Analysis Dairy
FrieslandCampina starts member round with boost
FrieslandCampina has started the autumn round of member meetings with a mood lifter. The bonus payment that was promised in the interim results at the end of July will be made, although the amount is not yet certain. Three-quarters into the fiscal year, FrieslandCampina now dares to state that the rest of the year will also turn out well. The message is also useful in terms of member retention and potential new entrants.
In an explanation for journalists, CEO Jan Derck van Karnebeek and chairman Sybren Attema provide further clarification. There are, of course, threats to FrieslandCampina. For example, milk supply is under pressure, partly due to the buyout scheme of farms initiated by the previous government. Attema believes that it is 'not realistic to think that FrieslandCampina will succeed in maintaining the milk volume'. However, he cannot and does not want to mention concrete figures on member and volume losses.
The goal is to recruit new members and suppliers. Attema also prefers to focus on the bright spots that are more prevalent now than, for example, a year ago. There is room for innovations and members are willing to embrace them. They now see sustainability less as a threat and more as an opportunity, he notes. Attema even dared to claim that 'the battle has been won' by the members. The 'good intentions' of the new government also help.
Simply a good year
Meanwhile, CEO Van Karnebeek has also undergone a complete turnaround. The spectacular recovery shown at the presentation of the interim results is being sustained for the rest of the year, providing enough confidence to, for example, guarantee a bonus payment. Investments are also being made again. Van Karnebeek does not believe that 2024 will immediately be an exceptionally good fiscal year. Rather just good, he says. Sharply rising dairy prices can also bring their own challenges.
Maintaining improvements
However, he believes that the reorganization initiated last year is already yielding results. Business units that used to focus mainly on their own results now work better together because they are judged on the collective result, not just that of their own team. One of the first benefits is that the huge cheese division is now delivering better returns, apparently not at the expense of, for example, the ingredients division.
The challenge now is to maintain the changes that have been implemented. In a room full of alpha males - which many managers often are - it is difficult to sustain balance in the long term and ensure that one's own part is not favored. It requires a strict, consistent, and very attentive coach. It is not due to the capabilities of the FrieslandCampina apparatus. There are, as Van Karnebeek puts it, few dairy companies that can do as much with milk as FrieslandCampina. However, in recent years, it has also been shown that pressing the right buttons remains quite a task.
Strengthening capital, lowering the threshold
For the long term, it is also important to strengthen the equity again. It has taken some hits. Strengthening it would also benefit credit ratios and financing costs. It could even create room for a lower entrance fee and easier member recruitment. The choice is up to FrieslandCampina and its members.
