In April 2008, just a few months ahead of the Lehman Brothers collapse and the outbreak of the crisis, the French company was taking a decisive step in its regional expansion, by taking over the LaDorna group from founder Jean Valvis.
The price paid by Lactalis, at a time when the value of Lactalis assets peaked, was estimated at the time at around EUR70-90 million, with the French company entering a market that did not then show signs of weakness, but did not escape the subsequent financial whirlwind.
Three years after this transaction, the management of Lactalis Romania says the shareholders may have wanted more, but that growth is a decent performance during years of crisis.
What happened after the takeover
The management is not generous with financial details, information on the investments made since takeover or technical information on the production facilities. However, company representatives say things have budged.
“The biggest impact and, in fact, our focus, has been to increase volumes sold and market share. While on the UHT milk segment we had a less than 30% market share in 2008, now we have over 40%. The growth was based largely on product launches. We tapped the functional milk segment, milk for children, and lactose-free milk,” says Ioana Moga, marketing manager of Lactalis Romania.
Another segment that has grown in the three years since takeover is the cheese segment, especially traditional Romanian telemea. “Volumes have doubled and we have become no. 2 on this segment. It is a very fragmented market. Around 40% is held by companies that have a share of less than 1%. The top three companies cover around 30% of the market,” Moga also said.
Production stays in Romania
The number of employees has been cut from 1,000 at the time of the takeover to 800 at present, and so has the number of production facilities, from six to five.
Lactalis says however that the company does not intend to move production outside Romania for a very simple reason.
“Milk production is connected to the collection area. We are working with more than 2,000 farms of all sizes, from which we source 60 million liters of milk every year. Everything we collect and use comes from Romania. In 2008 we used to process less than 50 million liters of milk per year,” says Dorel Radu, general manager of Lactalis Romania.
Sales are increasing
Although the company entered the market in an unfavorable context, when demand was dealt several blows (layoffs, a decline in the purchasing power and the VAT hike), Lactalis Romania representatives say their turnovers rose.
“All dairy product markets are either recording flat growth or negative growth, with the only market giving positive signals being the fresh products segment (yoghurts, for instance). There are no longer rises of 5%-20%. But since milk consumption is very low, the declines were also low. We are hoping for a recovery next year,” Moga added.
However, Lactalis Romania expects to achieve its growth target of 10% against 2010, when it posted turnover of EUR40 million, with growth of 5%-10% budgeted for next year.
Further development plans
The Lactalis management has mentioned three segments which it intends to develop in the coming period.
“UHT milk and telemea are the products we want to build and develop. At the telemea plant in Mihail Kogalniceanu we will focus on expansion, modernizing and retooling. The two product categories account for 80% of our sales,” said Radu, without providing details on the investments that will be made. Organic products (Bio) are another segment which Lactalis officials say has a significant growth potential.
Lactalis also wants to grow its exports. Currently just around 1%-2% of the company’s production is exported in countries such as Italy, Spain or the Czech Republic. “I would be happy to consolidate the business in Romania and export as much as we can, double the figures in the next few years,” Radu concluded.
(English version by Daniela Stoican)