Challenges and Opportunities in Dairy – post EU milk quota
Frank van OoijenSVP – Nutrition, Sustainability & Society
Building a reputation when your relevance is challenged (consumer, social, business)
Agenda:
• Introduction: some facts and figures
• Painting the Dairy Challenge: what is the issue?
• Risks and opportunities post EU milk quota abolition
• How to keep endorsement and public support
• Defensive vs the Offensive approach on reputation
4
Give me your first spontaneousthoughts on milk and dairy
5
Who we are: a global player in dairy‘From grass to glass’
3nd largest dairy cooperative in the world● 6th processor of milk globally ● 19,000 member farmers
and 22,000 employees● Annual sales EUR 11.3bn (2014)● Factories in 32 countries● Sales in 100 countries● 14,000 dairy farms: 10 bn kg
milk (NL, Germany, Belgium)
6
Global Top 20 players in dairy
77
Generation 2 generation
Family ownedAverage87 cows
MeadowGrazing +CSR
A typical Dutch Farm
Average farm:670.000 kg milk per year
Who we are..
• Capital invested: EUR 3 mln• Annual milk sales EUR 300K• Net annual income:EUR 30K
Founding of Arnhemse
Melk-inrichting
Founding of CCF in
Leeuwarden
Friesche Vlag,Dutch Baby and
Bonnet Rouge are registered
for international markets
Founding ofCoberco in
Zutphen
Merger of Coberco, Friesland Dairy Foods,
De Zuid-Oost-Hoek andTwee Provinciën
Acquisition of Nutricia
Dairy &DrinksGroup
Friesland Foods
receives Royal designation on its 125th anniversary
Founding of the firstdairy co-operatives
Founding of the De Meijerij Veghel / De Melkindustrie Veghel
Campina brand introduced
DMV Campina and Melkunie Holland introduced
Founding Campina Melkunie
Acquisitionof Sudmilch(Heilbronn)
International launch of formation of international Campina brand and co-operative
Acquisition ofAlaska Milk CorporationPhilippines
Acquisition ofZijerveld
and Veldhuyzen B.V. andG. den Hollander Holding B.V.
Acquisition of IDB Belgium N.V.
8
18
79
19
13
19
19
19
65
19
97
20
01
20
04
20
13
20
12
20
08
20
01
19
93
19
89
19
79
19
47
19
26
18
80
20
14
20
20
We have a long history…
Acquisition Olam Ivory Coast and DEK srl in Italy.
Nine farmers take over a
cheese factory in the Dutch
Wieringerwaard
18
71
Ambition
Foundation
Growthcategories
Respond to needs
Capabilities
To create the most successful, professional and attractive dairy company for its member dairy farmers, employees, customers and consumers and for society by providing people around the world with essential nutrients from dairy products during every phase of their lives
Dairy-basedbeverages
Infant nutrition (B2B, B2C)
Strongholds & geographicexpansion
Brandedcheese
Food-servicein Europe
Basic products
Growth &development
Daily nutrition
Health &wellness
Functionality
Talent management
Milk valorisation
Innovation Business model& cost focus
Chainadvantages
Sustainable dairy farming & business operations
The way weWork & safety
Goodnessof dairy
9
And a clear strategy: route2020
Milk is a natural source of nutrition and provides nutrients for a healthy lifestyle
Milk contains essential nutrients such as proteins, vitamins B2 and B12 and minerals such as calcium
Milk is suited to contribute to the right balance in all types of diet
10
…using milk as a healthy basis
11
Chocomel versChocomel with fresh milk
Milner Koe & Geit and Milner Lente Graskaas
OptimelNew flavours yoghurt Greek style
Optimel Puur100% natural yoghurt drink
Friso infant nutritionNow also available in Indonesia
Peak Value pack
Dutch Lady Essential nutrients for children
Dutch LadyIntroduction portion packs yoghurt Dutch Lady Vietnam
Black & WhiteSachets
NoyNoyNoulac
Recent introductions
Landliebe HungaryIntroduction in Hungary
Mona(ice)pudding
NezhniyNew packagingCampina Nezhniy Russia
DubbelFrisss FreeFree from artificial sweeteners andadded sugars
Frisian Flag Frisian Flag Disney series in Indonesia
2009 2010 2011 2012 2013
8,160
8,972
9,626
10,309
11,281
2009 2010 2011 2012 2013
0.94
1.961.83
2.37
3.04
11,348
2014
2.93
2014
Revenuein millions of euros
Value creationPerformance premium + member bonds€ per 100 kilo milk
12
Successful merger since 2009?(sales grew 40%, dividend 300%)
A remarkable transition from useless
grass to a highly nutritious product
Feed stock NL: approx. 50% grass; 30% maize; 20% concentrates(“krachtvoer”) from recycled residue from food industry (soy crushing; breweries, potato industry, sugar beet leaf, citrus juice producers, etc.)
