FrieslandCampina, one of Holland’s largest dairy producers, has been globalizing its activities over the past few decades. Is this because the Dutch don’t produce enough milk? No, it isn’t. The Dutch dairy industry is an export industry. Then why globalize? FrieslandCampina’s CEO Roelof Joosten tells us why.
Why is FrieslandCampina globalizing?
“FrieslandCampina produces dairy products from the milk of member-farmers – united in a cooperative – who own the company. Since the Dutch produce more milk than they consume, we are export-dependant. So we seek countries that have higher demand for dairy products than they are able to source locally. These countries are to be found in a vast area between West Africa and South East Asia/China. Why? Because in those countries we can add value to our milk on the basis of consumer needs.”
What do your global activities accomplish?
“First, it is vital to focus on what you’re good at and where you can make a difference in product offerings. So we focus on infant formula, dairy-based beverages and branded cheese. Making a difference with these products, you engage with local consumers. Of course you have to adapt to local markets, but it all starts with the milk chain, the foundation from which you produce better products than your competitors.
Part of our job is convincing local entrepreneurs and local consumers of the power of the Dutch dairy industry. FrieslandCampina and other Dutch dairy producers, in contrast with many of our competitors, own the complete supply chain (from grass to glass) with an excellent and unmatched quality system built and nurtured over many years. It’s because of this heritage that you successfully export across borders. And when you adapt your value proposition to local markets, it helps you become successful.
Innovation is another source of success. You need it for your long-term strategy to stay ahead of the game. By the same token, new technology can be successfully implemented into our Dutch business, as well. Our global presence gives us the scale and leveraging capability to implement new technologies and products. It makes us a global leader in dairy products, willing and able to adapt to new trends.”
What are the challenges of globalizing?
“Probably the major challenge is deciding what not to do. As I said before, you need to focus on what you’re good at. The major trap is that you start to work on many exciting things which are eventually deemed too complex and, therefore, too expensive and unprofitable.
You also need to have a good rapport with local governments. They need our capabilities and skills to produce milk locally so that their country becomes more self-sufficient after allowing us to export dairy products to their country. There has to be a balance in what we can jointly do .”
What should your global activities achieve?
“The simplest answer is the best: a positive earnings model. Value generation allows for a larger premium payout to our farmers in addition to their earnings for milk. Our cost price is based on the average price of milk in Northwestern Europe. Additionally, it is important to provide our members a profitable long-term future which is essential for the continuity of FrieslandCampina and, hence, the continuity of the farms of our member-farmers. So making money is one thing but we should always do this in harmony with the environment/nature and society. The consumer endorses our way of operation if we pay respect to these three elements in total, that will ensure the continued success of our business”