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DMK boosts turnover and spreads Chinese wings with new sales office

By Ben Bouckley , 01-Feb-2012

Germany’s largest dairy processor Deutsche Milchkontor (DMK) has opened a new sales office in China to pursue regional growth, and has hinted at further investments in the country.

The company reported a 2011 turnover of €4.5bn, an uplift of €500,000 on combined sales figures of its two constituent firms, Nordmilch and Humana, prior to their merger to form DMK last March.

With profits after tax of €20m and an equity ratio in excess of 30%, CEO Dr Josef Schwaiger (pictured) said the company’s strong performance was due to its long-term strategic direction even before the merger.

Merger costs and factory reorganisations, the firm announced the closure of two sites last October – were included in the 2011 results, and Schwaiger said DMK was “very happy” with the numbers.

He explained how DMK had reacted to declines in domestic markets by investing in sales and building new structures, with an especial focus on international markets beyond the EU.

Sluggish German growth

In November 2011 data shared with this publication, Euromonitor International noted a recent consumption dip since in domestic German dairy (cheese, drinking milk products, yogurt and sour milk drinks, other dairy), with sales of €14.699bn in 2009, €14.553bn in 2010 and €14.648bn in 2011.

However, the research company predicted sales of €15.032bn in 2012, with growth in all categories.

Explaining the development of DMK’s global focus, Schwaiger said: "That kind of thing takes time. Our specialist employees now have contacts in the relevant markets. We are opening a sales office in China in the first half of 2012 to significantly increase turnover there. Further steps in this direction will follow."

However, speaking to DairyReporter.com, a DMK spokeswoman said there were no plans as yet to establish dedicated manufacturing facilities in China.

DMK said its diversified structure also assisted sales growth – the group owns a number of subsidiaries with their own distribution channels such as DMK Eis (Ice cream), Sanotact (health) and Humana (baby food).

Schwaiger said: "The divisions can develop more effectively as independent companies with a strong group in the background. From the group's point of view, we expect this approach to deliver promising future value creation opportunities for milk-based raw materials".

The DMK spokeswoman confirmed that the processor would also welcome further consolidation within the German dairy sector, in light of Schwaiger’s following remarks: "Our work in the cheese sector has demonstrated the potential that lies in bundling volumes. This is also the route to follow in marketing 'white line' products, i.e. fresh dairy products, and in exports".

Lactose free, convenient packaging…

In mid-January, DMK announced the appointment of Dr Ralk Zink (formerly of Nestlé and Cognis) as new head of research and development (R&D) in place of Manfred Feldmann, who will step down in March.

Zink will be responsible for projects in milk and fresh dairy products, powder and ingredients, process engineering and packaging development.

Commenting on his appointment, Ingo Műller, DMK’s MD for Ingredients, Central Quality Management and R&D said: "Particularly in the areas of industry products and ingredients, innovation is the most important driver of increased value added.”

Discussing future prospects for German dairy in more general terms, Euromonitor said: “Due to the maturity of the milk category, there is little potential activity expected. Focus on the regionality, naturalness and quality of products is expected to continue, as well as the merger and acquisition of smaller dairy manufacturers in order to strengthen competitive positions.”

Euromonitor said that fat-free UHT milk posted a volume sales increase in Germany during 2011, at the expense of both semi-skimmed and full-fat varieties, and predicted that flavoured powder milk drinks would be the best performing category in volume terms from 2009 to 2012.

Over 65s were expected to account for 22% of the German population by 2012, Euromonitor added, while a continued increase in single-person households, and co-habiting couples without children meant that dairy processors were likely to target these groups in future.

“More lactose-free products, convenient packaging and new tastes are expected for the drinking milk products category. It remains questionable, however, how many of them will perform well in the long term,” the research company said.

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