Merger of FrieslandCampina and Milcobel: 5 conclusions in a row

Although much is still unknown and needs to be worked out further in the course of next year, FrieslandCampina and Milcobel have tried to release a lot of information today. This is also necessary to make the members of both cooperatives enthusiastic about joining forces. After all, both member councils still need to agree to the proposed decision and uncertainty can easily disrupt this process. However, there does not seem to be a game-changer for the time being, because the will to merge is great on both sides. We list a number of conclusions.

1. Joint challenge unites
A common enemy often brings people together. This may have been the reason for FrieslandCampina and Milcobel to start talks. Both companies have suffered considerably in recent years, mainly from A-ware, which has 'taken' many farmers from both FrieslandCampina in the Netherlands and Milcobel in Belgium, albeit partly due to the mistakes of both cooperatives. Both FrieslandCampina and Milcobel had to make major cuts and cut production equipment as a result. The high outflow has now subsided somewhat at FrieslandCampina and Milcobel, but the challenges remain. In both the Netherlands and Belgium, the milk pool is in danger of shrinking (considerably). FrieslandCampina CEO Jan Derck Van Karnebeek emphasises that the merger is not a prelude to further cutbacks. The idea is to use the production equipment more efficiently and thus jointly address the challenges and opportunities in the market. This is also necessary, because both companies were still making a loss in 2023. Peter Grugeon, CEO of Milcobel, puts it in the classic way, that the sum of two companies yields more than they do separately. It is striking that it is indicated that the merger talks have only been formally underway for a few months. The will to merge is apparently very great.

2. No equal merger
The merger is being done on the basis of equality, or so it is claimed high and low. Formally this may be true, but who believes it? FrieslandCampina is almost ten times larger than Milcobel in terms of milk volume and carries much more weight. It is therefore significant that the merged company will continue as FrieslandCampina. The name Milcobel will disappear from the facade of the Belgian factories, but will not go up in smoke completely. It will be linked to the two districts that the merged cooperative will soon have in Belgium. It has not yet been revealed where the head office will be, nor who the CEO of the merged company will be. This also sounds like diplomacy. Based on the size of the company, you can expect that the base of operations of the merged cooperative will probably remain in Amersfoort. That also saves a lot of money. He did not want to confirm it himself when asked, but Jan Derck van Karnebeek will probably lead the new company. After all, he has only just taken office. However, the top management of FrieslandCampina will receive Belgian additions, as will the board of the merger cooperative.

3. Milcobel members reap the most benefits
For Milcobel members, the merger is more drastic than for FrieslandCampina. After all, they will be absorbed into a larger entity. At the same time, they will also reap the most benefits. Due to its size, FrieslandCampina has better access to sales markets, which benefits the valorisation of milk. At 37%, FrieslandCampina's solvency is considerably stronger than that of Milcobel, which is even tight at 25%. For Milcobel, the need to merge is therefore greater. Milcobel chairwoman Betty Eeckhout did not deny in the press conference this afternoon that discussions had also been held with other companies. The Guaranteed Price as FrieslandCampina currently has it will remain intact. This tackles a sore point, because in recent years, Milcobel's often lagging milk price was one of the members' greatest criticisms. Implicitly, this also means that FrieslandCampina will contribute slightly more from the Netherlands to bring the milk price in Belgium to the same level in the future. A striking detail is that Milcobel's milk price is still in the basket on which FrieslandCampina bases the Guaranteed Price.

4. Cultural gap smaller than in 2008
When FrieslandFoods and Campina merged in 2008, a cultural gap between the North and South of the Netherlands had to be bridged. This turned out to be not so easy at the time, as cooperative chairman Sybren Attema will undoubtedly remember. As a result, Amersfoort was chosen as a new and neutral base. There are no such obstacles now, in the sense that the merger process is taken quite lightly. Both companies literally speak each other's language and the cooperative roots have a connecting effect, as indicated by both camps. This is where underestimation lurks. After all, mergers are by definition challenging and therefore not without risk, although the advantages presented sound plausible. For example, a merger can easily distract from one's own optimization process.

5. Merger company will soon be larger than Arla
The ultimate goal of the merger cooperative is to go out into the field together and recruit new members. Naturally in the Netherlands and Belgium, but also in Northern France, where Milcobel is already active. FrieslandCampina is expanding its recruitment area with the merger. The German market also offers opportunities. In a market where supply volumes are increasingly coming under pressure, scale is crucial, as both the CEOs and the cooperative chairmen repeatedly pointed out in the press conference. With 10 billion kilos of member milk and a turnover of €14 billion, FrieslandCampina will soon be larger than Arla, which came alongside last year. The next task is to at least beat Arla's return.