HOW TO SUCCEED IN A TURBULENT BUSINESS ENVIRONMENT The experience - - PowerPoint PPT Presentation

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HOW TO SUCCEED IN A TURBULENT BUSINESS ENVIRONMENT The experience - - PowerPoint PPT Presentation

Apr 14, 2023 390 likes •577 views

HOW TO SUCCEED IN A TURBULENT BUSINESS ENVIRONMENT The experience of Valio in trading with Russia in dairy sector Raul Lnnstrm for EESC seminar 7 July, 2015 VALIO IS THE BEST IN FINNISH Valio company was founded in 1905 as a cooperative

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HOW TO SUCCEED IN A TURBULENT BUSINESS ENVIRONMENT

The experience of Valio in trading with Russia in dairy sector Raul Lönnström for EESC seminar 7 July, 2015

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Valio company was founded in 1905 as a cooperative group to export best quality Finnish butter. Valio still mean the best quality to the present time. In all countries and markets.

VALIO IS THE BEST IN FINNISH

Raul Lönnström 07.07.2015 2

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1905 1955 1992 1998 2009

VALIO IN FIGURES

2 000

Turnover of EUR 1,950 mln.

  • ne third of revenue derived

from abroad The number of employees is 4400, 1000 of them abroad 4 400

7 100

Company is owned by 17 cooperatives 7 100 Finnish milk farmers

1,900 80% 18

Milk intake is 1 900 million litres Valio processes 80% of all milk produced in Finland There are 15 plants in Finland, 2 in Estonia, and 1 in Russia

Raul Lönnström 07.07.2015 3

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VALIO GROUP’S TURNOVER AND PERSONNEL

Turnover*, € million Average number of employees Employees, 31 Dec 2014 Valio Oy 1,714 3,734 3,570 Valio Russia 258 475 354 Valio Baltics 92 371 371 Valio Sweden 97 51 50 Valio USA 58 24 23 Valio China 48 7 7 Valio Group total 1,950 4,662 4,375

*) Turnover of Valio Oy and the subsidiaries include sales within the Group. 4 Raul Lönnström 07.07.2015

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VALIO IN RUSSIA

Valio operates in Russia since 1908. Head office is in St.-Petersburg. Personnel: 400 + Key markets: Moscow, St.-Petersburg, “million+” cities, premium segments in CIS.

Since 1956 Since 1908 Market leader in Moscow and St.-Petersburg Oltermanni is # 1 cheese brand in Russia Viola is the most reliable brand in processed cheese

Raul Lönnström 07.07.2015 5

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Non-dairy products Lactose-free products ??? Valio quality, Russian plant and raw milk Valio quality, Russian plant and raw milk Own production in Moscow region

Raul Lönnström 07.07.2015 6

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VALIO WORKS ON MILK QUALITY ON RUSSIAN FARMS TO GET E-CLASS MILK DEMANDED FOR VALIO PRODUCTS

The same quality standards that in Finland (higher than the highest class in Russia, Regular audits of contracted milk producers, More parameters than Russian milk plants demands, Own attestation of milk producers by Valio, Milk producers education in Finland.

We are ready to buy the best Russian milk on higher price!

Raul Lönnström 07.07.2015 7

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VALIO AUDITS PRODUCTION. ONLY THE BEST PLANT CAN PRODUCE VALIO PRODUCTS

Obligatory audits by Valio quality Management System team Most modern production facilities International QMS (ISO, HACCP) Sanitary norms and allergens control Raw martials standards Regular quality control of each batch by Valio specialists

Best plants!

Raul Lönnström 07.07.2015 8

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Raul Lönnström 07.07.2015 9

RUSSIAN DAIRY SECTOR – MILK PRODUCTION

55715 51886 47236 46524 42176 39241 35819 34136 33255 32274 32259 32874 33462 33316 31861 31070 31339 31988 32363 32570 31847 31646 31756 30529 42452 38333 32167 29896 25287 22413 19020 17496 16662 15676 15271 15524 15963 15390 14375 14001 14135 14163 14246 14495 14313 14395 14752 14047

10000 20000 30000 40000 50000 60000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Milk production in Russia, Mkg

Kaikki tuottajat Maatalousyritykset (suurtilat)

All producers Agriculture companies (large farms)

NOTE! Only data from large farms is reliable

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Raul Lönnström 07.07.2015 10

RUSSIAN DAIRY SECTOR – CHEESE

2009 2010 2011 2012 2013 2014 Consumption 690 780 759 789 782 668 Production 400 438 425 446 430 450 Imports 310 353 344 356 364 230 100 200 300 400 500 600 700 800 900 1.000 tons/a

CHEESE CONSUMPTION, PRODUCTION AND IMPORTS

High dependency on imports! Effects from Russian import ban are seen in 2014 figures Cheese import from EU to Russia in 2013 was 257 ktons and in 2014

  • nly 133 ktons (-48%).

Valio´s share was about 15 % in both years.

