GRANAROLO GROUP DIRECTORS` REPORT 2014 1,6Mb

Transcription

(Translation from the Italian original which remains the definitive version)
Directors’ report
at 31 December 2014
Granarolo Group
2014 Directors’ report
Dear Shareholders,
Welcome to the shareholders’ meeting called to approve the financial statements as at and for the year ended 31
December 2014.
In keeping with custom, in addition to Granarolo S.p.A.’s separate financial statements, we are also presenting the
group’s consolidated financial statements, which give a more complete view of the results of operations in the year
ended 31 December 2014.
One single directors’ report is presented for Granarolo S.p.A.’s separate financial statements and the group’s
consolidated financial statements, as permitted by article 1.2.d) of Legislative decree no. 32 of 2 February 2007.
International, European and Italian scenario
As predicted, economic activity sharply took off in the United States, outperforming forecasts. However, short- and
medium-term projections for the global economy remain uncertain, due to the persistent weakness of the Eurozone and
Japan, China’s continued slowdown and the sudden downturn in Russia. The sharp fall in the price of oil, triggered by
growth in supply coupled with weak demand, may help sustain growth, but could put the financial stability of exporting
countries at risk.
The geo-political scenario, which is in ongoing and worrisome evolution, and the many conflicts in progress around the
globe instil a social malaise that infects markets, weighing down on confidence and, accordingly, demand and propensity
to invest.
Growth in the Eurozone is still very weak, with near deflation and unemployment levels that prevent recovery and
progressively weaken social cohesion.
In Italy, growth in consumption has returned in the past few quarters at very limited and varying rates, in line with the
trend in available income, thanks to the government’s measures. However, its contribution to economic growth has been
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offset by the decline in investments, slowed by the substantial uncertainty about prospective demand and difficulties in
the construction industry. In Italy, GDP has continuously decreased since 2008 and continues to fall, in a nearly
unprecedented downwards spiral.
In 2014, Italy’s GDP returned to 2000 levels and its GDP per capita to the 1996 figure, while industrial production was
back to 1986 levels and investments to those seen in 1994. The available income of households was at the levels
registered in the mid-Eighties, real estate production back to the Seventies, and savings had fallen by 15% (setting the
record for Europe). The past five years have seen the number of unemployed workers grow by 1.8 million, and 750,000
of them are under 34 years old, while 700,000 are over 45. Three million people are living under the poverty threshold
and one-fifth of small- to medium-size companies have gone out of business.
The tax burden has peaked, rising, according to official data, from 41.3% in 2000 to 45.3% in 2013, and is nearly 5%
higher than the average tax burden in the rest of Europe.
Italy is in dire need of deep, courageous political measures.
Labour, personal income, the structure of public spending and fighting growing inequality are priorities.
The inefficiencies in the country’s economic system, higher energy and transport costs, access to credit and its cost of
credit, the tax burden and significant red tape are the albatross around the country’s neck, holding it back from recovery.
Stability and governability are the conditions necessary for structural and institutional reforms that cannot be put off any
longer.
In this challenge, which may also involve strain, it is up to politicians, associations and businesses alike to bravely begin
some revolutionary rethinking.
It is also up to us.
Europe must become our frame of reference, the crossroads for our relationships, our domestic market: it is in Europe
where we must foster increasingly significant internationalisation processes and trade initiatives with other countries. It is
from Europe that we must reach out to new continents, armed with our best savoir faire.
In this way, 2014 marked a turnaround for Granarolo, the year in which it consolidated relationships with ICE, ISA and
the Ministry of Economic Development. It was the year of joint missions with the government in Europe and China, the
year in which the Prime Minister confirmed he would attend the opening of our new production site, to deliver remarks on
Italy’s growth.
This growth entails more responsibility for our group, which is seen as an engine for the country’s agro-food industry.
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The Italian livestock chain and “dual milk production limits”
Considering institutions’ increased willingness to listen and tangibly respond to Italian businesses’ requests than in the
past, we have sent various requests to the Ministry of Agricultural Policies and the Prime Minister. First and foremost, we
need to manage the risk of fluctuations in the price of milk. If we want the Italian livestock chain to survive (Italy
processes 11 million tonnes of milk, with 57% used for aged/protected designation of origin cheese, for which Italy is
famous and imitated around the world), Italy must adopt structural measures to protect dairy farmers from milk price
volatility, especially now that the milk production limits are about to end. Otherwise, businesses that have invested in
high quality, genuinely traditional products, like Granlatte-Granarolo dairy farmers, will find themselves competing with
the lower hand against approved European milk that will soon flood the Italian market at very low prices. The nearness of
cowsheds and sites and the special characteristics of the milk produced by animals fed in a specific way are what makes
our livestock heritage so special. Granarolo has endeavoured to protect this heritage, and will continue to do so,
petitioning regional and national institutions for their direct contribution to safeguard and modernise the chain. Resources
must be directed towards it. With increasingly sharp and sudden fluctuations in raw material prices, it is now crucial to
create tools that will protect income. Our country cannot sacrifice its livestock chain, and the thousands of people who
work for it, on the altar of the free market. Now is the time to form a mandatory interprofessional panel representing
farmers, industry, cooperatives and distributors to prepare a medium-term plan focused on safeguarding the chain in our
country’s interests. Our group collects and transforms just under 5% of Italy’s milk, which confirms the excessive
fragmentation of the sector under the current production and industrial system, but we are the only nation-wide, non-local
player to adopt this model. We will continue to play an active role in the debate between farmers, transformers,
distributors and institutions.
