Emmi to Acquire Fromalp and Strengthen its International Business
The integration of Fromalp's international business will allow us to market speciality cheeses even better internationally, which will also benefit the Swiss dairy industry.
13 Apr 2010 --- Emmi has signed a purchase agreement for Fromalp Ltd (Zollikofen/BE), an international company which manufactures and distributes speciality cheeses. The contract with the owner of Fromalp, the German firm Hochland SE, will be implemented following approval by the Swiss Federal Competition Commission. Fromalp fits in well with Emmi's international growth strategy. The acquisition will help boost the export of raclette and fondue, thereby supporting Swiss milk sales by the Swiss agriculture sector.
Since the cheese market was deregulated, Emmi has had to pursue a targeted international growth strategy in order to ensure long-term success. In the international business, Emmi does not currently have the necessary size to significantly increase exports of fondue and raclette on its own. As Emmi CEO Urs Riedener stresses: "The integration of Fromalp's international business will allow us to market speciality cheeses even better internationally, which will also benefit the Swiss dairy industry. Emmi is an established player in the agricultural sector and is a more credible exporter of Swiss cheese than a foreign company."
Increased competition in the fully deregulated cheese market
The purchase agreement with Fromalp's owner Hochland SE has been concluded on the proviso that the transaction will be approved by the Swiss Federal Competition Commission. Emmi does not anticipate any restrictions under competition law as the Swiss cheese market has been fully deregulated with the EU since 2007.
The Swiss cheese market was liberalized gradually from 2002, and this has noticeably increased competition. Over the past five years, imports from abroad have risen by almost 30 per cent, while international exports have only increased by just under 10 per cent. Switzerland's cheese trade balance has fallen by almost 4,000 tonnes during this period.
Synergies allow stronger international growth
Fromalp Ltd. specializes in the manufacture and distribution of typical Swiss cheese products. The company employed some 150 people in 2009 and generated sales of approximately CHF 100 million. Its export share is 40 per cent.
Emmi will finance the acquisition of Fromalp using existing funds and credit lines. The contractual parties have agreed not to disclose details of the purchase price.
The value chains of Emmi and Fromalp are largely identical. Emmi can therefore leverage synergies during the integration of the Fromalp business in order to increase efficiency and reduce costs. The cost advantages will give Emmi the financial leeway to invest more heavily in marketing abroad.
Brand manufacturers such as Emmi need to reach a certain size in order to achieve international success. They need to generate sufficient sales to be able to cover the requisite marketing expenditure for major markets. They also require a certain market position in order to be accepted as a competent trading partner and to attract the necessary consumer interest.
Zollikofen to remain an Emmi site
Emmi will continue to use the current Fromalp building in Zollikofen for commercial purposes. Its future use will be defined as part of the integration work ahead. Emmi aims to gain maximum benefit from existing synergies. This objective may mean that production in Zollikofen may be relocated, at least in part, to other Emmi sites over the next few years. It is also possible that the Fromalp building will be converted to some extent for logistic purposes. The production facility in Lützelflüh, managed by Fromalp to date, will remain in operation.
If production is relocated, Emmi is confident of being able to continue to employ the Fromalp employees affected at its various facilities. Emmi currently employs over 1,000 people in the greater Berne area. Fromalp employees will be given priority for vacancies based on their qualifications.
