Campina grapples with tough market conditions
and Europe-wide milk price instability in forcing it to lower its
milk prices, Tom Armitage reports.
At a series of recent district meetings, the Campina executive board warned member-farmers that its price reduction would be lower than the EU subsidy, and also significantly more than any of its European dairy counterparts - although the company declined to issue a firm figure.
Currently its estimated 9,000 member-farmers across the Netherlands, Germany and Belgium, are in line to receive subsidies from the EU, which will pay €1.18 per 100 kilos of the 2004 quota.
The move will undoubtedly do nothing to appease the anger of dairy farmers, who in recent years have faced dwindling EU subsidies and declining market prices for their milk.
According to Campina, a series of milk price skirmishes across the leading Dutch multiples - operated by Laurus and Ahold - have resulted in lowered revenues, and also put pressure on liquid milk volumes.
Campina claims that its position has been hit the hardest in the Netherlands, where it currently is the market leader for liquid milk and dairy-based desserts.
Increased prices for dairy ingredients, and a high euro exchange rate resulting in lower export subsidies from Brussels, have also played a significant role in the decision to reduce liquid milk prices, the company said.
But Campina executive board chairman, Tiny Sanders, was quick to allay investor fears, noting that sales across its more innovative product offerings - the company's 0 per cent fat milk drink, for instance - were helping to offset disappointing sales growth in its liquid milk division.
Sanders also called for "adjustments by the organisation", to help deal with the changing market conditions, which this year faced "far stronger pressure on consumer products than anticipated".
According to a recent report in the Financial Times, Campina has been in takeover discussions with Swedish-Danish owned dairy group Arla Foods - the leading European dairy company.
If pursued, the merger could generate annual revenues of €10 billlion, consolidate Campina's position across the Netherlands, Belgium and eastern Europe, and also give the new company a 13 per cent stake in the EU's milk market - standing it in good stead for the upcoming common agricultural policy (CAP) reform, which the dairy industry widely believes will put further pressure on Europe's farmers.
According to industry analysts Euromonitor, the Dutch milk market is currently estimated to be worth €570 million, which is expected to increase to €612 million by 2009. The 2004 figure combines sales across fresh and pasteurised milk and long-life and UHT milk - which are currently estimated to be worth €459 and €108 respectively.