Swiss dairy group Emmi is confident that it can continue to increase sales of Emmenthaler cheese, but only by taking action to improve the image of the product worldwide.
Traditional Emmenthaler remains the best-selling Swiss cheese on export markets, according to Emmi, and volume sales are expected to grow by 35,000 tons on both the Swiss and foreign markets in 2003 and 2004. Around two thirds of this total will be exported, and Emmi's share of that export market is around 60 per cent.
But while volumes are likely to show good growth, there are two main issues which still hamper what Emmi sees as the cheese's true potential.
Firstly, the interchangeability of the various Emmenthaler brands, which means that producers can only really make a point of difference between each other on price, and secondly the old-fashioned production methods employed by many dairies, a throwback to the days of highly subsidised volumes, high production costs as a result of insufficient capacity utilisation and cheap exports.
With a new player expected to join the Emmenthaler market this year, Emmi said that a further 3,000 to 4,000 tons of the cheese would be produced in addition to the 35,000 already estimated, further exacerbating the problem of overproduction and forcing companies to sell their cheese at the lowest possible price to gain market share.
"This will lead immediately to rock-bottom prices and thus to the destruction of value creation at all levels," said Emmi, adding with regret that it too would be forced to join in this practice to avoid losing market share. "To this end, Emmi will continue to make carefully targeted investments in the market as well as in building up foreign sales companies," it said in a statement.
But the company also said that it remained determined to implement its ongoing strategy of value creation for the Emmenthaler market. "The price war is at odds with the Swiss key expertise of 'quality not quantity' in the foreign market and is thus unsustainable. Emmi is of the opinion that the best solution is by means of building up a genuine brand item, tailored to the requirements of customers, namely 'Swiss Emmenthaler from Emmi'.
"This calls, among other things, for a certain market share which Emmi has achieved with the acquisition of the SDF cheese business. It also calls for an international reputation as the leading company in the Swiss milk industry that can produce the desired added performance. With this strategy, and the setting-up of professional sales structures, it will be possible to achieve a stable, adequate Emmenthaler price."
But these are not the only measures which will have to be taken to ensure a more respectable price and a better quality image for Emmenthaler. Emmis said that companies need to work more efficiently - i.e. at full capacity - to ensure lower production costs. With this in mind, Emmi has already taken the hard decision to end its relationship with 81 cheese co-operatives, although some 30 of them are still working with the group in other areas and a further 24 have agreed to join forces to continue to produce Emmenthaler (the new player on the market mentioned above).
"In general, the Emmenthaler market has stabilised since last summer's slump and is at around the previous year's level. In order to reduce stock, the Emmi group stimulated the market in November and December with worldwide sales campaigns. The current challenges lie in the exchange rates of the Swiss franc to the euro and dollar, as well as in the reduction in government export subsidies from 1 March 2003," the company concluded.