FDBusiness.com

Finnish dairy group Valio is rationalising its head office, production and logistics operations as part of a cost savings programme in response to the changing market environment following the Russian trade embargo on Western food imports and a slowdown in domestic demand.

The cessation of exports to Russia has slashed Valio’s net sales by around a fifth. Meanwhile, consumer purchasing power has weakened in Finland and that has amplified the importance of price in buying decisions. Valio cannot compete in basic milks in its domestic market due to an interpretation of the country’s Competition Law, as a consequence of which the company’s market share of basic milks has fallen to less than 30%. In the global market, the recovery of prices is slow and uncertain.

Valio has commenced co-operation negotiations with around 2,900 employees out of a total workforce of 4,400 people, around 3,600 of whom are based in Finland. It is estimated that at most the equivalent of 320 man-years in redundancies need to be achieved.

“Most of the milk that was previously exported to Russia is now processed into milk powder and industrial butter for the global market, and their profitability is of a completely different order to consumer products exported to Russia. Exports to Russia are still under embargo and uncertainty there is expected to continue for a long time. In the co-operation negotiations over the next six weeks we shall investigate the most efficient way to manufacture our current product range and that for future needs. Some head office operations will be re-organised, including customer marketing, consumer services and some technical services,” says Mika Koskinen, executive vice president, operations.

In conjunction to cost savings, the company has to ensure that new value added consumer products can be launched. The most recent example of Valio’s capacity to innovate is the even more stomach-friendly and fresh-tasting Valio Eila® products which are manufactured using a patented process.