Granarolo today: 2014 results and future challenges
A snapshot of the Granlatte-Granarolo Group today shows:
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1,000 dairy farmers in 14 regions of Italy sending fresh milk to Granarolo’s sites through the country’s largest milk
cooperative. We process 850 million litres of milk per year;
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10 sites in seven regions of Italy (two in Emilia Romagna, two in Lombardy, two in Sardinia, one in Tuscany, one in
Lazio, one in Puglia and one in Calabria). This might seem like an excessively large number of factories when our
European competitors generate much more turnover with only one or two sites, but we believe milk should be
packaged and consumed near the cows where it is produced to ensure that it stays fresh. The quality of regional
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production cannot be migrated. Ours is the shortest chain, a model that brings producers and consumers closer
together, without intermediaries;
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two sites in France;
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one donated human milk bank in Bologna serving the S. Orsola and Maggiore hospitals and, in the near future, the
Ferrara hospital as well;
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2,074 employees (2009: 1,537). Despite the economic crisis, we have grown;
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satellite activities managed by some 15,000 families whose income is based on what we do.
In 2014, we posted turnover of over one billion Euros, up 4.8% on 2013, improving leverage and reducing debt. We were
only able to achieve this result by taking two crucial steps: we have become an international business (Granarolo
International is the company that currently heads all the Group’s foreign activities, with an export target of 35% for 2016 –
in two years, the share of exports has grown from 4% to 16%) and we have innovated, partly in order to support exports.
These steps entailed acquiring businesses and setting up new companies.
Amalattea Italia
Amalattea S.p.A. is a leading Italian producer and vendor of goat milk and derivatives. Amalattea Italia S.r.l., which
leases Amalattea S.p.A.’s production and commercial business unit, affords us access to a market segment, i.e., goat
milk, undergoing constant growth, particularly abroad, thanks to the favourable trend in consumption and the rise in food
intolerance. It also collaborates with the Sardinia regional authorities and other regional authorities in central and
southern Italy to develop a national goat milk chain, drawing on the Granlatte chain’s significant experience.
Pinzani 1969
On 16 October 2014, Pinzani 1969 S.r.l. (wholly owned by Granarolo S.p.A.) leaseed Caseificio G. Pinzani S.r.l.’s
business unit. Founded in 1969, Caseificio G. Pinzani specialises in the production of “raw milk” pecorino cheese and, as
it has been able to adopt modern production technologies while upholding the traditions of Siena’s art of cheese-making,
its excellent, high quality products have a wide following abroad.
Centrale del gusto
This is the first direct store for the Granarolo Group, which is interested in exploring direct sales on the market.
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Business Abroad: China
The Group’s activities on the international front were also dynamic. In 2014, Granarolo S.p.A. was part of a delegation of
Italian companies at the first Italian/Chinese business forum, along with the Prime Minister. Today, Granarolo is one of
Italy’s largest dairy exporters to China, especially for UHT (ultra high temperature) milk, mascarpone and cheese
(mozzarella). The sales branch in Shanghai became operational in January 2015, a direct presence that will further boost
commercial development on the Chinese and East Asian markets. After completing a tough evaluation process, the
Chinese authorities recently accredited the Group to export baby formula (the only Italian company to receive
accreditation). In this way, China has recognised the excellent quality of the Granarolo Group, in a country characterised
by its substantial demand for food products (milk and derivatives) that meet high food safety standards.
Plans for 2015
In early 2015, we completed another two transactions to which we had devoted much of 2014.
Gennari
The first new development is the lease of Gennari Vittorio S.p.A.’s commercial and production business unit. Gennari
Vittorio S.p.A. is a Parma-based company that boasts a longstanding tradition in the production of Parmigiano Reggiano,
Grana Padano and Prosciutto di Parma DOP, which will generate additional turnover of roughly €40 million. We will work
with the Gennari family to export these excellent products abroad.
Granarolo Chile
The second announcements relates to the set-up of Granarolo Chile S.p.A. (“Sociedad por Acciones”), an initial launch
pad for the South American market. Granarolo Chile plans to acquire 90% of Bioleche Lacteos, the historic Chilean
cooperative of 300 dairy farmers with a cheese production site and a brand that is well positioned on the market. This
transaction will enable Granarolo to achieve, once it is fully up and running within four to five years, turnover of €27
million through the sale of Chilean cheese and products imported from Italy. Latin America is a growing market, with
consumer habits that are similar to those in Italy. Indeed, we are exploring other countries in this area.
In addition to participating in the 11 major food fairs around the world, we have scheduled two important events for 2015:
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Expo 2015
EXPO will shine the spotlight on Italy’s agro-food heritage and Granarolo plans to play a key role, representing the Italian
milk chain at the Italian Pavilion. This is a unique opportunity for the country and for companies like Granarolo that are
developing abroad as ambassadors of good Italian food.
FICO: Fabbrica Italiana Contadina of Bologna
Once the doors to the Expo close, FICO’s open. It is the world’s largest centre for the celebration of Italian agro-food
products. FICO will be an important part of the City of Food, Bologna, and, above all, it will help affirm the new food
economy district.
One of Italy’s structural limits is that its businesses are medium-sized, which holds them back from being able to access
financial instruments, research and development and, accordingly, non-domestic markets.
From 2009 to date, we have invested €180 million in sites and €100 million in acquisitions, substantial amounts, without
any public grants. Granarolo aims to carry Italian agro-food products out into the world, but it must grow more.
We can grow internally, through acquisitions, through partnerships and through combinations.
In turn, the government must tenaciously carry on the reform policies it has adopted to modernise our country and close
the gap that divides us from the rest of Europe. Although the Bank of Italy’s forecasts do not leave much room for hope
(GDP +0.4% in 2015), 2015 could be a milestone year for the Group.
We need to do business in a country that works; we want to be part of a country that wants to survive and excel, as we
are convinced we will.
Bologna, 10 March 2015
Gianpiero Calzolari
(signed on the original)
Chairman of the board of directors
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CORPORATE GOVERNANCE
Corporate governance structure and organisation
Granarolo S.p.A. has a corporate governance structure that is based on the recommendations and rules established in
the code of conduct for listed companies, which the company upholds although it is not publicly listed, in order to ensure
the utmost corporate governance transparency and efficiency.
Granarolo S.p.A. adopts the “traditional method” of administration and control, as it has the following main management
bodies: board of directors, board of statutory auditors and the shareholders’ meetings.
The company has appointed the independent auditors KPMG S.p.A. to perform the legally-required audit.
