Interview

On track towards an agile and sustainable integrated value chain

Frans Keurentjes in conversation with Jan Kruise, Bas Roelofs and Maurits Klavert

Deep understanding of consumer needs is the key to market success

Reading time:
8 minutes

Interview One of FrieslandCampina’s objectives is to add as much value as possible to milk to generate a good living for our dairy farmer members. At the same time, consumers and buyers demand greater efforts and more differentiation from both dairy farmers and FrieslandCampina. Such as different milk streams – quality labels like ‘On the way to PlanetProof’, VLOG (non-genetically modified), organic and commitments to sustainable farming come to mind here. FrieslandCampina is expected to ensure that the production of milk becomes more sustainable – from farm to dairy processing plant and from procurement to end product. From “grass to glass”. How can we translate these challenges into market opportunities? Frans Keurentjes, Chairman of the Board of Zuivelcoöperatie FrieslandCampina U.A., discusses this with 3 Managing Directors of FrieslandCampina; Bas Roelofs (The Netherlands), Jan Kruise (Germany, Austria, Switzerland) and Maurits Klavert (Indonesia).

The chain works in two directions – we’re not only translating what the customer and consumer want back into the chain, we also valorise the efforts of member dairy farmers into the market

Frans Keurentjes, Chairman of the Board of Zuivelcoöperatie FrieslandCampina U.A.

The dairy farmer as part of the value chain

Frans Keurentjes kicks off: “Today’s reality is that we are driven by the rules of the market. Ultimately the consumer is king and this affects the dairy farming chain in full. Think of the demands placed on the product, as well as sustainability. While the dairy farmer’s main task used to be supplying milk, today they are an integrated part of the entire value chain. From ‘grass to glass’ has become the reality.”

“You could see this as a threat or consider it an opportunity. We’ve chosen for the latter: an opportunity, which is why we refer to the Cooperative’s vision as ‘The Merits of Milk’. For example, we provide a varied milk supply aligned to the market’s demand. We embrace this, but at the same time it represents a change that also requires a different way of working.”

“To be successful in this respect, it is essential for us to clearly understand what the consumer wants. Consumer needs vary across the world. With our insights, we want to be unsurpassed in our ability to adapt to the market and offer customers and consumers products they need and are prepared to pay more for. For example, a broad range of products and an integrated sustainable approach. Because we are a cooperative, this ultimately benefits our member dairy farmers. With respect to sustainability, it cuts both ways.”

In Indonesia, Frisian Flag is the only dairy brand ranked among the top 10 consumer brands. That says something about the strength of our added value

Maurits Klavert, Managing Director Indonesia

Sustainability offers added value

Bas Roelofs, Managing Director The Netherlands, can relate to this: “Sustainability has everyone’s attention in the Netherlands and is embraced by every retailer. It’s a good way of providing added value to dairy. As an example of this: our dairy was the first to meet the requirements of the independent On the way to PlanetProof quality label. After the first year, we see that this is starting to pay out: Our On the way to PlanetProof dairy products under the Campina brand are showing growth in volume as well as in value. We are winning in the market compared with our competitors and Private Label.”

“We are also seeing that sustainability is providing added value in Germany, although the focus can vary according to market,” Jan Kruise adds. “Consumer research about our Landliebe brand shows that people feel that Animal Welfare is extremely important, even more than anything else. Because our member dairy farmers take excellent care of their livestock, we can guarantee this with a quality seal on the packaging of our brands, and consumers are prepared to pay more for these products. This is a good example of how we add value.”

“In Indonesia, Managing Director Maurits Klavert is also seeing that sustainability is becoming increasingly important, with respect to plastic packaging for example, but also that FrieslandCampina implements its corporate social responsibility in different ways. “In Indonesia, stunting among growing children due to a lack of proper nutrition is a serious problem. With our brand Susu Bendera, we offer affordable and high quality infant nutrition with the right nutrients. By providing this product in small packages, consumers who are unable to afford large one-time expenditures are still able to purchase these products and this is how we add value to the chain. For retailers and consumers.”

