The Campina Group

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The Campina Group

Hogeweg 9 NL-5301
LB Zaltbommel,
Netherlands
Telephone: (31) 418 571-300
Fax: (31) 418 571-582
Web site: http://www.campina.com

Cooperative
Incorporated: 1989 as Campina Melkunie; 2001 as Campina
Employees: 7,099
Sales: EUR 3.56 billion ($5 billion) (2004)
NAIC: 311513 Cheese Manufacturing; 311511 Fluid Milk Manufacturing; 311512 Creamery Butter Manufacturing; 311514 Dry, Condensed, and Evaporated Dairy Product Manufacturing; 311520 Ice Cream and Frozen Dessert Manufacturing

The Campina Group is one of Europe's leading producers of fresh milk and dairy products, including dairy drinks, cheeses, yogurts, quark (a type of farmer's cheese), vla (custard) desserts, and snacks and butter products. The Group is comprised of Zuivelcooperatie Campina u.a., an umbrella company, and Campina B.V., a farmer's cooperative with nearly 9,000 member-farmers, is the leading dairy group in the Netherlands and also one of the largest in the world. Campina operates in more than 100 countries worldwide, and holds significant positions in many foreign markets—such as the number three spot in Germany, the largest single European market, a strong position in Russia and Poland, and fast growing sales in Asia, and especially in Thailand and Vietnam. Germany is the company's largest market, followed closely by the Netherlands, with each accounting for approximately one-third of sales. Campina's operations are structured into five primary divisions: Campina Netherlands, Campina Germany, Campina International, Cheese and Butter, and Industrial Products. Campina's range of consumer brands includes Mona, Campina, Puddis, Landliebe, Smakija, Joyvalle, and organic dairy brands De Groene Koe and Zuiver Zuivel, among others. The Industrial Products division includes butter and other food ingredients for the industrial food industry, dairy derivatives (notably lactoferrin, protein hydrolysates, and lactose) produced by the company's DMV International operation for the pharmaceutical and health industries. The company's Polderland Dairy supplies the catering and trade professional market in the Netherlands. Campina also produces Valess, a dairy-based meat substitute. In 2004, Campina posted revenues of more than EUR 3.5 billion ($5 billion).

ORIGINS AND CONSOLIDATING THE DUTCH DAIRY INDUSTRY

The Dutch dairy industry remained at a local, artisan level until well into the second half of the 19th century. Dairy products were typically prepared on the farm, by the farmers themselves, using milk from their own herds. Farms at the time were almost wholly of the mixed usage variety, meaning that production levels at individual farms remained highly limited. The region's industrial development, the growing population, and the accompanying development of urban markets stimulated demand for larger quantities of dairy products. The first dairy factories in the Netherlands appeared only in the 1870s. Over the next decade, the number of butter and cheese factories grew rapidly. By the outbreak of World War I, the Netherlands boasted more than 1,200 dairy factories.

From the start, the Dutch dairy products industry was marked by the cooperative movement, which had swept across Europe during the 19th century. While the operation of cooperatives and mutual aid societies had become commonplace in a number of industries-such as the banking sector, in the form of British building societies, for example-the agricultural sector formed the true center of the cooperative movement. This was especially true in the Netherlands, and particularly in the country's dairy industry, where farmers' cooperatives remained the dominant force into the 21st century.

For most of the 20th century, these farmer cooperatives remained quite small, locally or at best regionally focused. The consolidation of the Dutch dairy sector began in earnest in the years following World War II, however. That period saw a Dutch population explosion, which in turn boosted demand for dairy products. Other innovations, such as new self-service supermarket formats and new refrigeration and packaging techniques, also stimulated demand for a wider variety of products. Meanwhile, the developing transportation and logistics industries made it possible to expand more brand names, and especially perishable dairy brands, to a national scale. At the same time, the industry saw the development of increasingly sophisticated production equipment, coupled with rising demands for greater hygiene and food security in the food production process. These factors combined to place demands for increasingly larger investments on the part of farmers and the farmer cooperatives.