Board of directors
On 4 April 2013, the shareholders renewed the company’s board of directors for a three-year term, i.e., until the
shareholders’ meeting called to approve the financial statements as at and for the year ending 31 December 2015.
The board of directors consists of 11 members, including one executive member (the Chairman holding powers) and 10
non-executive members.
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Board of directors
Gianpiero
Danio
Camillo
Adonis
Giuseppe
Michele
Giovanni
Giovanni
Amedeo Giovanni Maria
Angelo
Vittorio
Calzolari
Federici
Nola
Bettoni
Dotti
Di Marziantonio
Giambi
La Croce
Nodari
Perrone
Vignoli
Chairman
Joint Deputy Chairman
Deputy Chairman
Director
Director
Director
Director
Director
Director
Director
Director
Pursuant to the by-laws, the board of directors has the widest powers of ordinary and extraordinary management of the
company. The board meets at least once each quarter. In 2014, it met eight times.
To effectively and efficiently manage the company, the board has given the Chairman ordinary management powers
without expenditure limits to be exercised in the scope of the annual budget approved by the board of directors and in the
implementation of such budget, but the board reserves the right to approve the budget each year and indicate, when the
annual budget is being approved, which ordinary and extraordinary transactions included in the budget must be
submitted to the board for examination and specific approval before the decisions implementing such transactions during
the year may be made.
Committees
The board has set up two committees with advisory and proposal duties, acting on a preliminary basis – by preparing
proposals, recommendations and opinions – to enable the board to make more knowledgeable decisions:
Control and risk committee
This committee is composed of three non-executive directors, the majority of whom are independent: Giovanni La Croce,
as Chairman, with adequate accounting and financial experience, Vittorio Vignoli and Adonis Bettoni.
The internal control committee was set up to support, by carrying out preliminary, advisory and proposal activities, the
evaluations and decisions of the board of directors concerning the internal control and risk management system and
periodic financial reports. The committee also supervises internal audit activities, and the committee may ask the Internal
Audit Department to audit specific operational areas.
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Remuneration committee
This committee is composed of three non-executive directors, the majority of whom are independent: Giovanni La Croce,
as Chairman, with adequate financial experience, Vittorio Vignoli and Adonis Bettoni.
The remuneration committee is responsible for submitting proposals to the board of directors for the remuneration of
directors and key managers, as indicated in the code of conduct.
Board of statutory auditors
On 11 May 2012, the shareholders renewed the term of the board of statutory auditors, appointing three standing
statutory auditors and two alternate statutory auditors, with a three-year term of office, i.e., until the shareholders’
meeting called to approve the financial statements as at and for the year ended 31 December 2014.
Board of statutory auditors
Roberto
Chiusoli
Chiara
Ragazzi
Franco
Colombo
Paolo
Foschini
Enzo
Grimandi
Chairman
Standing statutory auditor
Standing statutory auditor
Alternate statutory auditor
Alternate statutory auditor
The board of statutory auditors monitors compliance with the law, the by-laws and the principles of proper administration
and, in particular, the adequacy of the company’s organisational, administrative and accounting system and that it
functions properly.
All statutory auditors are chartered accountants registered with the specific roll.
Supervisory body pursuant to Legislative decree no. 231
On 23 April 2013, the board of directors renewed the term of the company’s supervisory body for another three-year term
from 2013 to 2015, i.e., until the shareholders’ meeting called to approve the financial statements as at and for the year
ending 31 December 2015, appointing:
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the lawyer Pierluigi Morara, as an external member, serving as Chairman;
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Vittorio Zambrini, Director for quality, innovation, safety and the environment;
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Francesca De Santis, Manager of Governance, Risk and Compliance.
In 2014, the supervisory body held eight meetings.
Its activities were focused on:
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monitoring that the 231 Model functioned and was complied with, by examining information received as part of
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information flows which the relevant departments send periodically to the supervisory body and by conducing
the control activities established in the 2014 audit plan approved by the board of directors on 25 February 2014;
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defining the 2015 audit plan pursuant to Legislative decree no. 231, in the light of the risk mapping (“Sensitive
process/activity map”) in place.
Organisational chart
The Granarolo Group’s organisational chart at 31 December 2014, which has not changed since 2013, is shown below:
Internal control and risk management system
The Granarolo Group is aware that adopting an efficient corporate governance structure helps make the business more
competitive and its development more sustainable.
Indeed, the corporate governance principles, by structuring roles and responsibilities and developing an adequate control
system, ensure that knowledgeable management decisions are made and that business risk management and
monitoring are effective: in this way, the Group can limit risk management costs, thereby generating more profit and
value for all stakeholders.
The correct functioning and sound business performance of Granarolo is ensured through an internal control system that
is both organised and managed independently by the operational departments and centrally by the Group. In particular,
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the control system consists of three levels:
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first level controls: these are the controls inherent to the direct operational processes that ensure transactions
are performed correctly. They require specific expertise in the business, risks and/or relevant legislation and are
assigned to the operational functions or are part of the company’s daily operational procedures;
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second level controls: these controls are assigned to departments that do not carry out operations (Safety and
the environment; Quality assurance and food safety; Management control; etc.) to monitor and manage typical
business risks (e.g., operational, financial, market and compliance risks);
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third level controls: these controls are performed by a department that is independent of the operational
departments (Internal Audit), which conducts general checks of the structure and functioning of internal controls.
The Internal Audit Department reports to the Chairman of the board of directors and functionally to the control and risk
committee, which checks that this department is autonomous, effective and efficient. The committee may ask the Internal
Audit Department to perform checks on specific operational areas.
Internal audit activities are conducted in accordance with international standards for internal auditing.
Internal audit activities in 2014 entailed the checks established in the audit plan approved by the board of directors and
prepared taking a methodological approach based on audits integrating material business control objectives for the
scope of analysis (operational and financial). The audit showed critical areas that were discussed with management and
an action plan was defined to eliminate them.
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The Internal Audit Department routinely monitors and controls the correct and timely implementation of the action plan
through follow-up work. It periodically reports the outcome of its activities and the progress of action plans to senior
management, the Internal Control and Risk Committee and the board of statutory auditors.
