Emmis Kunz said recent investment in Spains Kaiku boosted Swiss group in emerging markets

Emmi's Kunz said recent investment in Spain's Kaiku boosted Swiss group in emerging markets

Swiss dairy group Emmi has this year pressed on with its plans to expand overseas and rely less on a stagnant domestic sector. At the SIAL 2012 industry expo in Paris, Dean Best met Matthias Kunz, head of Emmi's international business, to discuss the company's latest investments, including its decision to take a majority stake in Spanish dairy Kaiku.

just-food: Emmi has made a series of international investments in the UK this year, in Germany, Spain and in France, for example. You are still being very aggressive with your international expansion.

Kunz: We drew up a strategy four years ago to generate half of our sales outside Switzerland.

just-food: How far away are you from achieving that?

Kunz: We're very close to fifty-fifty. It's right on plan. We've always said the amount of time it took was not important. We wanted to find the right quality targets that fit Emmi; niche, premium companies or now more and more those that have a presence in emerging markets, which [Spanish dairy group] Kaiku does very well for us. Kaiku is present in Tunisia, where it is number two after Danone. They have a very promiment position in Chile. It is a step for Emmi outside our regular focus markets, allows us to learn and have experience in emerging markets. We want to make our focus markets stronger but at the same time we are also looking beyond these markets and not to be too slow in entering markets where there is very fast consolidation. Some markets are consolidating very quickly and if you wait five, ten years, it is too late.

just-food: With Kaiku, are there plans to use its position in Tunisia to act as a springboard further into north Africa and the Middle East?

Kunz: It's quite a jump to the Middle East but Tunisia might be a hub for north African markets. The local market is growing very well and we have very good local partners, which is a prerequisite for success. We have established clear priorities. That strategy is not public so obviously we will not say exactly where we go next.

just-food: And is the priority in Latin America to focus on Chile first, then?

Kunz: We want to make sure what we acquired really works well. In Chile, it means we have to look at how to transfer our know-how into the organisation and add added-value products into their portfolio. That's a slow process in those markets. The readiness of the consumer to accept added-value offers has to be there.

just-food: But you have fierce competitors in these emerging markets - Danone in Tunisia and Nestle in Chile. Growth is there but everyone is going for that growth.

Kunz: Competition is already there but it's like that in all markets. You have to find the right approach and beat them on the proposition.

just-food: Of course, one emerging market where Emmi was not able to press on with its plans was Russia, when a proposed venture with Unimilk fell through. What is the latest on your plans for Russia?

Kunz: Russia is a very interesting market. It's in our emerging market analysis. We export cheese products out of Switzerland to Russia. We have a very good distributor in Moscow.

just-food: Is it a market in which you could try to find another partner for a venture, similar to what you tried with Unimilk?

Kunz: Absolutely. That is an option. We could find a partner and give what we tried to do another try.

We still have a clear focus on our main markets. Acquisitions in focus markets are not finished. We are still open for looking at our focus markets.

just-food: One of your main markets is Spain. How are you finding trading conditions there? Danone has publicly stated how challenging the market is.

Kunz: We're developing very well in Spain. We are market leader in certain segments in Spain via Kaiku. We see a lot of opportunity for regional, branded milks. Kaiku is real Basque brand. In Spain, they live for their regionality. There is a market for national, for competitive private label but there is also a market for regionality and that's what we are able to do really well with the Kaiku management. Regional brands that people identify with. That gives us a strong base. On top of that, Kaiku is market leader in lactose free. They have also built up our Caffe Latte business in Spain. They doubled sales this year - in a crisis environment. You always have opportunity in a crisis. We are growing and we are profitable and we have potential to improve.

just-food: And turning to the UK: what difference did the Onken acquisition make to Emmi's business in the country?

Kunz: It made an incredible difference. It really gave us a new dimension, critical mass. Before we had a team work just on Swiss imports, which is a great niche to be in in the UK but is somewhat limited. With Onken, we had access to all the important retailers and that has helped the business out of Switz.

just-food: It's a challenging period to make a big investment in the UK. Has the business met Emmi's expectations?

Kunz: The Onken acquisition was very successful. The brand is very well established in the UK, our team understands the brand really well and how it translates to the needs of the British consumer. They have developed the range in a very interesting way. It is a great alternative to organic yoghurt for example in the UK. It's a great offer, at a good price in hard times and a very good product.

just-food: The UK is renowned for its high level of promotions and that has increased even further in the last 18 months. Are retailers putting pressure on you to share the burden of promoting more often?

Kunz: We have to focus on the story behind the brand and the quality of the product. There are studies in the UK that show if you exceed a certain level of promotional pressure, you are damaging the brand. Consumers are also buying less and acting in a more targeted way. If you do a 'three for two', that's too much product. We want to focus on each SKU and what we can tell consumers about them. There's a limit to promotion. People don't want bags and bags anymore.

just-food: The yoghurt sector in the UK is very competitive, with new entrants coming in, perhaps in different segments to Onken, like Greek yoghurt. In your particular category, are you seeing increased competition?

Kunz: Onken's position is very stable. Rachel's Organic and Yeo Valley are both organic big pot yoghurts. Rachel's has been very aggressive on its growth path and Yeo Valley is trying to hold its ground. Private label is an issue. It has increased its share but Onken has been able to hold its ground, inspired by the innovation we have and the fruitiness of the product. It's quality and taste that sells. We have had high single-digit sales growth this year. With the launch of private-label products, it was very difficult, although our advertising campaign helped us a lot. The sales increase has come mainly through price.

just-food: Is Emmi seriously looking at adding to its UK business through acquisition?

Kunz: We look at every way in our main markets to strengthen our market position. We are open to looking at targets but we are not proactively looking in the UK.