Proteins
Minerals
Vitamins
Milk fat
Bio-actives
14
NL: global leader in dairy because of USP’srivers delta, mild climate, soil & knowledge
15
A century of craftsmanship & salesmanship conquered foreign markets
June 2013: celebration 100th anniversary of CCF factory in Leeuwarden:
Sietze Hepkema
16
>70%
€ 1.8 billion in the Netherlands
in € x million
More than 2.5 billion invested…
2009
2010
2011
2012
2013
2014
2015
€ 2.5 billion total
600
261
236
376
423
559
656
Agenda:
• Introduction: some facts and figures
• Painting the Dairy Challenge: what is the issue?
• Risks and opportunities post EU milk quota abolition
• How to keep endorsement and public support?
• Defensive vs the Offensive approach on reputation
Building a reputation when your relevance is challenged (consumer, social, business)
19
Doing the Google test:
• Cell phone radiation
is bad for your health! 5,060,000 results
• Fats are bad for you! 14,800,000 results
• Potato chips are bad for you! 20,200,000 results
• Coke is bad for you! 136,000,000 results
• Smoking is bad for you! 296,000,000 results
• Sugar is bad for you! 365,000,000 results
• Milk is bad for you! Just guess……
20
Doing the Google test: what is our problem?
• Fats are bad for you! 14,800,000 results
• Potato chips are bad for you! 20,200,000 results
• Coke is bad for you! 136,000,000 results
• Smoking is bad for you! 296,000,000 results
• Sugar is bad for you! 365,000,000 results
• Milk is bad for you! 270,000,000 results
• Milk is good! 590,000,000 results
Communications challenges FrieslandCampina Post-merger 2009
• Campina well known as consumer brand, FC was invisible
• Poor employer brand, reputation: ‘room to improve’
• Focus in communications on cooperative and farmers
• Logo & strategy in place, but no corporate story, purpose
• Social media non-existing, leadership comms underdeveloped
• Sustainability & CSR still to be developed and integrated
• Health story of dairy underutilized both in- & externally
And there are serious challenges with milk..How to deal with these?
• Milk consumption goes down in the West
• Only 56% of Dutch mothers serves milk to kids in NL
• Soy drinks and ‘biobased’ are hot and trendy
• Lactose intolerance and milk allergy are the talk of the school courts today
• Dairy & global warming is becoming an issue
Complexity and Ambiguity in the (big business) world of dairy
- We love cows and farms, but we stop drinking milk (in NL)
- Chinese know everything about food & health and do everything to get our milk (even take it from the shelf here)
- What automotive is for the German economy is agrofood(incl. dairy) for the Dutch economy. But there is no pride
- There is a food and health authority in the NL (Gezondheidsraad) that tells us what to eat but we rather believe our neighbour, the book Voedselzandloper, etc.
- Is this related to our poor food culture? How is this in France or Italy?
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Food, health and consumer confidence
Louise Fresco: President of ExBo Wageningen University & Research (former assistant DG Food & Agricultural Organisation UN: FAO)
“Healthy eating does not depend upon the choice of individual food items. It is about your entire food consumption pattern. You cannot say pineapple or dairy is bad for you, or having walnuts every day is good for your health. There is no single, simple solution.”