The organisational management model
After Legislative decree no. 231/2001 took effect, the parent adopted the “Organisational, management and control
model” (the “231 model”) to prevent the crimes covered by such legislation, and it implemented a code of ethics that
establishes guidelines for everyone acting in its name and on its behalf in the management of relationships with the
Group’s main stakeholders.
The creation of integrated corporate bodies, in accordance with the code of conduct and the code of ethics, makes it
possible to best meet all stakeholders’ expectations (including employees, consumers, customers and the community in
which Granarolo operates, foremost).
The board of directors approved the Model on 29 March 2005 and it was revised and updated for compliance with
legislation in place with the resolutions of 16 November 2010, 14 July 2011, 25 January 2013 and 29 November 2013.
Granarolo also implements and manages all the necessary activities to mitigate main business risks.
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THE GRANAROLO GROUP
The ultimate parent Granlatte Soc. Coop. Agricola heads the Granarolo Group and together they constitute Italy’s largest
milk chain directly owned by the associated farm producers as a cooperative.
Granlatte and the associated cooperatives supply Granarolo S.p.A. first with the milk produced by around
1,000 associated members.
Granlatte works to encourage and develop the collaboration of milk-producing agricultural and livestock businesses
operational in Italy and to improve the quality of their milk through organisational structures that can efficiently and
effectively manage activities.
Granarolo S.p.A.
Granarolo S.p.A. is the industrial and commercial parent. It operates through sites in Bologna, Soliera (Modena),
Pasturago di Vernate (Milan), Anzio (Rome), Gioia del Colle (Bari) and Usmate Velate (Monza Brianza), the site in Sestu
(Cagliari) managed by its subsidiary Casearia Podda S.r.l., the site in Castrovillari (Cosenza) managed by its subsidiary
Calabrialatte S.p.A, the site in Volterra (Pisa) managed by its subsidiary Pinzani 1969 S.r.l. and the site in Villagrande
Strisaili (Ogliastra) managed by Amalattea Italia S.r.l., in addition to the CIPF Codipal Group’s sites in France: Saint
Genix sur Guiers and Campagne-lès Wardrecques.
In particular, production is organised as follows:
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fresh milk:
Bologna, Anzio, Gioia del Colle, Pasturago di Vernate, Sestu and Castrovillari;
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UHT milk:
Soliera, Gioia del Colle and Pasturago di Vernate;
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soft cheese:
Bologna, Usmate Velate, Castrovillari, Volterra and Villagrande Strisaili (Italy) and
Saint Genix sur Guiers (France);
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hard cheese:
Sestu, Castrovillari, Volterra and Villagrande Strisaili (Italy), Campagne-lès
Wardrecques (France);
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yogurt and desserts:
Pasturago di Vernate and Sestu.
The sites supply the Group’s direct and indirect distribution centres. The Group serves over 45,000 delivery points.
Granarolo S.p.A. manages and coordinates the commercial, management and financial policies of its subsidiaries. The
legislative and economic conditions of this arrangement are specified in an intragroup regulation that is approved each
year by the decision-making bodies of each group company.
The ultimate parent, Granlatte Soc. Coop. Agricola, does not act as manager and coordinator, because its role is merely
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to provide guidance and services mainly to its associates.
Zeroquattro S.r.l.
Zeroquattro S.r.l. provides integrated logistics services and is specialised in the cold chain (0°-4°), handling, transporting,
distributing and selling products at controlled temperatures and providing services to support the sale of food products.
As general agent for Granarolo S.p.A. in Italy, this company also performs door-to-door sales and related activities, such
as taking orders and payment collection from customers.
This company is 81.96% owned by Granarolo S.p.A..
An agreement is in place with a non-controlling owner whereby Granarolo S.p.A. has undertaken to buy the former’s
quotas within a set date at a set price. This is why these quotas have been considered as acquired by the parent
Granarolo S.p.A. in the consolidated financial statements, in accordance with IAS 32, and a financial liability has been
recognised equal to the estimated, discounted consideration.
Furthermore, on 31 July 2014, Zeroquattro S.r.l.’s quotaholders approved the plan for the partial proportional demerger
to the newco Zeroquattro Logistica S.r.l., as described in more detail below.
Zeroquattro Logistica S.r.l.
Zeroquattro Logistica S.r.l. was set up on 31 July 2014 and is based in Bologna. It will be the beneficiary of the partial
proportional demerger of Zeroquattro S.r.l.’s logistics business with effect as from 1 January 2015.
The planned demerger is part of Zeroquattro S.r.l.’s streamlining and restructuring project to create a separate structure
that can independently perform porterage and integrated logistics services in Italy and abroad as well as domestic and
international shipments and transport.
This company is 81.96% owned by Granarolo S.p.A..
Calabrialatte S.p.A.
Calabrialatte conducts commercial and production activities on Calabria’s regional market.
The company leases the industrial business unit of Agroalimentare Assolac, a farming cooperative and owner of 50% of
Calabrialatte S.p.A.. The business unit is based at the production site in Castrovillari (CS), where milk and cheese
products are made.
Granarolo S.p.A. owns 50% of the company, with shareholders’ agreements that, pursuant to article 2359 of the Italian
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Civil Code and IAS 27, entail Calabrialatte S.p.A.’s recognition as a subsidiary.
Casearia Podda S.r.l.
Based in Sestu (Cagliari), Casearia Podda S.r.l. produces and distributes food, milk and dairy products in Sardinia, and
specialises in the production of Pecorino Sardo D.O.P. and Pecorino Romano D.O.P..
This company is 65% owned by Granarolo S.p.A..
Centrale del Gusto S.r.l.
Based in Bologna, Centrale del Gusto S.r.l.’s core business is the preparation and serving of food and beverages and the
take-away sale of breakfast, lunch, ice cream, confectionary and chocolate products.
Amalattea Italia S.r.l.
Amalattea Italia S.r.l. has signed a business unit lease agreement for Amalattea S.p.A.’s commercial and production
business unit, with effect as from 1 August 2014.