Source: USDA FAS http://apps.fas.usda.gov/psdonline/ps dHome.aspx

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Raul Lönnström 07.07.2015 11

RUSSIAN DAIRY SECTOR – BUTTER

2009 2010 2011 2012 2013 2014 Production 246 207 217 216 219 235 Imports 107 118 120 124 144 130 Consumption 349 324 334 340 361 363 50 100 150 200 250 300 350 400

1.000 tons

BUTTER CONSUMPTION, PRODUCTION AND IMPORTS

High dependency on imports! Russia was the biggest export destination for EU

  • butter. From EU to Russia

was exported 30 ktons butter in 2013 and in 2014 c. 21 ktons (-30%), more than half of EU´s export was a Finnish butter

Source: USDA FAS http://apps.fas.usda.gov/psdonline/ps dHome.aspx

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RUSSIA: GOVERNMENT EFFORTS

Due to deficit of local milk production the aim is to support local milk production and development of dairy industry. The dairy market is dominated by international companies, e.g. Pepsi, Danone, Valio, Lactalis. Locally

  • wned companies are more like regional players.

The government has already for a long time supported local milk production and processing with no significant effect to decrease imports. The quality

  • f raw milk is generally lower than in EU.

Embargo supports the development of the Russian dairy sector. The new Minister of Agriculture Mr. Alexander Tkachev is encouraging companies to invest, increase milk production and processing.

Raul Lönnström 07.07.2015 12

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RUSSIAN EMBARGO

Embargo implemented 7 August 2014 for one year. 25 June one-year extension of the ban. Countries involved: United States of America, the EU member countries, Canada, Australia and the Kingdom

  • f Norway

Includes dairy products with the exception of baby foods and lactose free products. Due to the ban additional measures has been raised to control the imports: on the border quality control performed by the customs and Rosselkhoznadzor (Federal Service for Veterinary and Phytosanitary Surveillance). Recently also necessity to register the allowed products to Rospotrebnadzor (Russian Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing) as special dietary products

Raul Lönnström 07.07.2015

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IMPACT OF THE EMBARGO

The world market balance has been affected: strong drop in commodity prices world wide. Increasing imports from Belorussia, South America, Switzerland, New Zealand etc

  • capacity in Belorussia in good use, raw

material flow in from Poland and Baltics

  • new

countries approved by Rosselkhoznadzor e.g. Egypt, Turkey Availability of consumer products have changed, especially cheese and butter. Government has also big concerns about falsified products. Increase of the consumer prices in Russia by 25…30 %. The consumption of cheese has declined by 25 % and the dairy products in general 10 … 15 %.

Source: Eurostat until 2009,EWPA, GDT USD-rate previous month/week

impact of embargo

Raul Lönnström 07.07.2015

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IMPACT ON VALIO GROUP

Most of the products sold in Russia were imported from Finland and Estonia. Russian sales dropped from 8.000 tons/month to current 2.000 tons/month, which is now mainly local production. Only minor volumes of water, juices etc are imported to Russia. In Finland immediate redirection of production from consumer products to industrial. Personnel reductions in Russia and in Finland so far totally c. 700 persons. Due to the basic principles of Valio all milk from the owners has to be processed. The Russian export has been replaced by industrial butter and powder sales to industrial markets. The milk price for the producers has dropped by 25 %!!

Raul Lönnström 07.07.2015

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IMPACT ON VALIO RUSSIA

Embargo started August 2014 and still continues most likely until August 2016. At first stage autumn 2014, getting prepared:

  • a recovery plan was created
  • stocks already in country to be sold to regular clients
  • decision to increase capacity in Moscow plant
  • agreement with existing co-packer to increase production
  • negotiations with potential suppliers in Russia and Belarus.
  • planning of personnel reductions

Second stage autumn and winter 2014/2015, implementation:

  • slower sales of existing stocks
  • investment to additional capacity in Moscow plant
  • planning of new launches and stating of sales in January 2015
  • implementing of personnel reductions

Third stage winter 2014/2015 and spring 2015, new start:

  • adjusting the and reorganizing resources
  • sales increase to recover back the position on the shelves

impact

  • f

embarg

  • Raul Lönnström 07.07.2015
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RUSSIA IS STILL AN OPPORTUNITY FOR VALIO

There has been crisis before: 1998, 2009 and now 2014. Valio has earlier survived on the market; lost some sales but always recovered. Valio has a great reputation in Russia. In the informational environment the company is mentioned in positive manner more often than all foreign dairy companies in Russia combined! In longer run the balance between production in Russia and EU to be reconsidered by the owners:

  • before embargo: EU 90 % - RUS 10 %
  • now RUS 90 % - EU 10 %
  • after embargo new balance: EU xx % - RUS yy %

Continuation of embargo will strengthen the volume of local production as the government is expecting. At the same time increase of our local production keeps the shelves reserved also for Valio. This will smoothen the comeback of Valio’s imported products after embargo, when ever it is over…

Raul Lönnström 07.07.2015

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18 Raul Lönnström 07.07.2015