“Food is our direct link with nature. Food is about life and death. Technology dominates our society and our lives, but in food we are afraid of technology. Understandable but unjustified. Food has become anonymous, we are no longer personally involved in food production. Put us out in the forest or the ‘polder’, we would die in three days. That is why we feel so powerless and why food triggers emotion.”
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The pedestrian question about gluten-free
25
Agenda:
• Introduction: some facts and figures
• Painting the Dairy Challenge: what is the issue?
• Risks and opportunities post EU milk quota abolition
• How to keep endorsement and public support
• Defensive vs the Offensive approach on reputation
1984-2015 : EU milk quota system
• EU ‘milk lakes’ and ‘butter mountains’ have vanished
• Now EU dairy farmers can produce for the world market
• 1983: 2.5 million dairy cows in NL – 2015: 1.6 million cows
• More sustainability required (manure, phosphate, GHG)
• And volatility in milk volume / price needs to be managed
Growth in global dairy demand2015–2024 looks great
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15
17
10
78
4
6
11
Source: Rabobank
Canada, USA & Mexico
South America
Central-America & Cariben
EU
Rest of Europe
Africa
MiddleEast
Russia & GOS-
countries
Australia andNew Zealand
in billion kg milk
1
2Asia
“Until 2024 global dairy demand will be between2.6% to 2.9% per annum. Growth will be drivenmainly by L America, Africa, India and Oceania. The EU – behind India – will be one of the keyproduction regions in milk volume.” (Financieele Dagblad: 7 July 2014)
But growth prospects are hampered by
serious global challenges
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800 mln people undernourished, 1.6 bn obese
By 2030 the world needs 50% more foods (FAO)
Food waste in supply chains is about 30%
- 150 mln households depend on dairy farming- Farmers are aging (57 years on average)
Growing scarcity in natural resources
Agenda:
• Introduction: some facts and figures
• Painting the Dairy Challenge: what is the issue?
• Risks and opportunities post EU milk quota abolition
• How to keep endorsement and public support
• Defensive vs the Offensive approach on reputation
31
How do we bring responsible
entrepreneurship and sustainability
into practice on the basis of a vision on
society?
Milk, by nature, containsessential nutrients. By offeringtrustworthy and tasty dairyproducts FrieslandCampinacontributes towardssafeguarding food and nutrient security. FrieslandCampinaalso strives to limit the pressure on the sources of natural raw materials andthe environment.
Now dairy gets visible U.N. endorsementas a provider of key nutrients….
33
Our social purpose is aimed at three global challenges..
Food and nutrient security for
a fast growing world population
Building more efficient & sustainable food supply chains
Helping small farmers in dairyworldwide (aging farmers is a major issue)
Our navigation tool to build a more sustainable business “grass to glass”
CSR Mission and Vision
FrieslandCampina CSR Business CaseCSR Strategy, 4 priorities, KPIs
CSR Performance Measurement – Annual Reporting – Stakeholder dialogue - Partnerships
Employee & Dairy Farmer Engagement – CSR Training programs – Annual CSR Team Award
CSR Governance Board – 4 implementation teams
Dairy Development
Helping farmers Africa, Asia
Sustainable Value Chains
Improving resource
utilisation
Responsible Dairy Farming
Setting the standard
Health & Nutrition
Combating obesity & nutrient deficiency
companycompany company cooperative
Business Practices for Suppliers – Code of Conduct – Foqus – Policies & Position Papers
The CSR Strategy House
Our CSR targets:
3838
Outdoor grazing
BiodiversityEnergy andclimate
Animal health and welfare
Sustainable dairy farming
Sustainable dairy farming is one of the four pillars of our CSR policy
The ‘pressure factors’ or levers constitute the framework for biodiversity actions
Land-use
Emissionsto air
Emissions to water
Landscape
Biodiversity
Energy(CO2)
Use Fossil energy
Soiluse
Water-use
Use of pesticides
Light &noise
Energy Production Sustainable
energy
Sustainable Soy &
Palm oil kernel
Ammonia
Methane (CH4)
Nitrous Oxide(N2O)
Nitrate
Phosphate
OutdoorGrazing
Nature & Landscape
maintenance
Soil fertility
Soil compaction
Chemicalcomposition
Light emissions
Noise Emissions
Application
Types
Quantity
1 2 3 4 5 6 7 8 9
4040
+ 5.725 euro• Meadow farming• Maximum
sustainabilityperformance
+ or –10.000 euro
Redistribution of cooperative funds leads to income difference per farmer
- 4.275 euro• Indoor housing• Minimum
sustainabilityperformance
41
Renewable energy
Mineral efficiency
Green transportationBiogas as truck fuel
Digesters
We keep on pushing the green innovation agenda
Climate-neutral growth is our starting point…
Agenda:
• Introduction: some facts and figures
• Painting the Dairy Challenge: what is the issue?
