Valio reports net sales increase of 4.3 percent, despite a challenging market

Valio is launching a new line of lactose-free yogurt to the Spanish market. Speaking to FoodIngredientsFirst, during Alimetaria 2018, in Barcelona, Anette Almi said: “In Spain, we are moving into the lactose-free dairy market. We see more and more that consumers in Spain are conscious about lactose-free dairy. They don't want vegan products they do want dairy but without the lactose. At Valio, we are the expert in lactose-free dairy and now it is growing and there is a much bigger focus on the technology behind it. Protein has been developing a lot too; Spain is about five years behind the Nordic market, so we are targeting two things at once with some of our new Spanish launches – protein and lactose-free.” You can view the full video interview with Almi here.

In addition to existing export markets, Valio also entered new consumer markets. Other significant events of the year included the commissioning of the world’s most modern snack plant in Riihimäki and the historically most extensive quality and production reforms to improve animal welfare.

Challenging milk market situation
Valio Group net sales in 2017 were €1,708 million (€1,638 million in 2016). Domestic net sales remained unchanged and international net sales increased by 12.4 percent. Valio continued its growth particularly in Sweden, the Baltics, Russia and China. The milk margin was €797 million (€772 million) and the milk return was 37.9 cents per liter. The milk market situation remained challenging despite the overall economic growth.

“The biggest challenges come from the dairy industry’s operating environment. The imbalance of the global markets continues, and the growth in milk production is expected to outpace the demand for dairy products,” says Valio’s CEO Annikka Hurme.

The very low price of milk powder and the drop in the price of industrial butter from the peak prices at the beginning of the year chipped away at the milk return, i.e., Valio’s profitability. The situation is expected to continue because of the high volume of EU milk powder intervention stocks. The cause of the development is the EU and global overproduction of milk. About 35-40 percent of Valio’s raw milk is made into powder and butter, so changes to productivity have a direct impact on Valio’s profitability. The overall downward trend in the consumption of dairy products in Finnish markets is increasing the channeling of raw milk into these industrial products. Therefore, it is important to grow the exports from Finland.

“Accessing new export markets and achieving profitable growth requires us to invest in personnel and marketing in the upcoming years. Consequently, we are constantly looking for new ways to do things more agilely and efficiently. There are no shortcuts to accessing new export markets; it’s a matter of going through the regulatory permit processes as well as the long-term building of recognition,” Hurme notes.

World’s most modern snack plant in Riihimäki
Commissioned in September 2017, the Riihimäki R2 snack plant is the largest single investment in Valio’s history. The plant’s annual production capacity is 120 million kilograms and it employs some 70 people.

The dairy’s energy, logistics and water consumption solutions reduce losses and conserve natural resources, and over three-quarters of the thermal energy used at the plant is produced from renewable fuels. The world’s most modern heat recovery system brings an energy savings of 30 percent compared to the old Riihimäki plant.

The most responsible company in Finland
In 2017 Valio was voted the most responsible company in Finland for the fourth consecutive year in Scandinavia’s biggest Sustainable Brand Index. Valio examined the views of its different stakeholder's groups in its sustainability survey in December 2017. In addition to more than 1,000 consumers, Valio’s personnel and owner-entrepreneurs, customers, partners, and social leaders took part in the survey.

The majority of all respondent groups considered Valio as a company that operates responsibly. The themes considered as the most important for responsible operations were Valio’s economic impacts, i.e., employment and retention of the Finnish dairy industry, product safety, procurement transparency, supply reliability, and animal welfare.

“We will continue working on these and other issues. This year we will step up our communications around the specific actions Valio is doing to promote sustainability. An active, open dialog and concrete actions are tremendously important factors affecting trust,” Hurme concludes.