The consolidation of the dairy industry began in earnest in the 1960s, and saw the creation of most of the major names in the Dutch dairy industry. Among these were Campina, formed as part of a large-scale merger among several cooperatives in the southern Netherlands region. Campina, named for the De Kempen region near Eindhoven, stemmed from that region's first cooperative, created in Tunglelroy in 1892. The merger of several cooperatives produced the De Kempen Cooperatives Dairy Association, based in Eindhoven, in 1947. That cooperative began marketing its dairy products under the Campina brand name.

Campina carried out a new large-scale merger in 1976, emerging as the dominant cooperative in its region. By the end of the decade, the cooperative had joined with another major dairy group, De Meijerij, based in Veghen, in the southeast of the Netherlands. That cooperative had been founded in 1926 by six farmer-members under the name Cooperatieve Centrale Melkproductenfabriek-De Meijerij. Over the next decades, and a number of mergers, the Meijerij group became its regions' major dairy cooperative, changing its name to De Melkindustrie Veghel (or DMV). Following the merger with Campina in 1979, the combined group became DMV Campina. While Campina gradually became the cooperative's flagship consumer brand, the DMV name became associated with the group's actively developing industrial ingredients operations. These included the production of butter and other dairy products for the professional catering and food processing industries, as well as such products as lactose (milk sugar) and protein hydrolysates, bioactive peptides, and lactoferrin.

The consolidation of the Dutch dairy sector was largely completed by the end of the 1980s, which saw the creation of two national-and international-giants, Friesland Coberco (later Friesland Foods), in the north, and Campina Melkunie, created through the 1989 merger of Campina with Melkunie Holland, in the west and south. Melkunie stemmed from one of the first Dutch dairy cooperatives, founded in 1872. Melkunie became a leading force in the consolidation of its region, becoming CMC/Melkunie by the end of the 1960s, and finally established as Melkunie Holland in 1979. By then, the cooperative had established itself on a national level, in large part through its highly popular Mona dessert brand, launched in 1970. By the end of the 1970s, Mona had become the largest dairy dessert brand in the Netherlands. By the mid-1980s, the company produced more than 100 million Mona-branded dairy items annually.

COMPANY PERSPECTIVES

Campina adds value to milk through being an entrepreneurial co-operative, making a difference in the total dairy-chain, our focus on consumer needs, and care for people. It's in our nature.

INTERNATIONAL DAIRY LEADER IN THE NEW CENTURY

With further growth limited in the Netherlands, Campina Melkunie turned to the international. The European market was then beginning its own consolidation, marked by a series of cross-border mergers and the appearance of a smaller number of large-scale, internationally operating dairy concerns. Germany and Belgium became natural markets for Campina Melkunie's expansion, especially given the central role of dairy cooperatives in these markets as well. The company's first acquisition came in 1991, with the purchase of Comelco, in Belgium. This acquisition was followed two years later by the purchase of Sudmilch AG, based in Stuttgart, Germany. In 1997, the company expanded its presence in Germany, forming Tuffi Campina, a joint venture with Miclhwerke Koln/Wuppertal. Germany quickly grew into Campina Melkunie's largest market, outstripping even its sales at home in the Netherlands. At the same time, the cooperative eyed further expansion, now beyond Western Europe, buying up two dairy concerns, Bacha and Tojo, in Poland in 1997.

Back at home, Campina Melkunie boosted its presence on the liquid milk market with the acquisition of those operations from the Dutch company Menken van Grieken in 1997. The cooperative later took over two more parts of Menken, Menken Dairy Food and Menken Polderland, both in 1998. In that same year, the company also added an organic dairy products component in the Netherlands through the acquisition of De Vereeniging. Campina Melkunie returned to Germany that year, adding Kutel, based in Essen. The following year, the company's Tuffi Campina joint venture expanded as well, merging with Berlin's Emzett.

