Comment: Emmi looks further afield for growth
Emmi eyes international markets
Swiss dairy group Emmi is investing in building its presence overseas by upping its stake in two European dairy firms - France's Diprola and Kaiku. Emmi wants to reduce its dependence on the stagnant Swiss dairy market and the deals will strengthen its position in key European countries as well as developing its footprint in fast-growing emerging markets, notably in Latin America, Katy Askew suggests.
Emmi has said it aims to increase its exposure to international markets in the coming years. Like many food companies, the Swiss dairy firm is attracted to the growth prospects afforded by rapidly expanding emerging markets.
However, for Emmi, the need to invest overseas is becoming ever more pressing. The overall Swiss retail market for dairy products dropped by around 3% in 2011 and, a spokesperson for the group tells just-food, Emmi also expects a "slight decrease" in 2012.
"The Swiss market is highly saturated: per capita consumption of yoghurt and cheese are the highest among all markets. For example, yoguhrt: almost three times the UK; cheese, about double," the spokesperson said.
"We do not aim at growing in Switzerland but at holding our market share. Therefore, we assume a slight decline in sales in our domestic market. We are convinced that we can hold our market share in Switzerland despite price pressure and 'purchase tourism'... thanks to our innovative brand concepts."
In order to mitigate the impact of the slowdown it is seeing in its domestic market, Emmi aims to generate 50% of sales from overseas markets in the next few years, up from the current level of 30%.
As part of this push, Emmi announced last week (3 July) that it is increasing its stake in French cheese group Diprola.
Emmi and Italy's Ambrosi operate a joint venture company in France, Ambrosi Emmi France, through which they acquired a 25% stake in French cheese packing group Diprola in 2010. The groups will now take full ownership of Diprola, with Emmi holding a controlling 63% stake.
Diprola primarily operates in France and Germany and specialises in the fresh packing and distribution of cheeses from Switzerland, Italy and France. Freshly packed cheeses have been a growth segment for Emmi in its key European markets and it hopes the acquisition will strengthen its position in the European cheese category. The move will provide Emmi with greater market access for its Swiss cheeses and the firm will gain Diprola's technical expertise in the field of fresh packing.
However, perhaps more significant in terms of Emmi's aim to increase its international presence, was the news that it is increasing its stake in Spanish milk processor Kaiku.
Emmi revealed it has increased its stake in Kaiku from 42.6% to 66%. The move, a spokesperson for the group told just-food, will allow Emmi to "benefit more" from the firm's "leading position in several product groups". It will also "emphasise our long-term commitment to the company," the spokesperson added.
Increasing its investment in Kaiku furthers this aim and raises Emmi's exposure to the high-growth emerging markets.
Approximately 50% of the Spanish group's sales - which totalled EUR278m in 2011 - are generated in emerging markets. Kaiku has a strong presence in South America, particularly Chile, and north Africa, where it has a majority stake in Vitalait, Tunisia's second-largest dairy group.
Emmi's increased participation in Kaiku will enable it to benefit from rapid and strong growth in these markets and through its investment in Kaiku Emmi will gain a route to market for its brands.
"Both markets are fast growing and offer us opportunities for some of our brand concepts," the spokesperson revealed.
Meanwhile, in its domestic market, Kaiku is the market leader in northern Spain with regional brands. The firm is also the largest supplier of lactose-free milk and chilled coffee beverages. Emmi markets its Café Latte brand through Kaiku in the market and the group has seen considerable success. The brand achieved a 76% sales increase in 2011 and Emmi indicated it is expecting a similar level of sales growth in 2012. "This is the largest increase in all our markets," the spokesperson revealed.
For the moment, Emmi does plan to attempt to take full ownership of Kaiku, primarily because it "does not currently have any such option," the spokesperson revealed. However, while the participation of Basque share-holders will "continue to be important", the group did not rule out the possibility of taking 100% ownership somewhere down the line.
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