News Albert de Groot
Vreugdenhil well equipped for battle over milk
Vreugdenhil Dairy Foods has confidence in the future of dairy and of the company itself. It is a solid and specialized company that produces highly demanded, high-quality products and also sets a very competitive milk price. What is concerning, however, is the environment in which it has to operate, where nitrogen is causing everything to come to a standstill and tunnel vision seems to prevail, according to CEO Albert de Groot.
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, as an additional reduction of the livestock is expected due to nitrogen and manure reduction. This places dairy companies in a double challenge, as they have to deal with the loss of farmers and also compete with others. Optimal performance is required for the latter, attractive delivery conditions and a nice package of earning opportunities in terms of milk money. Vreugdenhil Dairy Foods has prepared itself well for this. In addition to a high base price (this year again the highest), there is an additional earning potential of €6.90 per 100 kilos. This makes Vreugdenhil one of the highest earners in the Netherlands.
Nestlé concept
For the top stream, this is thanks to a collaboration with food concern Nestlé. Admittedly, not everyone can currently participate in that stream, as various efforts need to be made, 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 is a market for it, as CEO Albert de Groot of Vreugdenhil Dairy Foods explains. He believes that with the current package of delivery conditions and milk money arrangements, Vreugdenhil will be an attractive partner for new dairy farmers in the coming years. Active efforts are being made to attract more farmers, both in the Netherlands and in Belgium.
He does not disclose the number of newly acquired suppliers in Belgium. "We have bound a number of dairy farmers to us there, but we are not necessarily going for quick results. We are looking at the long term." The published milk prices since April show that Vreugdenhil is setting a strong competitive milk price in Belgium. Vreugdenhil is not the only one seeking more milk in a shrinking market. Several dairy companies want a larger share of a shrinking pie. How this will turn out is unpredictable. "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. "In recent years, the government has paid too little attention to the business sector. This is felt across the industry." As chairman of the Dutch Dairy Organization (NZO), De Groot notices this within the employers' organization VNO-NCW. The sharpest impact is felt when it comes to issues like nitrogen, but not only there. "It's sad in the agricultural sector. Everything is stuck, all beaten paths have been walked in recent years, but if the government keeps asking the same questions to the same people and committees for advice, the result is predictable. Nothing happens because of tunnel vision."
"The Netherlands also has some strong points, such as the location, the reputation, the investments already made, and the infrastructure. We have that. We also do not have outdated installations or anything like that. We have a strong and modern production facility, highly 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 another 500 million liters of dairy in milk equivalents."
Despite a loss of €13.5 million in 2023 - a rarity for Vreugdenhil - De Groot assures that this was not due to operating in the wrong market segment. "It was a combination of circumstances, including a fire in Putten and a conscious choice 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 very hard time in the current market, with low milk powder prices, especially because it would only have those powders. De Groot makes it clear that such people do not understand. "Indeed, we are highly specialized. We have always believed in focus. This makes you better. We have proven this over the past decades. We are not a producer of bulk milk powders. If you only operate in the bulk segment, you have no function. We are more than a milk powder company. Much more a food company that produces functional and nutritional powders. We mainly do this for other food companies and we have a reputation to uphold.
Customer satisfaction surveys show that many of our buyers see us as a '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 midst of the corona period and at the start of the Ukraine crisis, we succeeded. We do what we say. This also applies to our dairy farmers. We really are not doing that bad! Look at our milk price."
Last fall, Vreugdenhil faced 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 trading relationship with its dairy farmers, suppliers, and customers and the statement that efforts are being made to reach a joint solution.
Mainly demand-driven, high-end
Although Vreugdenhil Dairy Foods increasingly delivers 'high-end' products, De Groot acknowledges that a piece of bulk is still necessary. This is almost unavoidable. "However, the vast majority is product with high added value. We are therefore slightly less focused on maximum capacity utilization, but mainly produce demand-driven. Fortunately, that demand is still rising. Milk remains the main ingredient of the raw material, but several other raw materials are used. And, although less talked about: when you make powders, you also have leftover cream. We sell this to butter makers, cream producers, and even liqueur producers. This also ensures a nice valorization of milk." Despite being strongly focused, Vreugdenhil Dairy Foods is still exploring whether other tracks are interesting to develop for further growth.
Dairy more appreciated than often said
According to him, Vreugdenhil Dairy Foods is certainly capable of making additional investments. We are a solid company, with a strong equity, and dairy is certainly not a declining business, as some voices may want to suggest. "Dairy fits in a sustainable diet, is extremely nutritious, and it is not a vague and/or deeply processed fashionable product, where you do not know where it all comes from. About 98% of all Dutch people consume dairy weekly, and maybe 0.5% are completely against it. Almost everyone also enjoys dairy. Why else do you think milk fat is so expensive? Worldwide, the demand for dairy continues to grow, 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 increasing in emerging countries, but that is not a real threat. Scarcity is more of a concern than oversupply. Producing milk can also be less efficient and more difficult in most emerging countries. Here with us, it really works best, and the dairy farming helps us to maintain our living environment."
Advocacy
In addition to being the CEO of Vreugdenhil, De Groot is also the chairman of the NZO, as mentioned earlier. From that position, he also participates in the discussions 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 collaborative perspective, but not from a co-directing or decisive role, De Groot assures. "Advocacy, with seven primary organizations, is not always equally effective, even without the Stikstofclaim Foundation and the FDF, but they still have to work together. If they agree, we can also play our role, otherwise not." Whether the current way of advocacy, with endless consultations, is the best, De Groot wonders. He tries not to have an opinion on it, but sees that the environmental movement follows two tracks: negotiating and litigating. The latter apparently happens without damaging the relationship with the government, something that many agricultural advocates are very afraid of.
Furthermore, the NZO represents the interests of the dairy sector at a 'pre-competitive' level. We advocate for 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 a good position, with modern factories and customers operating in the higher segment. Our dairy farmers play an essential role in producing valuable products at this level. Now and in the future.
