Emmi happy despite decline

By Jim Cornall

- Last updated on GMT

Emmi products had mixed results in 2015 globally
Emmi products had mixed results in 2015 globally

Related tags Milk

Swiss dairy manufacturer Emmi generated net sales of $3.2bn (CHF 3,213.9m) in 2015, a decline of 5.6 % over the previous year.

In its statement, the company says that, in organic terms, i.e. adjusted for currency and acquisition effects, this corresponds to a decline of 3%.

Emmi said that organic sales in the Europe business division fell by 0.8%, while those in the Americas business division (which includes the markets in Tunisia, France and Spain) rose by 2.8%. The Switzerland business division came under greater pressure as a result of increased retail tourism and higher imports, posting a decline of 5%.

Brands such as Emmi Caffè Latte, Kaltbach and Jogurtpur grew.

Positive acquisition effects came from the increased stake in German dairy Gläserne Molkerei (with effect from October 1, 2014) and the purchase of the cheese business of Canadian company J.L. Freeman (with effect from April 15, 2015). Negative acquisition effects resulted from the sale of Italian company Trentinalatte (with effect from October 31, 2014) and Emmi Penn Yan in the US (with effect from December 18, 2014).

Cheese under pressure

The company said that the cheese segment came under strong pressure. By contrast, the performance in fresh products (e.g. yogurt, milk drinks) was positive, as brands such as Emmi Caffè Latte, Jogurtpur, Onken, Bontà Divina and Rachelli delivered growth.

Emmi said that the sales in the business division Switzerland, which accounted for 56% of group sales (down 1% from the previous year), fell significantly more than expected, by 5 %, from $1.89bn (CHF 1,888.1m) to $1.8bn (CHF 1,793.3m).

Volume effects accounted for -3.3%, and price effects for -1.7%. Emmi had forecast a decline of between 3 and 4%.

This performance was due, among other factors, to the increase in imports, which was particularly marked with regards to cheese, the report said. In addition, it stated, retail tourism in areas close to the Swiss border rose significantly due to the low Euro exchange rate, putting pressure on Swiss retailers and food producers. The resulting price and cost pressure is set to continue.

Some products perform, cheese declines

Despite the challenging situation, Emmi noted that there were also positive developments in the Swiss market. Various brands recorded increased sales. These include Emmi Caffè Latte, Jogurtpur and YoQua, the new protein-rich yogurt.

Sales of dairy products (milk, cream, butter) fell in line with the market. In the cheese segment, AOP cheeses posted significant declines, while the Kaltbach specialities and Der Scharfe Maxx generated slightly higher sales. Strong import pressure also left its mark on fresh cheese, both in terms of price and volumes.

Sales fell by 5% from $842m (CHF 840m) to $800m (CHF 798.1m). Emmi states that, in organic terms, i.e. excluding currency and acquisition effects, this resulted in growth of 2.8%. This was below the original expectations of 3-5% due, among other factors, to persistently low milk prices.

The business division Americas accounted for 25% of group sales.

The positive acquisition effect is attributable to the cheese business of J.L. Freeman, while the negative acquisition effect resulted from the sale of Emmi Penn Yan.

Higher sales in Tunisia

According to Emmi, organic sales growth was due primarily to good performance in Tunisia and the US. In Tunisia, yogurts, milk and desserts, sold under the Vitalait brand, generated significantly higher sales, adjusted for currency effects, with a corresponding positive impact on the dairy and fresh products segments. The latter was also boosted by growth in Kaiku’s lactose-free products and double-digit growth of Emmi Caffè Latte in Spain. In the US, both cheese exports to the US (primarily Kaltbach) and locally manufactured cow’s and goat’s milk cheese experienced a boost.

Emmi notes that Chile and France were limiting factors, with both markets facing difficult economic conditions.

In the business division Europe, sales fell by 4.2% from $510m (CHF 508.8m) to $488.7m (CHF 487.3m). When adjusted for currency and acquisition effects, sales declined by 0.8%.

Emmi stated that this exceeded expectations, due to the weakness of the Euro, lower milk prices and the rigorously implemented price increases. The original forecast was a decline of 2-4%.

Increasing the stake in Gläserne Molkerei resulted in a positive acquisition effect. The negative acquisition effect was due to the sale of Trentinalatte.

Global Trade sales decline

In fresh products, sales of Emmi Caffè Latte and Onken (in the UK) as well as those of the Italian specialty desserts of A-27 and Rachelli increased in organic terms. In cheese, the Kaltbach specialities and Der Scharfe Maxx proved resilient. Both brands saw increases in Germany and Austria.

By contrast, the company said, the cheese business suffered clearly in the AOP cheese area due to negative currency developments.

The business division Global Trade – 4% of groups sales overall – covers direct sales from Switzerland to customers in international markets, primarily in countries where Emmi has no subsidiaries. These include Asian and Eastern European markets, as well as most South American countries and the Arabian Peninsula.

Sales amounted to $135.6m (CHF 135.2m) compared with $167.6m (CHF 167.1m) in 2014. This corresponds to a 19.1% decline.

Challenges continue in 2016

According to Emmi, the negative performance was due primarily to lower butter and milk powder exports. Other reasons include the decline in contract manufacturing and the economic slowdown in countries such as Japan, Brazil and Russia. By contrast, the strong position of Swiss Premium Yogurts in Asia was expanded.

Emmi’s CEO Urs Riedener said, “Our international business made a major contribution to mitigating the considerable drop in sales in Switzerland. The fact that this was achieved despite the necessary price increases for export products demonstrates how robust our brands are. Price and import pressure is a challenge in Switzerland, which we will continue to face in 2016.”

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