Vreugdenhil well equipped for battle for milk

In an environment where the availability of milk is structurally under pressure, both in the Netherlands, in Europe and perhaps worldwide, the battle for milk is increasing. In the Netherlands probably the most, because an additional reduction in the livestock population is expected due to nitrogen and manure shrinkage. This places dairy companies before a double challenge, because they have to deal with the loss of farmers and they have to face the competition. Optimal performance is required for the latter, attractive delivery conditions and a nice package of earning opportunities in terms of milk money for the former. Vreugdenhil Dairy Foods has 'armed' itself well in this respect. In addition to a high basic price (this year again the highest) there is €6,90 per 100 kilos to be earned. With this Vreugdenhil has one of the highest pluses in the Netherlands.

Nestlé concept
For the top stream, this is thanks to a collaboration with food company Nestlé. Admittedly, not everyone can participate in this stream now, because all kinds of efforts have to be made for it, and there is a waiting list, just like with competitors, but the top stream can be expanded. The 'Nestlé concept' can also be expanded to other buyers, if there appears to be a market for it, says CEO Albert de Groot of Vreugdenhil Dairy Foods. He thinks that with the current package of delivery conditions and milk money schemes, Vreugdenhil will be an attractive party for new dairy farmers in the coming years. Actively looking for more farmers, both in the Netherlands and in Belgium.

He does not make any statements about the number of newly acquired suppliers in Belgium. "We have a number of dairy farmers there, but we are not necessarily going for the quick effect. We are looking at the longer term." The milk prices published since April do show that Vreugdenhil is achieving a very competitive milk price. in Belgium. Vreugdenhil is not the only one looking for more milk in a shrinking market. Several dairy companies want a bigger piece of a shrinking pie. How that will work out is impossible to predict. "The industry will settle."

Tunnel vision
The environment in which companies have to operate is not helping, De Groot notes with a sense of 'understatement'. "Politics has paid too little attention to the business community in recent years. This is felt across the industry." As chairman of the Dutch Dairy Association (NZO), De Groot notices this within the business association VNO-NCW. This is most acutely felt when it comes to a matter such as nitrogen, but not only there. "It is sad in the agricultural sector. Everything has come to a standstill, all the well-trodden paths have been walked in recent years, but if you as a government also keep asking the same questions to the same people and committees for advice, the result is predictable. Nothing happens because there is tunnel vision?"
"The Netherlands also still has a number of strong points, such as its location, reputation, investments already made and infrastructure. That's what you have. We also don't have outdated installations or anything like that. We have a strong and modern production apparatus, very specialized and 'state of the art'. We can move forward with that. We process 1,3 billion liters of milk annually. In addition, we trade 500 million liters of dairy in milk equivalents."

The fact that a loss of €2023 million was incurred in 13,5 – a rarity for Vreugdenhil – is not due to the fact that it is operating in the wrong segment of the market, De Groot assures. "It was a combination of circumstances, including a fire in Putten and a conscious decision to pay extra to our dairy farmers. This year we are almost back to the long-term average in terms of results." 

Preferred supplier
Outsiders sometimes conclude that a milk powder producer must be having a hard time in the current market, with low milk powder prices, also because it only has those powders. Such people do not understand, De Groot makes clear. "We are indeed very specialized. We have always believed in focus. That makes you better. We have also proven this over the past decades. We are not a producer of milk powders in bulk. If you are only in the bulk segment, you have no function. We are more than a milk powder company. Much more a food company that makes functional and nutritional powders. We do that mainly for other food companies and that is why we have a reputation to uphold.

Customer satisfaction surveys show that many of our customers see us as 'preferred supplier' of year-round fresh product of high quality, reliable and with a high level of service. We always deliver on time, even in the middle of the corona period and at the start of the Ukraine crisis we succeeded. We do what we say. Incidentally, that also applies to our dairy farmers. We are really not doing that bad! See our milk price."

Last fall, Vreugdenhil was faced with a complaint from the OHP Commission, following an action by a farmer who felt that the dairy company was not transparent enough about the milk price. De Groot does not want to say much about this now, except that Vreugdenhil stands for a fair trade relationship with its dairy farmers, suppliers and customers and the announcement that work is being done to arrive at a joint solution.

Mainly demand-driven, high-end
Although Vreugdenhil Dairy Foods is increasingly delivering 'high-end' products, a certain amount of bulk is still necessary, De Groot acknowledges. That is virtually unavoidable. "The vast majority is nevertheless a product with a high added value. That is also one of the reasons why we are slightly less at maximum capacity utilisation, but we mainly produce demand-driven. Fortunately, that demand is still increasing. Milk is and remains the main ingredient of the raw material, but multiple raw materials are used. And, although it is less talked about: if you make powders, you also have cream left over. We sell that to butter makers, producers of whipped cream and also of liqueurs. This also ensures a nice valorisation of milk." Although strongly focused, Vreugdenhil Dairy Foods is still investigating whether other avenues are also interesting to develop for further growth.

Dairy more valued than often said
Vreugdenhil Dairy Foods is certainly capable of additional investments, he says. We are a solid company, with strong equity, and dairy is certainly not a declining business, as some voices might want us to believe. "Dairy fits into a sustainable diet, is extremely nutritious and it is not a vague and/or deeply processed fashionable product, of which you do not know where it all comes from. About 98% of all Dutch people consume dairy every week, and maybe 0,5% are completely against it. Almost everyone also likes dairy. Why else would you think milk fat is so expensive? Moreover, the demand for dairy continues to grow worldwide, also because the world population is increasing, and still needs to be fed. Our product is only becoming more relevant. You can see that dairy production is also growing in emerging countries, but that is not a real threat. Scarcity is more of a concern than oversupply. Milk production can also be less efficient and requires more effort in most emerging countries. Here with us, it is really going best, and in doing so, dairy farming helps us to maintain our living environment."

Advocacy
In addition to being CEO of Vreugdenhil, De Groot is also chairman of the NZO, as already mentioned. In that role, he also monitors the consultations between the dairy farming organizations (G7) and the government to comply with, among other things, the manure and environmental regulations. The NZO does this from a thinking role, but not from a co-directing or decisive role, De Groot assures. "The advocacy, with seven primary organizations, is, without the Stichting Stikstofclaim and the FDF, not always equally effective, but they have to do it together. If they agree, we can also play our role, not before." De Groot wonders whether the current method of advocacy, with endless poldering, is the best. He tries not to have an opinion about it, but sees that the environmental movement is following two paths: consultation and litigation. The latter apparently happens without damaging the relationship with the government, something that many agricultural lobbyists are very afraid of.

Furthermore, the NZO represents the interests of the dairy industry at a 'pre-competitive' level. We represent matters that strengthen the entire dairy sector and benefit the entire dairy farming sector. As Vreugdenhil, we have confidence in the future of dairy and the market in which we operate. Our company is in good shape, with modern factories and customers who operate in the higher segment. Our dairy farmers play an essential role in this in order to be able to produce valuable products at this level. Now and in the future.