FrieslandCampina grows strongly despite European weakness By Guy Montague-Jones, 01-Sep-2010

FrieslandCampina has reported strong overall growth in the first six months of the year despite a disappointing performance in Europe.

First half revenue was up 5.5 per cent to €4.3bn, supported by strong volume growth in Asia and Africa and €51m in positive currency translation effects.

Cees ‘t Hart, CEO of FrieslandCampina, said: “Particularly in Asia we were able to gain from the economic recovery and pass on the increased raw material prices through to our selling prices.”

Overall revenue from the Consumer Products International business group, which includes Asia, Africa and the Middle East, grew 15.9 per cent to €1.1bn.

European weakness

Meanwhile, in established European markets, FrieslandCampina struggled in the face of tough competition and a weak economic environment. Sales revenue at Consumer Products Europe dropped 2.3 per cent to €1.1bn.

“The development of consumer activities in Europe is however disappointing,” said ‘t Hart. “In this region both revenue and profit growth are under pressure.”

As for the other business units, Ingredients grew 11 per cent to €658m in H1 and Cheese & Butter achieved a 2.1 per cent increase in revenue to nearly €1.1bn.

Improved profitability

With the exception of Consumer Products Europe, all divisions contributed to improved profitability figures at FrieslandCampina. Operating income in H1 doubled to €238m compared to the equivalent period last year.

The Dutch dairy firm said the contribution of the Ingredients business was particularly positive. It turned a negative operating performance of minus €45m last year into a positive contribution of €43m this time around, thanks to improved sales of special ingredients and higher prices for standard products.

The improvements on the operating level translated into higher net profits, which rose to €156m from €78m last year.

Despite the recovery in H1, FrieslandCampina said that it can not make a definite statement about expectations for the full year. The company explained: “The economic outlook is at the moment uncertain. Minor fluctuations in demand and supply on the world could have major consequences for the price developments of dairy products.”

Dairy, bakery, beverages dominate functional foods Post a commentBy Shane Starling, 24-Aug-2010

Dairy, bakery and beverages account for 72.9 percent of functional foods in the world’s biggest markets with energy/mood enhancement, gut health and heart health the dominant claims, according to a Leatherhead Food International report.

In 2009 figures, dairy accounted for $8.702bn globally, bakery $5.18bn excluding Japan, and beverages $2.825bn not including energy and mood drinks.

The UK-based organisation said the US and Europe will drive growth in the market from $22.923bn in 2009 to $27.126bn in 2015 – an 18.3 per cent growth rate – but warned health claim regulations in the EU and elsewhere could severely crimp market development.

It did not include sales of mood/energy products in the figures, despite registering their popularity, trend-wise.

Credibility is key

“The future of functional foods depends on a few key points,” Leatherhead observed. “Health claim regulations in Europe are currently under scrutiny and the future of other global regulations will shape the health claims permitted on packaging.”

“Credibility is key. Regulations are likely to become stricter and only health claims with strong scientific backing will be permitted for use or can be endorsed. Consumers are also becoming savvier to the concept of ‘scientifically proven’.”

Of the other countries in its survey, Japan was predicted to record slower growth because its market was older but it remained the biggest functional foods economy with 39.2 per cent of the total market followed by the US (31.1 per cent), the five European countries (28.1 per cent) and Australia (1.6 per cent).

European market analysis

The five European markets – the UK, Spain, Italy, France and Germany – would grow from $5.058bn in 2009 to $6.454 in 2015 – an increase of 27.6 per cent over the time span.

The UK has become the largest market for functional foods, having overtaken France in recent years. Leatherhead put this down to strong activity in functional dairy and yellow fats as well as “significant initiatives” in breakfast cereals and beverages. France remains the second biggest market followed by Germany, Spain and Italy, “a distant fifth”.

Leatherhead points out that active health drinks dominate the European market, along with functional yoghurts (showing “dynamic growth”) and functional milks. Dairy products account for almost 70 per cent of functional food sales in the five countries.

Popular brands include Danone Activia and Actimel spoonable and drinking yoghurts, Benecol spreads and dairy products, Burgen bread, Danone Danacol, So Good soy milk and Tropicana Essentials fortified juice.

Japan

The Japanese market is characterised by a longer association between food and health made by Japanese consumers. This is backed by the Foods for Specified Health Use (FOSHU) regulation which controls how health claims are made about functional foods. While the system was slow to take off, it has fostered a market worth almost $9bn.

Healthy non-FOSHU products rely on consumer knowledge and implied claims and when added to the mix contribute to a market worth closer to $25bn.

“In general, the use of functional ingredients is widespread in Japan, with probiotics, vitamins, calcium, and oligosaccharides regarded as almost standard in some sectors of the market.”

Australia

Leatherhead defined the Australian market as “relatively undeveloped, despite ongoing new product acitivity”. Australia’s population of a little over 20m was also cited as a factor.

But it said the country had health R&D activity going on in probiotics, drinks, bread and cereals. Glycaemic Index claims are popular.

Report sets out dairy strategy for Northern Ireland post-quotas By Guy Montague-Jones, 13-Aug-2010

A newly published study on the competitiveness of the Northern Irish dairy industry has called for a greater focus on efficiency and supply chain cooperation.

The report, undertaken by Promar International, set out how the dairy sector in Northern Ireland should prepare for the EU abolition of milk quotas in 2015.

