Netherlands-based dairy giant FrieslandCampina plans to continue to invest in its brands and remain focused on stripping costs out of the business amid declining demand for dairy products.
The company announced yesterday (31 August) that it has witnessed a 15% drop in sales during the first half of 2009, as global demand for dairy products has been dampened by the economic crisis.
In an effort to protect sales of consumer products, a spokesperson for the Dutch group told just-food that FrieslandCampina would invest heavily in brand-building.
“We have a fairly good promotional budget and we don’t scrimp on that more than is necessary. We will continue to invest in our brands,” the spokesperson said.
Nevertheless, since the merger of Friesland and Campina at the end of last year, the enlarged group has looked to cut expenses and benefit from potential synergies.
“Since we began operating as a merged company in January we began looking at what is possible. We have taken some cost-control measures, such as combining our purchasing. In the future, we expect to have a better look at the production side,” the spokesperson said.
As part of its effort to control costs, FrieslandCampina cut its payment to farmers by 32% during the first half. The move, the spokesperson admitted, is likely to have a negative impact on the farmers who supply raw milk to the company.
“Every farmer is suffering from the current price situation. It will take a longer period, but maybe next year farmers will come to severe problems,” the spokesperson predicted.
FrieslandCampina said that it did not expect an improved performance in its second half. The company said that the market was likely to remain “challenging” with selling prices under continued pressure from sluggish demand.
“Low commodity prices could result in bigger price pressure in consumer products,” the spokesperson warned.
“When prices do go up the affect on our results will be minimal because lots of contracts have already been set up for the remainder of this year,” he added.