Swiss-focused Käserei Studer to boost Emmis international ops?

Swiss-focused Käserei Studer to boost Emmi's international ops?

Emmi announced yesterday (9 April) it has acquired Swiss speciality cheese maker Käserei Studer. While the majority of Käserei Studer's sales are generated domestically, the move should nevertheless be viewed in the context of Emmi's drive to expand internationally, Katy Askew suggests.

Many European dairy majors aim to increase their exposure to international markets in the coming years. The imminent end of EU milk quotas presents European dairies with both a challenge and an opportunity: the expected increase in milk supply coupled with the mature nature of the European dairy category has prompted companies to seek out new markets for their products.

However, the need to expand internationally has a slightly different - and possibly more pressing - dimension for Swiss-based Emmi.

Switzerland abolished its milk quota system four years ago. However, the overall Swiss retail market for dairy products is in decline, dropping by around 3% in 2011. And the outlook is not great for Emmi's home market, which the company has forecast will remain flat or be in moderate decline in the near term.

Per capita consumption of yoghurt and cheese is higher in Switzerland than any other European market and the sector is highly saturated - meaning Emmi sees little room to expand its home market.

The group has said it aims to maintain its market share in Switzerland. In a declining market, this means Emmi is anticipating a slight decline in Swiss sales.

In order to mitigate the impact of the slowdown it is seeing in its domestic market, Emmi has targeted an increase in overseas revenues. The company has said it plans to generate 50% of sales from its international operations in the next few years, up from 38%.

To achieve this, Emmi has said it plans to use M&A to grow its international operations. 

So, perhaps the announcement that Emmi has acquired speciality cheese group Käserei Studer should come as something of a surprise.

The firm, which is located in eastern Switzerland and will continue to operate on a stand-alone basis, produces speciality hard cheeses. Its primary product is Der Scharfe Maxx, a Swiss cheese that is popular in Switzerland and Germany, its two largest markets. The majority of Käserei Studer's sales, around 60%, are generated at home.

Nevertheless, announcing the deal, Emmi suggested the move would strengthen its position in Swiss cheeses in both Swiss and international markets.

Emmi plans to achieve this by feeding Käserei Studer's speciality cheeses into its existing sales and distribution network, a move that will open up over 60 markets to the smaller group. In this way, Emmi said it would "harness the growth potential" of Käserei Studer, leveraging the group's expertise and know-how to bolster Emmi's own range.

Emmi has repeatedly indicated it plans to grow internationally through acquisitions. This often means acquiring a company that is strong in emerging markets, as such deals would allow Emmi to feed its existing product line into these countries via the other company's distribution channels. This model can be seen at work in Emmi's purchase of a majority stake in Spain's Kaiku, which has a strong presence in Latin America and North Africa.

However, in the steady churn of M&A that Emmi has turned out over the past year, the group can more frequently be seen buying up a niche European player. Emmi then expects to grow the target company's revenue by leveraging the strength of its own distribution channels.

Last summer, the group acquired France's Diprola; in the autumn, the group took a stake in Germany's Gläserne Molkerei; and at the beginning of this year Emmi took up a stake in Dutch dairy AVH Dairy Trade. AVH manufactures products from goat's milk, Gläserne Molkerei is an organic dairy group, Diprola distributes freshly packed cheeses - a high growth sector for Emmi.

Like Käserei Studer, these businesses have continued to operate on a stand-alone basis, finding revenue growth opportunities as their speciality products are fed into Emmi's global distribution and sales network.

When viewed in this context, it is clear Emmi's acquisition of a small speciality Swiss cheese maker will ultimately further its goal of growing international sales.