FrieslandCampina to focus on sustainable growth in worldwide dairy activities

18 June 2010

  • route2020: long-term strategy following successful integration;
  • Extra investments in products such as dairy, branded cheeses and infant & toddler nutrition ingredients;
  • Geographical expansion of consumer products in Europe, Africa and Asia;
  • 5% average annual volume growth in added-value products;
  • Climate-neutral growth throughout the dairy chain.

Dairy multinational Royal FrieslandCampina, which has its own production plants in 24 countries and markets its products in more than 100 countries, has announced its new strategic plans and priorities for the coming decade. The new strategy envisages growth in dairy based beverages, branded cheeses and infant & toddler nutrition ingredients. These growth targets apply both to new and existing markets in Europe, Asia and Africa. The company also wants to grow in Europe through the sale of dairy products for the catering, bakery and professional kitchen (food service). FrieslandCampina is working to further improve its ingredients product range for the food industry by responding to the specific wishes of its clients. The company also wants to improve energy efficiency throughout the dairy chain and reduce associated greenhouse gas emissions. The new strategy will therefore add extra value to the milk supplied by FrieslandCampina’s member farmers.

As Cees ’t Hart, CEO of FrieslandCampina, explains, “The route2020 strategy marks the next step towards achieving our ambitions. After our merger in early 2009 we focused on integrating the two organisations and establishing a strong management team, while also putting in place plans for a better streamlining of various parts of the production chain. Now, 18 months after the merger, we can consider the integration a success. And last autumn we and our top 70 managers started working on our long-term strategy.”

Strong starting position in dynamic dairy market
FrieslandCampina operates in a dynamic dairy market. As Cees ‘t Hart says, “Worldwide we are seeing sharp movements in dairy prices, as well as a shift in the economic focus towards Asia, a globalisation of markets and businesses, increasing attention to sustainability and growing consumer demand for good, healthy food. We firmly believe that we are well-positioned in this market thanks to our expertise throughout the dairy chain, our broad-ranging product portfolio, our geographical spread and our strong brands. We will be using our route2020 strategy to continue reinforcing our international presence and increasing the focus on our activities that create added value.”

Value drivers for growth
In developing and expanding its activities, FrieslandCampina is primarily concentrating on growth, profitability and milk valorisation (adding value to milk). FrieslandCampina has chosen to underline worldwide growth in dairy based beverages, branded cheeses and infant & toddler nutrition ingredients by selling its branded products in more European, Asian and African countries. With its products for the hotel and catering industry, bakeries and the professional food service industries in Europe, FrieslandCampina is aiming to achieve growth by offering a wider range of dairy products and by increasing its geographical presence. FrieslandCampina wants to generate worldwide growth in the products it supplies to the food industry by developing specific ingredients in liaison with clients. This will mean a shift from sales of commodities such as milk powder and whey powder towards sales of more specialised products. Further expanding its strong positions, both in consumer products and ingredients, is an important element of route2020. FrieslandCampina’s strategy includes the possibility of acquisitions, while there are no plans at this stage to dispose of activities.

Innovation based on all the goodness that milk has to offer
Innovation and enhancing the natural qualities of milk are essential if the company is to develop its focus on achieving value growth. As Cees ’t Hart explains, “Milk is one of the most nutritious sources of food in the world. We firmly believe that we can do even more with milk and use even more of the nutrients it contains. Given the developments we are seeing in society as a whole, as well as among consumers and our clients, our innovation is targeted at good, healthy food and nutritional benefits. In the case of our professional and industrial clients we are concentrating on the functional qualities of our ingredients so that our customers, in turn, can improve both the quality and taste of their products.” Alongside this targeted innovation is additional scope for investments in developing the focal points of our plans for value growth.

Improving results
The company expects to increase sales volumes of its differentiated products by an average of five per cent a year. route2020 will lead to further improvement in FrieslandCampina’s results, with larger numbers of added-value products, fewer commodities and a strong focus on cost management. The strategy will mean a gradual improvement in FrieslandCampina’s result, and this will be reflected in the performance price paid for all milk supplied by member farmers. FrieslandCampina expects to be able to fund the costs of implementing route2020 from profits.

Achieving climate-neutral growth
FrieslandCampina will go beyond the agreements between the Dutch dairy sector and the national government on reducing greenhouse gas volumes by 30 per cent between 1990 and 2020. The company has also set itself the objective of achieving growth that is climate-neutral throughout the entire chain, from cow to consumer. FrieslandCampina is seeking to achieve this aim by working with dairy farmers and partners in the chain to improve energy efficiency, reduce greenhouse gas emissions and encourage dairy farms to generate energy from sustainable sources.

Further developing the dairy chain
FrieslandCampina is keen to respond more actively to opportunities for collaboration throughout the dairy chain, both in respect of products and sustainability. As Kees Wantenaar, Board Chairman of Zuivelcoöperatie FrieslandCampina U.A., explains, “The developments that FrieslandCampina is facing as a business, such as globalisation, price fluctuations and the increasing attention to sustainability, also affect the businesses of our members. And that means they also represent new challenges for our cooperative model.” The member farmers supply their milk on a daily basis and, via the cooperative structure, are the owners of FrieslandCampina.

According to Kees Wantenaar, “Our chain approach, which extends from our dairy farmers to the consumers, enables us to guarantee the quality we supply to consumers and clients. Our cooperative chain enables us to use our products to differentiate ourselves, thanks to the natural variation in the composition of milk. Our plans in this respect may include expanding our existing, separate milk chains, but there may also be some new initiatives.”

Another aspect the cooperative will be focusing on in route2020 is pro-actively working with member farmers to increase the sustainability of the dairy chain. As Kees Wantenaar comments, “An important element in this respect is how we as members will achieve further progress in sustainability. Our efforts will focus on ensuring that sustainable production is accompanied, wherever possible, by cost price management, not least because of the level of international competition we face. Wherever possible, and in those areas where we can provide mutual reinforcement, we will be seeking to align our activities with those occurring at sector level, such as the Sustainable Dairy Chain initiative in the Netherlands. In other areas, however, we will opt for our own FrieslandCampina approach.’’

The steps to be taken along route2020 and the role to be played by the cooperative and the individual members will be discussed at the meetings that will be held starting this autumn between member farmers and the 210 district council members representing the members.