FrieslandCampina admits to “challenging” 2023 start marked by a mix of inflation and low commodity prices
22 Jun 2023 --- The Dutch multinational dairy cooperative FrieslandCampina has confirmed its outlook for 2023, which anticipates a complex year due to high inflation and low basic dairy prices.
The company’s CEO, Jan Derck van Karnebeek, and CFO, Hans Janssen, shared the update at yesterday’s cooperative members’ council meeting.
Difficult months ahead
FrieslandCampina has seen its volumes drop in the Netherlands and other markets as consumers struggle with rising living costs. The company also faces higher expenses due to energy and raw material prices, labor costs, foreign exchange rates and interest rates.
The company’s guaranteed price for milk has not fallen as fast as the dairy prices, which means that the products in stock have lost value and “had to be sold at a lower market price.”
Moreover, dairy prices continue to plummet, with the UN Food and Agriculture Organization (FAO) Dairy Price Index revealing that prices fell 3.2% from April to May. The FAO further emphasizes the effects of “seasonally high milk production in the northern hemisphere” amid ten months of consecutive declines.
Dairy prices are now at September 2021 levels.
High inflation pressures volumes
Low commodity dairy prices put pressure on the results of the Food & Beverage and Trading business groups. According to the business, the Specialized Nutrition and Ingredients business groups have performed well, but not enough to offset the negative impact on FrieslandCampina’s financial results in the first half of 2023.
FrieslandCampina has seen its volumes drop in the Netherlands and other markets as consumers struggle with rising living costs. (Image credits: FrieslandCampina).The company expects that the gap between the guaranteed and basic dairy prices will narrow in the second half of the year, reducing the devaluation of stocks. However, it also expects volumes to remain under pressure due to inflation and low consumer buying power in all markets.
To optimize production and navigate the complex environment FrieslandCampina announced job cuts earlier this year, planned for mid-2025.
Furthermore, the cooperative sold part of its German dairy operation to focus on high-performing brands.
FrieslandCampina moves
Besides its core dairy operations, FrieslandCampina has diversified into plant-based products, infant nutrition and precision fermentation this year.
The company announced in April it will expand its plant-based segment with a partnership with Agrifirm, piloting the cultivation of oats and soy on 200 and 50 hectares, respectively.
Meanwhile, FrieslandCampina opened a new facility in the Netherlands that will produce lactoferrin, a highly nutritious protein and “extremely important ingredient,” which can boost immunity. The facility will enable the production of antiviral ingredients and critical components of infant formula – from 20 metric tons to 80 metric tons per year.
In January, the cooperative announced its partnership with Triplebar Bio to develop and scale up the production of cell-based proteins via the technology and boost its entrance into the precision fermentation market.
By Marc Cervera