Paul Vernon, Dairy UK Northern Ireland chairman Paul Vernon, said: “We know that there will be changes in the CAP over the next few years that will have a significant impact on our industry. This report is an attempt to identify these changes, and suggest strategies that will help ensure that we continue to have a profitable dairy industry in Northern Ireland.”

Key objectives

The report lays out two key objectives for the industry, including the fostering of greater revenue generating potential and the development of closer co-operation to increase competitiveness.

To achieve these broad goals, it then goes on to present a set of strategies. Within the next decade, the authors say the industry should aim to have a Northern Irish milk pool of at least 2 billion litres a year.

In the same period, the report says the energy costs of the supply chain need to be reduced by 25 per cent to make it competitive with other regions in the UK and other country competitors. It also urges the industry to focus more generally on improving economies of scale and the pursuit of planned and sustained R&D to improve products value and efficiency.

On the subject of co-operation, the report calls for more interaction at processing level to ensure that milk is turned into products with the best returns from markets.

Implementation group

In addition, Dairy UK has agreed to set up an implementation group, responsible to the board of Dairy UK NI, which will identify and consider aspects of the report that have industry level implications.

The Promar report said the group should evaluate models for pre-competitive research, and recommend a suitable approach for Northern Ireland.

Funding for the study was provided by industry, the Department of Agriculture and Rural Development and Invest NI.

Fonterra gets embroiled in Chinese dairy scare By Guy Montague-Jones, 11-Aug-2010

Fonterra has insisted that the New Zealand-based dairy is 100 per cent confident in its products as one of its Chinese customers faces an investigation into tainted milk claims.

Chinese media reported earlier in the week that medical tests had reported excessive levels of hormones in three young girls who had consumed milk powder made by Synutra International.

Parents of the children and doctors in the Hebei province had expressed concern that the milk powder caused the girls, aged four- to 15 months, to prematurely develop breasts.

The Chinese health ministry has ordered an investigation into the claims. In the meantime, the manufacturer Synutra International has said that the milk powder in question was sourced from New Zealand.

Fonterra statement

Fonterra has responded to this, saying that it is indeed a supplier to the Chinese company but that it is entirely confident that its products are not tainted with growth hormones.

In a statement released this morning, the company said: “Fonterra is a supplier of milk powder to Synutra International but we understand Synutra sources some milk locally and imports whey powder from Europe.

“In New Zealand there are strict legislative controls on the use of Hormonal Growth Promotants (HGPs) – they are not allowed to be used on milking cows. The strict controls mean that it is not necessary for New Zealand milk or milk products to be routinely tested.”

The dairy concluded that it “remains 100 per cent confident about the quality of its products.”

Allegations that milk products were tainted with growth hormones is another blow for the Chinese dairy industry as it continues to fight melamine contamination scares.

Chinese produced milk powder laced with the toxin killed six children and sickened an estimated 300,000 in 2008, virtually wiping out the Chinese dairy export market in its wake. Despite efforts by the authorities to improve food safety practices, two fresh cases of melamine tainted milk emerged in December.

Ireland sees potential for big milk export push By Guy Montague-Jones, 21-Jul-2010

Ireland is planning a big increase in milk output once quotas are lifted in 2015 as the government places food at the heart of an export led growth strategy.

At the launch of the Food Harvest 2020 strategy document, agriculture minister Brendan Smith said: “The ending of milk quotas in 2015 represents an exceptional opportunity to grow our milk output by an estimated 50 per cent.”

Smith made the comment on the basis of the conclusions reached in the Food Harvest report, which had been drawn up by a committee of industry leaders led by Irish Dairy Board chief executive at Dr Sean Brady.

Export-led growth model

The Irish government has expressed a keen desire to pursue export-led growth and it sees the agri-food sector as a key pillar in this strategy.

In a statement, the government said population growth and the abolition of EU milk quotas gives the Irish food sector significant opportunities for growth.

Smith said the new Food Harvest report has shown that Ireland can grow its food and beverage exports over 40 per cent by 2020. And a move away from milk quotas at an EU level offers particularly strong opportunities for growth in the dairy sector.

Dairy threats and opportunities

Michael Barry, director of the Irish Dairy Industries Association, added that in a more competitive dairy marketplace Ireland stands to benefits from a good low-cost production base although he said consolidation is called for at the processing level.

Adding a word of caution, Barry told DairyReporter.com that whether the tremendous growth opportunities for the Irish dairy sector are realised over the next ten years will depend to a great extent on outside factors.

Another slump in global prices could jeopardise export growth and there are other uncertainties facing the industry like how to square the ambitious expansion goals with equally ambitious carbon emission targets. A lot may depend on how government policies are implemented.

On this point, Barry was optimistic, saying there has been a realisation at government level of the importance of the food sector, and this is feeding into greater support for the industry.

To help industry full its export potential, the government has set out two guiding principles: ‘act smart’ and ‘think green’.

Brady expanded on this, saying: “Smart – that means being innovative, investing in research, focusing on what the consumer wants, applying lean manufacturing techniques and ensuring we have the scale at every level to maximise our cost competitiveness.

“Secondly we must be green. We must build in a meaningful way on our green image to scientifically prove, and then market, the environmental sustainability of our food production systems.”

A new high level group is to be set up by Smith to ensure effective, joined-up implementation of the strategy.