Development performance

price and milk price

Short communication lines for better mutual insight

However, how can FrieslandCampina respond even better to what consumers really want? “Prepare yourself for the need for greater flexibility and adaptability,” says Jan Kruise. “Start with the consumer and work backwards in the chain. We are justifiably proud of our dairy, but if consumers buy fewer dairy products, we shouldn’t start moaning but rather try to better understand why they this is the case, find out exactly what they’re looking for and actively respond with new or differentiated products. The market rules.”

Frans Keurentjes: “Shorten our entire value chain and make it fully sustainable is a prerequisite. The picture that comes to my mind is that of a farmer who makes and sells his/her own cheese on the farm. What I mean by this is that you then bring the supplier of raw materials, the producer and consumer very close together. FrieslandCampina should translate this concept more intensively into actual practice. While that obviously won’t be literally possible on a large scale, we need to think up original ways in which we can bring our member dairy farmers and employees closer to the consumer. With our ‘grass to glass’ approach, we control the entire chain ourselves and we can therefore take the necessary steps in this respect. We very much value close and intense cooperation and continuous dialogue between our top management, the member farmers and the commercial units in the local markets.”

“And consumers are very interested in what’s happening on the farm”, says Bas Roelofs. “We organise annual Campina Farm Days in the Netherlands, where more than 100,000 visitors come to learn and teach their children what happens there and where milk comes from. And throughout the year, many of our farmers open up their farms to consumers for various activities like school visits, workshops, business meetings and short holidays.”

According to Maurits Klavert, transparency is the key word. “Show what you’re doing and where the product originates. The TrackEasy concept which we launched in China is a good example of this. Consumers, especially in China and other Asian markets, want to see where their products come from. Our packaging becomes a big differentiator for customers and consumers.

Don’t underestimate our cooperative heritage and the strength of our brands. Throughout the world, our brands are synonymous with quality dairy

Bas Roelofs, Managing Director, The Netherlands

Flexibility in the value chain

“Ultimately the consumer is king, but the retailer is the gateway to the consumer,” Jan Kruise argues. “In other words, we also need to know exactly what retailers want. And that’s not just a good margin through competitive prices or optimal product value. It also includes a varied product range, good customer service and, of course, sustainability. In addition, flexibility in the value chain is the key to responding to the retailer’s wishes. What comes to mind here is offering the right pack sizes, high quality nutrients, availability and different presentations of our products and innovations. This is where our added value lies.”

Pride in your product

Bas Roelofs indicates that showing pride can also help boost business. “Together with our members and employees, we are a family of more than 40,000 brand ambassadors across the world. I encourage everyone to only have FrieslandCampina dairy products in their fridge and to speak to family and friends about these products with pride. This way we could significantly improve direct communication between FrieslandCampina and the consumer and enhance our impact. Imagine the power of these stories and advocacy. This would certainly have an impact on what’s ultimately going to appear on retail shelves. Milk is “gold”, a unique – not copyable – product of Mother Nature and the way we process that within the chain is nothing short of unique in the world. We aim to be frontrunners in quality and sustainability.”

We can also strengthen our position by ensuring that our products are difficult to replace. Think about a leading position in a product category and strong brands

Jan Kruise, Managing Director, Germany, Austria, Switzerland

Recipe for success

Frans Keurentjes: “The combination of a varied high-quality product range, integral sustainability and being second to none when it comes to knowing what consumers and customers want gives our company a competitive edge. This not only enables us to create value for our member dairy farmers, but also to ensure that our brands stay relevant for the years to come. Our dairy farmers not only form the basis of this future with our quality dairy but are also the owners of FrieslandCampina, the company. With over 18,000 members, we are capable of taking a strong stand to value creation. This is fantastic and I am tremendously proud of being a member of this family and part of this journey.”

A good living for our farmers

Milk price for
member dairy farmers

37.95

per 100 kilos of milk in euros

37.43 in 2018

432

Operating profit
342 in 2018 
in millions of euros

17,431

Number of member dairy
farmers at year-end 

18,261 in 2018

77,934

Number of local farmers who
participate in a training
programme in DDP countries

FrieslandCampina

27/2/2020

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Our themes

Better nutrition for the world

A good living for our farmers

Now and for generations to come