Emmi, the Swiss dairy group, has set out its stall for 2009 – and its ambitions are increasingly international. Dean Best analyses the company’s plans as it looks to milk markets outside Switzerland.
The recession has prompted many businesses to look inwards, to perhaps indulge in a bout of navel-gazing, as they try to devise strategies to withstand the gales blowing through the global economy.
This week, however, emerged news of one business in our sector – Swiss dairy group Emmi – that is looking outward to new markets in a bid to ride out the downturn and prosper when markets recover.
On Wednesday (8 April), Emmi, the maker of brands like Aktifit drinking yoghurts and SwissAlp cheese, posted rising profits for 2008, announced the acquisition of a 60% stake in yoghurt and dessert maker Nutrifrais and outlined an ambition to grow its international operations to the same size as its domestic business. It’s a tall target. Emmi’s Swiss revenues stood at CHF2.07bn (US$1.79bn) in 2008 – out of group turnover of CHF2.69bn.
The company also predicts its foreign sales will slow on an organic basis this year, as weak consumer sentiment and falling dairy prices weighs on the business. And that’s notwithstanding the effect that the strong Swiss franc could have on Emmi’s overseas sales.
Nevertheless, Emmi has forecast a 15% rise in international sales – boosted by a contribution from the US cheese maker Roth Kase, which the group acquired in January.
Alongside the US, Emmi has also earmarked Germany, Austria, Italy and the UK as potential overseas growth markets. Furthermore, the company has also set out its stall to grow through partnerships for the French, Spanish and South American markets. This month, Emmi increased its stake in Spanish dairy Kaiku Corporación Alimentaria from 23% to 43%.
For some industry watchers, Emmi’s long-term growth depends on further expanding overseas. The cheese market in Switzerland, where Emmi is market leader, is now saturated. And, according to Patrik Schwendimann, an analyst at Zürcher Kantonalbank, Emmi only faces seeing its market share eroded by cut-price competitors.
“Emmi doesn’t have any other choice. In the long-term, Emmi’s Swiss sales will shrink because there will be more pressure from outside players,” Schwendimann tells just-food.
Emmi’s focus on overseas market is the latest growth strategy pursued by the company since Urs Riedener, a former executive at Swiss retailer, took control last April.
Riedener’s immediate task had been to restore Emmi’s profit margins, which had been whacked by rising raw material costs in 2007. The company’s 2008 numbers – which included rising EBIT margins – demonstrated that Riedener had fulfilled that goal.
Now, his task, according to Schwendimann, is not just to boost Emmi’s presence overseas but also to build Swiss cheese brands. The acquisition of Roth Kase will also help Emmi’s cause in the US, where the company sells speciality cheese to the foodservice sector. “Americans have always loved Swiss cheese,” Schwendimann says, but the market has lacked “real Swiss brands”.
When asked for an assessment on Riedener’s reign at Emmi, Schwendimann replied: “So far so good.” The analyst said Riedener had succeeded on gettig Emmi’s margins “back on track” but he was cautious about the company’s prospects internationally.
“It’s ambitious [but] that’s not to say it’s not possible,” Schwendimann said. “This second [challenge] is more difficult.”
For all Riedener’s initial success in his first year in charge at Emmi, it will be tough, amid the global downturn, to keep the cheese maker’s international ambitions from turning sour.