• Risks and opportunities post EU milk quota abolition
• How to keep endorsement and public support
• Defensive vs the Offensive approach on reputation
How do we build our defense line:
- Regular high level communications meetings FC + sector- Quarterly issues matrix (dairy sector/food industry)- Position papers portfolio (ongoing)- Issues & Crisis Mngt team (global remit)- Cooperation with risk discipline FC- Crisis simulations (on the “wish list”)- Calender with relevant events - be prepared- Regular stakeholder meetings (bric & mortar plus digital)- Public opinion research (case: outdoor grazing)- Consulting risk rankings (e.g. WEF annual risk list)- Quarterly reputation tracking, weekly (social) media analysis
Farm Factory Product
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What to do about it – following the offensive approach?
Customer appreciation Top Stakeholder Mngt
Business Excellence X Social Purpose X Top Communications
-------------------------------------------------------------- =
Leadership in Corporate Responsibility & Sustainability
Corporate Story
WhyCorporate purpose
What Company
profile
WhoCorporate identity
How route2020
strategy
The FrieslandCampina corporate story is ready and shared
What makes FrieslandCampinadifferent from other big dairy players?
What makes us unique?
CorpCom facilitates effective CEO communication
Employees central officeFinancial results
town hall presentation 2x p.a.
Corporate traineesBusiness update 6-8x p.a.
All employeesColumn Spark 4x p.a.Local town hall presentation ± 24 p.a.Financial results webcast and CEO letter 2x p.a.Ask Roelof on Yammer 6x p.a.
Academic Potential & Future LeadersBusiness update 6-8x p.a.CEO event 2x p.a.
New joiners NLPresentation our story 10x p.a.
Top 200Business update 6-8x p.a.IMD Q&A - live or via videoconference 1-2x p.a.
YoungstarsMeet & Greet 1x p.a.
Top 70Leadership Days 3x p.a.Leadership Team WebEx 10x p.a.
Employees NLCEO Breakfast 4x p.a.
48.
The Story of Milk commercial, World Milk Day and Campina Open Farm days
www.melkisbijzonder.nl
ONLINE AND OFFLINE PLATFORM FOR DIALOGUE
FRIESLANDCAMPINA / HET PORTAAL
LISTEN CONNECT COMMUNICATE COOPERATE
Blog contestEvents Facebook
Instagram Twitter
Hike & Bike tour
De MelksalonShare Your Story
50.
‘Campina Dichtbij’ campaign 23 May 2012
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-5.000 member farmers and 1.200 employees of FrieslandCampina-350.000 families in 135 cities/towns ‘got milk’-One million consumers reached by social media
Campina en Epke Zonderland maken zich sterk voor gezonde voeding
Campina gaat zich samen met topsporter Epke Zonderland sterk maken voor gezonde voeding. In de nieuwe campagne ‘Sterk met Campina’ moedigt de zuivelaar samen met de Olympisch kampioen sportend Nederland aan om gezond te leven. De campagne start vandaag, vlak voordat het buitensportseizoen begint. Maar liefst 9 miljoen Nederlanders sporten minimaal één keer per week. Niet alleen omdat het gezond is, maar vooral ook omdat ze het leuk vinden. Uit onderzoek blijkt dat 81% het ‘goede gevoel’ na afloop het allerleukste vindt aan sporten.
