Dutch dairy giant FrieslandCampina has just reorganised its export operations. Cees Ruijgrok is overseeing a more integrated export effort to build on the overseas businesses Friesland Foods and Campina had before their 2008 merger. Dean Best spoke to Ruijgrok about the company’s export ambitions.
just-food: The integration of FrieslandCampina’s export divisions after the merger went live this summer. That seems to be one of the key steps the company had to make.
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Ruijgrok: After the merger, we still had over three export divisions. Since July 1st, we have combined into one big export organisation. It was not cost-driven, it was market-driven. Maybe you can save a few people in the back offices but that was not the idea. We wanted to get a better grip on the markets and to have one face for the customer. We had situations where our cheese distributors could easily take butter but the cheese boys were not allowed to sell butter. All this fragmentation led to a lot of inefficiency. Now we have one export manager with responsibility for a certain country and he sells the whole assortment. Sometimes you have to appoint two or three distributors because baby food is not the same distribution method as cheese but still it works a lot more efficiently and you build up much more knowledge about these markets. These people are supposed to be experts about what is going in the market and actively scanning for opportunities. We know much better what is going on rather than have it fragmented across various divisions.
just-food: It seems a wise move, given the competition you have with the likes of Arla Foods and Lactalis.
Ruijgrok: The challenge is to educate your export manager so they don’t only look at one product. We have had the first orders from our distributors the products they never used to have. We hope the assortment in various countries will be expanded. We have strong contacts in all the markets.
just-food: In the teeth of the worst economic conditions in the West for decades, there is resilient optimism among some companies.
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By GlobalDataRuijgrok: Fortunately the rest of the world is still growing very well. If you look specifically at dairy, Europe is not the big gr market and it wasn’t the big growth market before the crisis anyway. The pop is getting older, the market is actually saturated and the big growth has to come from BRIC countries, several countries in Africa are doing very well because they sell much raw material to the Chinese and there’s a lot more money in those countries. People do recognise the value of dairy products but until now they didn’t have the money to buy them. All of a sudden, dairy as a highly nutritious product comes within reach of classes that had not been able to buy them in the past. We’re focusing not just on Europe but the rest of the world. The big traditional markets of the US and Canada are imp but they are very well covered by the local dairy industries. Dutch cheeses do have a market there but it’s a niche market.
just-food: With Arla making a major investment in China with local dairy company Mengniu, what are you doing to make sure you have a share of this growth in the East? I know you had the recent acquisition in the Philippines.
Ruijgrok: Yep, we bought Alaska. The Chinese market is very particular. We were in mainstream dairy in China but that was not successful. You are competing with huge, local Chinese companies that have a different cost base to European manufacturers. The trick in China is to have with real value-added products. We’re doing very well with baby food because of the one child policy people want the absolutely top product and consumers don’t trust their own manufacturers. You do see cheese consumption increasing with wine consumption increasing. I don’t think the Chinese diet is going to change overnight from rice to cheese but it is a huge country and if you are only in the top segment you are talking interesting volumes.
just-food: Are you concerned about the slowdown in growth in China?
Ruijgrok: I think everybody is still looking jealously at China. It’s all relative. China will continue to grow.
just-food: China is the obvious emerging market. Are there other markets FrieslandCampina is strong in beyond the BRICs?
Ruijgrok: Indonesia is a huge market for us. There are 240m people living there and fortunately we are market leader in some key segments there. You mentioned the acquisition of Alaska. The Philippines has huge potential. Of course competition is very strong there but it’s a matter of having a very strong brand and good quality products and then we’ll succeed there. India is an interesting case as it is opening up to foreign retailers and that should improve the access of our products, partic our baby food and cheeses. Africa is doing very well. There’s a lot more money being pumped around there than there used to be. The trick in emerging markets is to make sure your distribution is well organised. That is a very intense job. It takes a huge effort. That’s where FrieslandCampina is very strong as we’ve been doing it for very many years. Friesland Foods was existing because of our strong positions in Asia built up over decades.
just-food: The likely end of EU dairy quotas mean processors are investing ahead of that to feed growing demand for dairy in emerging markets.
Ruijgrok: After the quota is abolished, we think Dutch farmers will increase prod by 10-20%. You see farmers investing now. They are preparing for growth. We are a co-operative and more milk will come in our direction. And where do we go with the milk? Not to Europe. You need to build market positions for branded products wherever we can.
just-food: What product categories will you be looking at particular?
Ruijgrok: It differs from country to country. In some countries we see exciting opportunities for our yoghurt. In other countries it is butter. You cannot say one size fits all.
just-food: All of these trends seem to be pointing towards more consolidation in the sector. Companies need to combine to cater for the demand in the East.
Rujigrok: I don’t think we are at the end of it yet in Europe. You need scale.
just-food: Now the post-merger integration is complete, are you ready to move to the next acquisition?
Ruijgrok: I don’t think another acquisition is due. By the way, the merger went so smoothly. The merger made us more market-driven instead of production-oriented. Traditionally, the dairy industry has been about how we can make the best possible cheese. Now, we are looking at what the market actually needs. If the market wants cheese of EUR5 a kilo, we make that, instead of being very proud of making cheese worth EUR20 a kilo.
just-food: You say there will be more consolidation in the sector. You don’t see FrieslandCampina taking part in that? Maybe bolt-on acquisitions?
Ruijgrok: I don’t see what another merger could bring. We have worldwide coverage. I cannot see the next step. Acquisitions, yes, but mergers, no.
just-food: Looking to the next 12-18 months, there is still some pessimism about the economy.
Ruijgrok: FrieslandCampina will feel the pinch within Europe. We will have to deal with it and adapt to the circumstances. There will be a lot of price pressure. We are in a relatively good position as we have the scale. We will survive it. My focus is on outside Europe and there is a lot of opportunity still and markets will continue to grow. The countries that are in trouble are not markets where we have a lot of turnover. I’m optimistic.
