirck van Karnebeek probably does not want to get started with a few more corpses in the closet of his predecessor (about whom he does not want to say a bad word) and has rigorously cleaned up the balance sheet. After all, you only make a fresh start once.

That alone is probably not enough for him. FrieslandCampina must also become more attractive to dairy farmers, the milk pool is declining steadily and actually a bit too far, although a credit rating agency never thinks that is a bad thing. He sees things with different eyes. At Arla, the milk pool is still swelling, although both companies lose approximately the same number of members every year. But at Arla the companies are larger and often growing. 

Milk price improved
Last year, FrieslandCampina did its utmost to at least keep farmers; by increasing the milk price by more than €3 per 100 kilos at the expense of reserves. This way you retain farmers, but it is not possible every year that way. Farmers wouldn't trust it either. From now on, the milk money must simply come from the market and yield a leading payment. That should attract suppliers.

Strong on the European market
Arla earns and keeps members satisfied with, among other things, a series of strong brands and a strong market position in its own European market. However, it does not suffer as much from the pressure of the guaranteed price as its Amersfoort counterpart. On average, Arla is a little more relaxed with the advance price, but makes up for the reward with a substantial subsequent payment. At FrieslandCampina the pressure seems to be a little more on the advance price.

Export markets
Furthermore, the Dutch cooperative relies more heavily than Arla on export markets in Asia and the Middle East for earnings. That can also yield good earnings, but the income often fluctuates a little more. Not all sales markets are equally stable and exchange rate fluctuations (a consequence of this instability) can also cost a lot of money.

Earn with the basics
In China, FrieslandCampina is suddenly doing good business again children's food Friso and the company is also doing well in a number of other Asian countries, but the Nigerian market - once a major source of profit - has not been much enjoyed in recent years. Money now has to be added almost every year. In addition, it is an art for FrieslandCampina to learn to earn again from regular dairy production, with or without additional climate guarantees. The company had forgotten this a bit too much in recent years. 

It is not the case that Arla does everything right and FrieslandCampina is often wrong. In recent years, Arla has been trying to sell more product in Africa and Asia, but has sometimes had to incur losses. For example, a country like Senegal has almost as much difficulty getting earnings out of the country as FrieslandCampina does in Nigeria (but the sums involved are still smaller).

Arla is in trouble in China
In China, Arla is also seeing a decline in turnover, while it seems to have little control over a major investment in Cofco Dairy Holdings and Mengniu. According to the annual report, Arla has a share of €445 million in the first company, but has little insight into what is going on with its assets, and whether it is still real assets. FrieslandCampina knows how that can go. It once had an interest in China Dairy Huishan. However, it suddenly went bankrupt. In 2022, FrieslandCampina sold the last interests in its estate.