Based in Rome, this company processes, produces and sells goat milk and derivatives with an operational site in
Villagrande Strisaili (OG).
Granarolo S.p.A. owns 50% of the company, with quotaholders’ agreements that, pursuant to article 2359 of the Italian
Civil Code and IAS 27, entail Amalattea Italia S.r.l.’s recognition as a subsidiary.
Pinzani 1969 S.r.l.
With registered office in Bologna, Pinzani 1969 was set up to lease the commercial and production business unit of
Caseificio G. Pinzani S.r.l., operating in the processing, production and sale of sheep milk and sheep cheese products,
specialised in the production of raw milk pecorino.
Gennari Italia S.r.l.
With its registered office in Bologna, Via Cadriano 27/2 and administrative office in Parma, Via Emilio Lepido 68, Gennari
Italia S.r.l. was set up to lease, as from 1 January 2015, Gennari Vittorio S.p.A.’s commercial and production business
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unit consisting of cutting Parmigiano Reggiano and Grana Padano and dividing the cheese into portions and processing
and ageing Prosciutto di Parma D.O.P..
Granarolo International S.r.l.
Based in Bologna, Granarolo International S.r.l.’s main activity is acquiring investments in other companies in Italy and
abroad. Particularly, it will act as a vehicle for all the Granarolo Group’s activities on foreign markets.
Granarolo Iberica S.L.
Based in Barcelona (Spain), Granarolo Iberica S.L. distributes dairy products in Spain and Portugal.
This company is 100% owned by Granarolo International S.p.A..
Granarolo UK LTD.
Based in Chelmsford, Essex (UK), Granarolo UK LTD. distributes dairy products in the UK and Ireland.
S.A.S. Compagnie du Forum
Based in Metz (France), S.A.S. Compagnie du Forum is the holding company and parent of the CIPF Codipal Group,
and was included in Granarolo Group’s consolidation scope in March 2013.
On 27 June 2014, implementing the agreements signed in 2013 with non-controlling owners, Granarolo International
S.r.l. acquired the remaining 30% of S.A.S. Compagnie du Forum’s quotas, and now wholly owns the Codipal Group’s
holding company.
S.A.S. CIPF Codipal
Based in Metz (France), S.A.S. CIPF Codipal sells dairy products in France and is specialised in high-quality Italian
products sold under the Casa Azzurra brand.
The company is 100% owned by S.A.S. Compagnie du Forum.
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S.A.S. Les Fromagers de Saint Omer
Based in Campagne-lès Wardrecques (France), S.A.S. Les Fromagers de Saint Omerè specialises in the processing of
cheese products.
S.A.S. Les Fromagers de Sainte Colombe
Based in Saint Genix sur Guiers (France), S.A.S. Les Fromagers de Sainte Colombe specialises in the production of
cheeses typical of the Savoie region.
S.A.S. Compagnie Fromagère
Based in Metz (France), S.A.S. Compagnie Fromagère owns the Maison Bernard brand of typical French cheese. The
company is dormant at 31 December 2014.
S.C.I. Charmi
Based in Metz (France), S.C.I. Charmi is a real estate company. At 31 December 2014, it owns the property in Metz,
Place Saint Thiebault, where S.A.S. Compagnie du Forum and S.A.S. CIPF Codipal are based.
Parma Frais S.A.R.L.
Based in Luxembourg (Luxembourg), Parma Frais S.A.R.L. is mainly active in the trading of goods.
Granarolo Chile S.p.A. (“Sociedad por Acciones”)
Based in Las Condes (Chile), Granarolo Chile S.p.A.’s core business is the sale of dairy products in Chile and South
America. It began operating in January 2015.
18
Granarolo Group
Other investments in companies not included in the consolidation scope
Granarolo S.p.A. owns 100% of Sitia-Yomo S.r.l. in liquidation and court-approved creditors’ settlement, which in turn
owns 100% of Caseificio Fratelli Merlo S.r.l. in liquidation and court-approved creditors’ settlement and 100% of
Caseificio Pasquale Pettinicchio S.r.l. in liquidation and court-approved creditors’ settlement.
19
Granarolo Group
DISTRIBUTION ANALYSIS
Development of distribution in Italy
In 2014, modern trade (hypermarkets, supermarkets, self-service shops and discount stores) registered a decrease of
approximately €800 million in turnover, which came to €92.1 billion (-0.9% on 2013) with a concurrent downsizing in the
number of stores, now at 27,966 (-484 on 2013). All product segments distributed through modern trade organisations
are down. The performance of fast moving consumer goods (€57.6 billion, -0.5% on 2013) and products sold by weight
(€26.4 billion, -1.1% on 2013) saw limited losses, while the decline in non-food products is the greatest (€8.1 billion, 3.6% on 2013).
Supermarkets constitute the main distribution channel, with a share of 41.6%, slightly up (+0.3% on 2013). Hypermarkets
are steady at 29.1% (+0.0% compared to 2013). Self-service shops have slipped, accounting for a share of 12.1% (0.4% on 2013), while the growth in discount stores has slowed, and they now stand at 17.2% (+0.1% on 2013). The
group purchasing orgnaisation with the largest market share is Centrale Italiana (which comprises Coop Italia, Sigma,
Despar, Il Gigante and Disco Verde). However, Centrale Italiana underwent winding up in late 2014. The second largest
is ESD (Selex, Sun and Agorà), with Sicon ranked third (Conad and Rewe).
Purchase Group
Centrale Italiana
ESD Italia
Sicon
Auchan and Crai
Esselunga
Market share
26.4%
14.4%
13.7%
10.8%
10.0%
Among the groups, Coop Italia remains market leader, Conad ranks second and Esselunga third.