De meest favoriete sporten in Nederland zijn wandelen, fietsen en fitness. Mensen sporten het liefst aan het begin van de avond, één uur lang en vinden daarbij gezelligheid belangrijker dan winnen. Ook voeding speelt bij het sporten een belangrijke rol. Als snack direct na het sporten zijn fruit en zuivel favoriet, zo blijkt uit onderzoek van PanelWizard onder 1.000 respondenten.
Carola Boer, Marketing Directeur FrieslandCampina Nederland: “In onze nieuwe campagne ‘Sterk met Campina’ brengen we beweging en goede voeding samen. Zuivel bevat belangrijke voedingsstoffen waardoor het prima past in een gezond eetpatroon. Melk bijvoorbeeld levert proteïne, calcium en vitaminen B2 en B12 die je spieren en botten goed kunnen gebruiken. Samen met Epke Zonderland als ambassadeur willen we het verhaal over de kracht van zuivel delen met heel Nederland.” bron: FoodClicks
‘Campina’ teams up with Olympic
champion and NOC NSF
Amsterdam gets ‘pop-up’ MilkSalon
Op 1 april a.s. opent er in Amsterdam een MelkSalon. Een tijdelijke proef- en ontwerplokaal waar consumenten, melkveehouders, zuivelverwerkers, ontwerpers en wetenschappers worden samengebracht, om de waarde(n) van melk te herontdekken. Er zullen onder andere lezingen, ontwerpsessies, filmavonden en stadswandelingen worden georganiseerd. Ook verzorgen chefs een serie bijzondere diners.
De pop-up MelkSalon, die opent aan de Oude Spiegelstraat 6, is tegelijkertijd een winkel en een melkbar waar je binnen kunt lopen om bijzondere melken te proeven. De pop-up is een initiatief van ontwerper Sietske Klooster en project- en campagnebureau Food Cabinet. “
Rond 1900 kende het straatbeeld van Amsterdam vele melksalons, waar stadsbewoners een glas melk nuttigden van boeren uit de buurt. Melk kopen we tegenwoordig in de supermarkt, maar nog steeds speelt melk een belangrijke rol in de Nederlandse geschiedenis, (eet)cultuur, economie, innovatiegeest en het landschap.
Met de pop-up MelkSalon wordt melk uit de anonimiteit gehaald en wordt de dialoog aangegaan over de betekenis van het product voor onze cultuur en maatschappij.
“The Dutch Oscar for businesses and entrepreneurs..”
May 14, 2014
FrieslandCampina winner "Koning Willem I" Award
Amersfoort, the Netherlands - Thursday evening 13 May 2014 Cees ‘t Hart,
CEO Royal FrieslandCampina N.V. accepted the prestigious "Koning Willem I"
Award from Her Majesty Queen Máxima on behalf of FrieslandCampina. The
winner was announced during a gala at the Dutch Central Bank in Amsterdam.
Cees ‘t Hart: “I am immensely proud to have accepted this prestigious award
on behalf of the company, its board, our members and all our staff. The King
Willem I Award reflects the public acknowledgement of the contribution that
we, as a business, are making to the economy of the Netherlands.“
Concluding:
#Reputation mngt built on top of a robust foundation of showing relevance:
• Consumer Health / Nutrition, • Societal / Sustainability / Food Security • Business / Innovation / Economic NL)
#Our Purpose – part of corporate story – has made the difference
#Transparency , reaching out, partnering is key for success
#“Dusting off” our dairy category / business and finding new ways to connect with consumers & society is still going on (re-invent yourself)
Thank you