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Dairy producers battle for market share

Emmi posted a profit last year despite strong competition Keystone Archive

Switzerland’s leading dairy group, Emmi, is continuing to expand and consolidate its position as market leader.

This content was published on April 22, 2004 - 11:09

But competition in a limited domestic market remains tough for both big producers and small dairy firms.

Last year Lucerne-based Emmi more than doubled its net profit to SFr47.2 million ($35.9 million) as it snapped up units and branched into new product areas.

Sales in 2003 rose by 35 per cent to nearly SFr1.9 billion, buoyed by a series of take-overs. Internal growth only accounted for five per cent of the sales increase.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) rocketed by 47 per cent to SFr118 million, despite the cost of integrating new units.

In a statement released on Thursday, Emmi said it was satisfied with the results given the increasing pressure on prices and the difficult economic situation.

Tough domestic market

What sounds like a standard formula is a tough reality for the dairy sector – even for the few big producers, including Emmi, Elsa and Nestlé.

The collapse two years ago of the former Swiss Dairy Food Group underlined the difficulties of staying afloat in a tight domestic market.

Sales of milk and diary products in the retail business totalled SFr3 billion last year, but they have been stagnating.

And it is virtually impossible for the dairy industry to expand abroad as long as Swiss milk prices remain above European Union levels.

This has prompted many producers to branch out into new areas, such as organic products, so-called “energy drinks” and “beauty drinks” based on aloe vera.

Karl Weisskopf, spokesman for one of Switzerland’s leading supermarket chains, Coop, says products marketed as fitness products appeal to today’s more health-conscious consumer.

Different strategies

Despite developing new strategies, Switzerland’s dairy firms are still dominated by traditional structures.

Farmers hold a 70 per cent stake in the market leader, Emmi, while rival Elsa is a subsidiary of the country’s biggest retailer, Migros.

The two companies have different business strategies: Emmi primarily provides brand products for various retailers, such as Coop; Elsa sells to Migros.

Nestlé, the global food giant, is also active in the Swiss market, pushing brand names including Hirz. The Vevey-based group has been the driving force behind the move towards lifestyle products.

swissinfo, Alexander Künzle

In brief

Swiss dairy farmers benefit from government subsidies, but dairy producers operate under free-market conditions.

Apart from a few major dairy producers, there are numerous small dairies notably in mountain regions.

The collapse two years ago of the former Swiss Dairy Food group underlined the difficulties of competing in a small domestic market.

Emmi took over parts of Swiss Dairy Food: the generic cheese business as well as the old-established company Gerberkäse and the dairy in Ostermundigen, Bern.

The acquisitions led to an increase in sales of more than SFr500 million in 2003, and the integration of some 850 employees.

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