Company

Still on track

The business development of the Uelzena Group was significantly influenced by the Covid-19 pandemic in the 2020 reporting year. Fortunately, raw ingredient processing and production has been maintained since the start of the pandemic. However, the operating profit and the milk payout did not achieve the values of previous year – also to the economic disadvantage of the milk producers. Despite the difficult framework conditions, the company maintained its course and implemented the scheduled strategic measures.

Challenges for everyone

The 2020 financial year was associated with major challenges for all business divisions. From an economic perspective, the annual planning became invalid with the first lockdown. The prices of skimmed milk powder and cheese declined even further from an already poor starting position and the Instant Beverages business division recorded a veritable collapse after years of growth. In particular, the difficult market situation at the start of the pandemic with highly fluctuating raw material prices led to a drop in sales of five percent compared with the previous year. Our Group achieved sales of EUR 670 million in the reporting year and could not therefore build on the success of the previous year.

Declining milk payout

The overarching objective of Uelzena as a cooperative is to generate a sustainable and competitive milk payout price for its milk suppliers. This was not adequately achieved in the 2020 crisis year. Despite measures to improve the payout price such as cost savings and a reduction in the earnings target, the average payout was 31.57 euro cents per kilogram raw milk and therefore 2.22 euro cents below that of the previous year. The lower milk payout price, combined with increased operating equipment costs and increased environmental constraints, led to a persistently strained economic situation for the milk-producing companies.

Uelzena is participating in the “Initiative Milk” for collective industry communication with the aim of securing and increasing the added value of milk. It will continue to press ahead with investments in the future so that the Uelzena Group remains a successful market player in the long term, thereby helping to secure the livelihood of the dairy farms.

Expansion of capacities

About 18 months of construction from the initial ground work to handover of the finished and tested plant to production – that's our schedule for building the new spray-drying plant in Uelzen, which started in 2020. This state-of-the-art plant is specialised in spray drying vitamins and minerals, as well as other specific ingredients, to the highest quality requirements. “High Care” is therefore the highest priority when designing and equipping the new spray-drying plant for the contract drying division. This includes, for example, a strict hygiene zones concept with hygiene airlocks to separate the different areas, and cleaning concepts with separate washing and drying rooms to clean plant components. In energy terms, the plant will meet the latest standards and enable production that is both sustainable and conserves resources. A bridge with an automated conveyor belt connects the plant to the fully automated high-bay warehouse, which was commissioned in 2019. To relieve pressure on the spray drying towers at the Uelzen site, which are running at full capacity, the capacities in the instant beverage field were expanded in Ratzeburg. By installing an agglomeration plant to produce readily soluble and loose powdered products, the potential capacity is significantly increased.

Our investment in the new spray drying plant means that we will be able to comprehensively meet the growing requirements of our customers for technically sophisticated products. This investment decision should also help to further build on the good company results of recent years."

Jörn Dwehus, CEO, Uelzena

Partnership for product diversity and innovation

In the reporting year, Uelzena eG held a 50 % stake in Biohealth International GmbH (BHI) in Münchberg and has integrated its nutrineo-health food solutions (nutrineo) business division into the joint company. With this move, and as a contract manufacturer for brand products and retail, the partners wish to jointly serve the market with a broad spectrum of product solutions for nutritional supplements, sports nutrition, and dietary foods. In this joint venture, BHI and nutrineo share the clear common objective of further developing their position as one of the leading providers in the private label health market. Uelzena/nutrineo's production expertise and approach to high quality perfectly complement the flexibility and the broad product portfolio of BHI.

 

 
Outlook for 2021

The coronavirus pandemic will continue to impact Uelzena’s business development in 2021. However, the strategic projects to safeguard the sustainability of the Group will continue to be promoted. By investing in production facilities and expanding its product range, Uelzena is well equipped for the future. The aim is to build on the successful business development before the coronavirus outbreak and to generate a competitive milk payout for the milk producers.

 
 Context: Why the Uelzena Group needs a sustainable corporate strategy

The Uelzena Group is a dairy that faces one key challenge, namely the heavily fluctuating prices for its main products of milk powder, butter and cheese on national and international markets. The Group is responding to this challenge with a strategy of diversification and differentiation. The primary objective is to compensate for fluctuations in milk prices and to provide farmers with a competitive milk payout.

A lot depends on the business success of the Uelzena Group; the milk payout for the members as well as the employee wages, capital expenditure and taxes. It is therefore the company’s responsibility to maintain and expand corporate performance in the long run and to continuously invest into its future viability.

The Uelzena Group is a medium-sized cooperative enterprise with around 780 employees and consolidated sales of 670 million euros, processing almost 773 million kilograms of liquid dairy raw materials, 686 million kilograms of which is raw milk, at four production sites in northern Germany. The business purpose of Uelzena Group is the support of its member cooperatives and their milk producers. See also: Company profile

 Our management approach: Company

The main focus in the action field ‘company’ is economic performance. Systematic planning and hard work are the foundations for the business success of the Uelzena Group. In its efforts, the Group is supported by various management systems and processes such as strategic multi-year planning, risk management, compliance and management by targets.

Corporate management defines long-term goals, plans implementation measures and monitors their effectiveness. Norms and standards are constantly further developed and require adaptation in corporate management.

 

Our sustainable corporate strategy – overview on targets and measures

Corporate objectives

  • The Uelzena Group aims at generating a competitive milk payout for its members and guaranteeing reliable purchases
  • The goal is not short-term profits, but rather continual good corporate results
  • The independence of the Group must be maintained in the long term

Reliable and guaranteed sales

The Uelzena Group is committed to its members to reliably buy all of their milk. The company fulfils this obligation every year, again and again to 100 percent. This is achieved by ensuring that processing capacities and sales opportunities – i.e. access to customers - are always in line with the amount of raw milk delivered by the members. A medium-term strategy and investment plan (multi-year investment plan) was developed for the entire Uelzena Group that involved all business divisions, sites and executives. The plan includes the further development and modernisation of the corporate sites and the individual lines of business.

Balanced use of financial resources

Economic performance is expressed as the ability to generate appropriate revenues on the markets and to act cost-consciously. The generated revenues make it possible to pay the member companies and their milk producers a competitive milk price (operational costs) while at the same time strengthening equity with the surplus. It is important to have a sufficient amount of our own capital, otherwise the Uelzena Group, with growing capital requirements would have to rely disproportionately on external financing, for example, for investments. Added to that, the equity also acts as a buffer in difficult market situations.

Diversification

The Uelzena Group uses diversification to create several earning pillars that allow it to generate appropriate results. This enables the Group to better counterbalance unfavourable developments in market prices or sales in individual business or product fields. In total, it decreases the economic risk for the company and its member enterprises.

Differentiation

When it comes to products and services, the Uelzena Group is a strong partner to its customers.  The Group reliably takes care of the requirements from demanding customers and market segments. This creates added value for the customers and a basis for, very often, many years of partnership – this makes a significant difference in a competitive environment.

Strategy and management systems

The Uelzena Group has implemented various management systems in order to ensure proper management and control of the company. There are clearly defined work instructions, procedures, responsibilities and process descriptions in place:

  • Strategy and sustainability process
  • Systematic risk and crisis management
  • Quality management based on ISO9001 and a continuous improvement process
  • Energy management based on ISO 50001
  • A team responsible for occupational safety that reviews accidents and implements improvement measures
  • Reviews of IT systems in terms of data protection and privacy issues
  • Compliance officer who receives and checks information on violations of the Code of Conduct and, if necessary, initiates measures

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