Purchase Group
Market share
Coop Italia
16.8%
Conad
12.7%
Esselunga
10.0%
Selex Commerciale
9.3%
Auchan Group
8.6%
Carrefour Italia Group
6.8%
Despar Servizi
4.5%
Sigma
3.8%
Finiper
3.0%
Sun Group
2.7%
No. POS
1,589
2,656
146
1,892
1,681
1,097
1,349
1,852
250
453
Source: GNLC Nielsen data - July 2014
20
Granarolo Group
PERFORMANCE OF THE GROUP’S MARKETS AND SALES
For a better understanding of the data in this section, we would like to specify that research institutes are only able to
monitor sales reported by modern trade. All information on the size and performance of markets refers to hypermarkets,
1
supermarkets and grocery stores .
Accordingly, sales via other channels (normal trade and the hotel, restaurant and catering segment) are not monitored. In
reading market performance data, it should be noted that changes could arise as a result of a shift in consumption from
one channel to another, and not due to an actual change in consumption.
THE ITALIAN MARKET
Fresh milk
Market performance
In 2014, the fresh milk market registered volumes of 514,031 tonnes, down 7.1% on 2013. In terms of value, it generated
€741.5 million, down -5.2% on the previous year.
The top segment in terms of market volume is low-fat milk, with 166,000 tonnes (-7.5% on the previous year), worth
€238.5 million (-6.0% on the previous year), while the High Quality Milk segment shows a sharp decrease, with 156,294
tonnes (-10.1% on the previous year), generating €230.9 million (-8.2% on the previous year)
Long-life Milk, the third largest market segment, accounts for 87,510 tonnes, worth €113.5 million, down in terms of
volumes (-5.2% on the previous year) and value (-2.1% on the previous year).
The Organic segment, with 19,861 tonnes and €32.9 million, shows growth in volumes (+1.5% on the previous year) and
value (+3.7%).
Competitive scenario
The Granarolo Group remains market leader with a market share of 23.7% in terms of value (+0.2% on the previous
year) and 21.9% in terms of volume (+0.5% on the previous year).
The Parmalat Group has a market share of 22.4% in terms of value (-0.4% on the previous year) and 19.8% in terms of
volume (-0.4% on the previous year).
Private Labels have a market share of 17.9% in value (-0.2% on the previous year) and 22.1% in volume (-0.5% on the
1
Sources: IRI Infoscan and AC Nielsen Scan*Track hyper+super+self-service – Progression at 28 December 2014.
21
Granarolo Group
previous year).
Competition in the segments
In addition to its overall leadership, the Granarolo Group is market leader in the following segments: High Quality Milk
(market share of 30.1% in terms of value), Low-fat Milk (20.6%), Organic Milk (40.6%), Skim Milk (55.7%) and Long-Life
Milk (27.9%).
UHT Milk
Market performance
The UHT milk market generated volumes of 1,039,913 tonnes in 2014, showing a 2.0% decrease on 2013, with +0.8%
growth in terms of value on the previous year, up to €1,042 million.
The top market segment remains Low-fat Milk, with 712,038 tonnes, worth €624.6 million, showing a 2.2% drop in
volume on the previous year and 1.2% growth in value.
The Lactose-free Milk segment continued to expand in 2014 and is the second largest segment in terms of volumes, with
130,361 tonnes
(+7.6% on the previous year), worth €192.3 million (+7.1% on the previous year).
The third largest segment in terms of volumes is Whole Milk: 122,265 tonnes (-6.9% on the previous year), worth €133.8
million (-5.1% on the previous year).
The Granarolo Group remains the second largest player in this segment with a market share of 19.8% in terms of value,
up +0.9% on the previous year. The Parmalat Group is still market leader with 32.1% of the market’s value, down -0.5%
on the previous year.
Private Label products are slightly down on 2013, with a market share of 18.3% in terms of value (-0.1% on the previous
year) and 22.0% in terms of volumes (-0.5% on the previous year).
The Granarolo Group performed very well in the dynamic Lactose-free segment, with 29.7% of market volumes (+2.7%
on the previous year) and 30.7% of value (+2.0% on the previous year).
22
Granarolo Group
In the main segment, i.e., low-fat milk, the Granarolo Group is the second largest brand with 19.4% of volumes (+0.3%
on the previous year).
Yogurt
Market performance
The yogurt market generated volumes of 340,920 tonnes in 2014, down on the previous year(-1.9%). The market value
came to €1,367 million, down -0.8% on 2013.
Whole-milk yogurt remains the top-performing market segment (volumes: 149,912 tonnes; value: €511.3 million), down in
terms of volumes (-0.6% on the previous year) and up in terms of value (+0.9% on the previous year).
The Low-fat yogurt segment, the market’s second largest in terms of value, generated 70,409 tonnes and €263.6 million
in the year, growing both in volumes (+6.5% on the previous year) and value (+15.6% on the previous year).
Probiotic yogurt is the third largest in terms of value, with 43,305 tonnes and €196.1 million, down dramatically both in
terms of volumes (-12.5% on the previous year) and value (-13.9% on the previous year).
Probiotic drinks also show a highly negative trend in terms of volumes (-11.5% on the previous year, with 33,115 tonnes)
and value (-10.6% on the previous year, with €157.4 million).
The yogurt with mix-ins segment is down in terms of volumes (-2.3% on the previous year, with 18,214 tonnes), and up in
terms of value (+1.1% on the previous year, with €96.4 million).
Another small segment showing positive growth is Children’s yogurt, generating 9,225 tonnes in the year (+0.1% on the
previous year) and €70.0 million (+0.1% on the previous year).
The Granarolo Group, the third largest brand in this segment, posted 9.9% growth in volumes in 2014, up 0.3% on the
previous year and a 10.4% share of market value, slightly down (-0.1% on the previous year). Danone, which remains
market leader, shows a dramatic decline, with 22.3% of market volumes (-2.5% on the previous year) and 28.1% of
market value (-2.7% on the previous year).
Muller, the second largest player in this segment, grew 14.1% in terms of volumes (+0.55% on the previous year) and
13.6% in terms of value (+0.2% on the previous year)
Private Labels slipped both in terms of volumes, with a market share of 16.2% (-0.5% on the previous year), and value
with a share of 11.6% (-0.3% on the previous year).
23
Granarolo Group
Again in 2014, the Granarolo Group remained market leader in the Whole Milk yogurt segment, with a 20.8% share of
market value.