During this period, the group's industrial ingredients operations, grouped under DMV International since 1992, had expanded strongly as well. The company entered the United States, buying up Deltown Chumurgic, in 1991, in order to develop and produce protein hydrolysates and bioactive peptides. DMV turned to Germany in 1998, buying up ingredients specialist Nupron. Into the 2000s, DMV added a new lactoferrin joint venture in the United States, in partnership with Farmland National Beef Packing.

Campina Melkunie's expansion returned to Eastern Europe in 2000, as the company traveled to Russia to open a yogurt factory there. Closer to home, the cooperative was joined by two new cooperative members, Milchwerke Koln/Wupertal, in Germany, and Belgium's Milchwerke Koln/Wuppertal. That merger also gave the cooperative full control of the Tuffi Campina joint venture.

Faced with shrinking profits and a dwindling membership base at the end of the 1990s, the cooperative, then the ninth-largest dairy concern in the world, underwent a thorough restructuring. Completed in 2001, the exercise involved a streamlining of the group's brand portfolio, and a new name for the cooperative itself, which became simply Campina. The following year, Campina merged its German holdings into a single entity as well, Campina GmbH. That subsidiary expanded again in 2003, acquiring German desserts brand Mokerei H. Strothmann, based in Gutersloh.

Into the mid-2000s, Campina continued to explore new markets. The company entered the Asian market, buying up the Thai operations of failed Italian dairy group Parmalat in 2004, and opening a sales office in Vietnam that year as well. Also in 2004, Campina directly entered Greece, where it bought up its distribution partner there, Quality Brands International.

KEY DATES

1872:: Creation of a dairy cooperative that is a forerunner to Melkunie.
1892:: Creation of first dairy cooperative in southern region, a forerunner to Campina.
1926:: Creation of farmers' cooperative in Meijerij region, which later becomes De Melkindustrie Veghel (DMV).
1947:: Mergers form De Kempen Cooperatives Dairy Association, which launches Campina brand, in Eindhoven.
1964:: Campina formally established through new large-scale merger.
1970:: CMC/Melkunie launches Mona dairy dessert brand.
1979:: Merger of Campina and DMV forms DMV Campina.
1980:: New merger establishes Melkunie Holland.
1989:: DMV Campina and Melkunie Holland merge and form Campina Melkunie.
1991:: Company acquires Comelco in Belgium as part of international expansion effort.
1993:: Company enters German market through purchase of majority control of Sudmilch in Stuttgart.
1997:: The Polish market is penetrated with the acquisition of Bacha and Tojo.
1998:: An organic dairy operation, De Vereeniging, in the Netherlands is acquired.
2000:: Campina opens yogurt plant in Russia.
2001:: Corporate restructuring.
2004:: Company enters Thailand and Vietnam.

Campina also targeted a more significant horizon in 2004 when it announced that it had entered merger talks with Nordic dairy giant Arla Foods. The merger between the two cooperatives proposed to create the leading European dairy group and one of the top three dairy groups worldwide. By 2005, however, the two companies had failed to agree to terms of a merger and instead agreed to call off the talks.

Forced to go it alone, Campina sought new expansion through international opportunities. In 2005, the company acquired Aveve Zuivel, based in Belgium, which specialized in milk fat production. Campina also boosted its presence in its Asian markets. By the end of 2005, the company had formed a production joint venture with Vinamilk, the largest dairy group in Vietnam. In January 2006, Campina turned to Thailand, where it formed another joint venture, now with Thai Dairy Industries. Already a major force on the global dairy market, Campina had not ruled out a future merger with Arla; both sides acknowledged an interest in resuming merger talks as early as in 2007.

PRINCIPAL SUBSIDIARIES

Campina BV; Zuivelcoperatie Campina u.a.

PRINCIPAL DIVISIONS

Campina Netherlands; Campina Germany; Consumer Products Europe; Cheese & Butter; Industrial Products.

PRINCIPAL COMPETITORS

Nestle SA; Danone SA; Arla Foods amba; Lactalis; Unilever; Royal Friesland Foods NV; Bongrain SA; Humana Milchunion eG; NORDMILCH eG; Koninklijke Wessanen NV; Glanbia PLC.