Net sales in Finland grew by 0.5%; net sales abroad grew by 3%.
However, Valio said the situation on the global milk market remained challenging. Supply exceeded demand, which reflected in the prices for both Finnish and export sales. It was a challenging year for Valio’s owner-entrepreneurs: milk prices fell and the summer was record-setting hot and dry.
Valio and four other dairies reached a settlement in late 2018 and early 2019 in a compensation process regarding base milk pricing. The company said one-off compensation pay-outs resulting from this process were a burden on its operational profits.
Valio CEO, Annikka Hurme, said, “The greatest challenges arise from the dairy industry’s operating environment. Global milk production continued to grow, and last year we saw that weather conditions can have a significant effect on production conditions, both in Finland and around the world. The feed shortage resulting from the record-dry summer was an additional burden on the farms’ financial situation.”
From a renewal and innovation perspective, Valio said 2018 was strong. In February 2018, plant-based Valio Oddlygood products were launched in Finland and Sweden. In March, Valio returned to the ice cream market with its Valio Jäätelöfabriikki premium ice creams after a 14-year break. In summer, the Valio ProFeel range of protein products was refreshed, and new protein snacks were introduced. Basic milk products continued downward, consistent with market trends.
Foreign operations produced a turnover of €669m ($755.8m). Valio’s growth continued especially in Sweden, the Baltics, Russia and China.
“In 2018, our turnover in Sweden grew by 10% thanks to added-value products, such as lactose-free products. Our turnover growth in the Chinese market was also strong. Valio remains an unknown brand in China, and it takes time to build recognition and create profitable growth. In Russia and the USA, we are focusing on improving operational profitability. Development in these markets in 2019 has remained along those lines,” Hurme said.
Climate challenge and animal welfare
Since the beginning of 2018, Valio began paying a sustainability bonus of 1% per liter of milk to dairy farmers that commit to, among other things, planned and preventive animal healthcare with a veterinarian.
The Intergovernmental Panel on Climate Change (IPCC) report, released in late 2018, brought global warming and the means to mitigate it to the forefront. In October 2018, Valio set an ambitious climate goal to cut milk’s carbon footprint to zero by 2035.
“We know the climate and environmental impacts of milk production, and we are actively working to reduce them,” Hurme said.
“My vision is that dairy farmers and other agricultural operators can come together and become a part of the solution to climate change and the future food supply. As we work towards reducing milk’s carbon footprint, we also want to introduce new points of view when assessing food production’s climate impacts: the nutrition angle should be considered when looking at the carbon footprint of food.”
Valio said 2019 has started positively; net sales growth early in the year has been fueled by, among other things, rising milk powder prices in the global market. Valio said its three-year project to improve cost-effectiveness and competitiveness and therefore the milk return, was started in 2018 and is proceeding as planned.