The Children’s yogurt segment put in an excellent performance. The Granarolo Group competes in this segment with its
Yomino product and a range of Baby Food yogurt (made with High Quality fresh milk). The Group’s market share in this
segment is 20.8%, up 2.4% on the previous year.
Soft cheese and butter
Market performance
The performance of the five main products in this segment is described below:
-
Mozzarella: down in terms of volumes, 104,170 tonnes (-3.3% on the previous year), and value, €813.3 million (2.9% on the previous year).
-
Crescenza: down in terms of volumes, 25,132 tonnes (-0.8% on the previous year), and up in value, €242.8 million
(+1.2% on the previous year).
-
Ricotta: down in terms of volumes, 21,166 tonnes (-0.4% on the previous year), and value, €100.2 million (-1.4% on
the previous year).
-
Mascarpone: down in terms of volumes, 10,126 tonnes (-1.7% on the previous year), and value, €74.5 million (0.8% on the previous year.)
-
Butter: down in terms of volumes, 40,184 tonnes (-2.7% on the previous year), and up in value, €317.6 million
(+0.7% on the previous year).
The Granarolo Group remains the second largest brand on the self-serve soft cheese market, in which it competes
(Mozzarella, Crescenza, Mascarpone and Ricotta) with a market share of 10.4% in terms of volumes (+0.8% on the
previous year) and 10.6% of the market value (+0.8% on the previous year).
The Lactalis Group is still the leader on the self-serve soft cheese market (in which Granarolo* competes), holding 35.7%
of market volumes (+0.7% on the previous year) and 35.3% of its value (same as the previous year).
Private Labels on the self-serve soft cheese market now account for 26.7% of volumes (-1.3% on the previous year) and
23.0% of value (-1.0% on the previous year).
24
Granarolo Group
(* Soft cheese: Mozzarella, Crescenza, Mascarpone and Ricotta)
The Granarolo Group remains the second largest player in the following segments:
-
Mozzarella: with a market share of 9.1% in terms of value, up 0.8%;
-
Ricotta: with 12.7% of the market value, in line with the previous year;
-
Mascarpone: with a market share of 13.3% in terms of value, down 0.3%;
Granarolo is the third largest Crescenza brand (13.9% of market value) and shows growth in this segment (+1.4% in its
market share on the previous year) and is the fourth largest in the Butter segment, with 4.4% of the market value.
Galbani (Lactalis Group) is market leader in the various segments with the following shares in terms of value: Mozzarella
33.6%, Crescenza 34.7%, Ricotta 47.5%, Mascarpone 38.9% and Butter 5.9%.
Eggs
Market performance
In 2014, the market for packaged eggs sold in supermarket chains showed a -1.9% decrease in terms of volume, with
145,661 tonnes, and a -2.3% drop in value, with turnover of €563.2 million.
The Granarolo Group, which has a price ratio of 132 compared to the average market price, holds 3.1% of the market
value (-0.3% on the previous year).
The AiA-Veronesi Group, which has a price ratio of 80 in 2014, has reached a market share of 9.0% in terms of value
(+0.3 % on the previous year). The Eurovo Group, with a price ratio of 90, holds 10.2% of the market value (+0.6% on
the previous year).
Private labels, with a price ratio of 104, has achieved a market share of 45.2% in terms of value (-0.3% on the previous
year).
25
Granarolo Group
THE FRENCH MARKET
Italian cheese
The Italian cheese market in France is divided into two segments: Aged Cheese and Soft Cheese.
Aged cheese includes Parmigiano Reggiano, Grana Padano, Pecorino Sardo, Pecorino Romano and hard cheeses
produced using processes similar to that for Grana.
Soft cheese includes Mozzarella, Mascarpone and Ricotta.
Market performance
Aged cheese
This segment shows substantial growth in terms of volumes, 4,974 tonnes (+3.5% on the previous year) and value,
€108.5 million (+5.1% on the previous year).
Soft cheese
Mozzarella: up in terms of volumes, 20,126 tonnes (+7.4% on the previous year) and value, €167.4 million (+7.8% on the
previous year).
Mascarpone: up in terms of volumes, 5,472 tonnes (+3.1% on the previous year), and down in terms of value, €40.7
million (-0.9% on the previous year).
Ricotta: up in terms of volumes, 1,370 tonnes (+4.0% on the previous year), and value, €7.9 million (+0.2% on the
previous year).
Aged cheese
The Granarolo Group competes on this market with its “Casa Azzurra” brand, a brand leader on the self-serve aged
cheese market, with a market share of 17.0% in terms of volume and 17.0% in terms of value, which both show growth
(+1.4 in terms of value) thanks to the wide range, which is the most varied on the market, and includes Parmigiano
Reggiano DOP, Grana Padano DOP and Pecorino Romano DOP (“DOP” refers to EU protected designation of origin
status).
The Private Label self-serve aged cheese products showed a slight decrease in 2014, counter to the trends of previous
years, holding a market share of 58.2% in terms of volume and 54.0% in terms of value.
26
Granarolo Group
Soft cheese
The Granarolo Group is the second largest brand on the self-serve soft cheese market, competing with a market share of
11.7% in terms of volume and 13.5% in terms of value, reflecting a growing trend.
The Lactalis Group remains brand leader on the self-serve soft cheese market (in which Granarolo competes) with a
market share of 25.6% (volume) and 29.2% (value), showing a downwards trend.
Private Label self-serve soft cheese products have reached a market share of 54% in terms of volume and 46.5% in
terms of value, showing a slightly downwards trend.
On the soft cheese market, the Granarolo Group is the second largest player in the following categories:
-
Mozzarella: market share of 10.5% in terms of volume (+2.6% on the previous year) and 12.8% in terms of value
(+3.1% on the previous year). These data also include buffalo mozzarella, a segment in which the Granarolo Group
is brand leader;
-
Mascarpone: market share of 14.2% in terms of volume (+2.2% on the previous year) and 15.0% in terms of value
(+3.0% on the previous year);
-
Ricotta: market share of 19.6% in terms of volume (+3.8% on the previous year) and 20.4% in terms of value
(+4.5% on the previous year);
The market leader is Galbani (Lactalis Group) with the following market shares considering value, all of which are down:
Mozzarella 29.9% (-4.5% on the previous year), Ricotta 23.8% (-5.9% on the previous year), and Mascarpone 27.3% (2.5% on the previous year).
In 2014, the Granarolo Group became Ricotta market leader with a 20.0% share of market volumes, while Galbani
remained at 16.0%.
(Sources: IRI Infoscan for hypermarkets, supermarkets and self-service shops – at December 2014)
The changes described above are summarised in the following table, which highlights the dramatic progression of the
Casa Azzurra brand on the French market:
27
Granarolo Group
28
Granarolo Group
THE RAW MATERIAL MARKET
The global and European scenario
2014 confirmed the growth trend in global consumption of milk and its derivatives, especially for the consumption of milk
powder and butter, up 4.6% and 3.1%, respectively (Source: FAS USDA). This increase was mainly seen in the areas
where economies are undergoing constant development (Southeast Asia and China).
In Europe, consumption of milk and its derivatives remained substantially steady, although the increase in global demand
led to an increase in the production of milk and dairy products. The 3.36% growth in milk production (FAS USDA data)
could already be seen in the second half of 2013 and continued for all of 2014. As in 2013, milk powder, butter and
industrial cheese set the course for European and global milk prices and production.
European exports of these products were extremely positive in 2014 (+10.4% according to GTIS), despite the embargo
in Russia in the second half of the year, which caused decreases in milk derivative markets and prices.
The decline in butter and powder prices began in the second half of the year and did not adversely affect milk production.
Milk production: expansion in 2014
Already at the start of the year, European milk production was up on previous years, and most of this growth was
encouraged by the positive trend in farm-gate raw milk prices throughout Europe, which in some countries, like Germany,
exceeded 40 Eurocents per kg between September 2013 and April 2014 (source: ZMP-France Agrimer-CLAL).
This brought milk production to the highest level seen in the past four years, up around 4.71% on the previous year
(source: EU Eurostat).
In the second half of the year, the gradual drop in commodity prices began affecting farm-gate raw milk prices, which
registered the first decreases. It is worth noting that production has physiological and biological response times that differ
from those of the current market, so there is a lapse before the effects on volumes can be seen.
29
Granarolo Group
Source: CLAL processing of Eurostat, *AGEA and Productschap Zuivel data
World demand for milk and milk derivatives
2014 confirmed the global growth in emerging countries’ consumption, as their economic and demographic growth is
fuelling agro-food production. Total imports of commodities are down 3.5% due to the economic crisis in South American
countries and a few countries in Africa. Countries in the Middle East post growth of 6.4%, while Southeast Asia remains
stable. Through the increase in local production in countries like China and India, milk production has grown 5.0% and
5.2%, respectively.
Tonnes
World WMP imports - SM - Butte - Cheese
P
r
*
8,000,000
7.3%
7,000,000
7.2%
2.3%
-3.5%
1,382,198
1,454,040
1,199,069
1,150,766
1,224,809
938,098
767,827
907,835
1,033,795
2,665,162
2,641,245
Jan-Dec 2013
Jan-Dec 2014
6.4%
6,000,000
5,000,000
1,260,854
1,231,405
1,323,870
1,281,073
1,244,516
4,000,000
1,155,946
1,174,864
941,399
3,000,000
2,000,000
1,000,000
747,373
944,847
1,605,155
1,043,378
769,001
906,198
966,101
996,475
1,876,473
2,079,209
2,254,366
Jan-Dec 2010
Jan-Dec 2011
Jan-Dec 2012
0
Jan-Dec 2009
Other areas
Source: GTI
Asia - Middle East
South and Central America - Caribbean
Africa
Southeast Asia
* estimated 2014 data
30
Granarolo Group
While Europe still prefers the consumption of products with short shelf lives, such as liquid milk, cheese, cream and
yogurt, global consumption is focusing more on products like skim milk powder (“SMP”) and whole milk powder (“WMP”),
deproteinized whey concentrates (“DWC”) and whey protein concentrate (“WPC”). The increase in the consumption of
these products is due to their use, which ranges from direct consumption to myriad food preparations, and to the fact that
they are easy to store and transport. In addition, in areas where the cold chain is not yet widespread, these products
offer a good degree of food safety. This is why demand from Southeast Asia affects not only the prices of the raw
material in producer countries, but also the quantities produced.
In Europe, most of the increase in the farm-gate cost of raw milk was seen in the first half of 2014, triggering an increase
in milk production, was due to exports and the price of commodities. When commodities are priced high, the farm-gate
price of raw milk benefits, and the retail price of liquid milk rises in producer countries. On the contrary, when
commodities for export are overpriced, the cost of the raw material in the producer country can inflate, encouraging
production in the importer countries.
Skim milk powder
In Europe, demand for milk powder, especially from outside the continent, boosted production and prices in 2013 and
early 2014, as they were no longer controlled by the stocking policy that was discontinued in 2012. In particular, from
March 2013 to July 2014, prices remained at over €2.5/kg. In the second half of the year, the milk powder price
decreased to €1.89/kg, and drawing near the intervention price of €1.79/kg. The drop in the powder price was due to the
disproportionate increase in production (+9.1% on the previous year) with respect to consumption (+4.6%). The following
table shows the development of monthly prices in 2014 compared to 2013.
Skim milk powder, ADPI-Exsta
(Market price (€/Kg)
2014
January
3,29
February
3,36
March
3,27
April
3,12
May
2,90
June
2,91
July
2,89
August
2,55
September
2,14
October
2,04
November
1,93
December
1,89
Average
2,69
2013
2,68
2,66
2,66
3,03
3,19
3,18
3,18
3,27
3,30
3,19
3,14
3,25
3,06
Change
22,8%
26,3%
22,9%
3,0%
-9,1%
-8,5%
-9,1%
-22,0%
-35,2%
-36,1%
-38,5%
-41,8%
-12,1%
31
Granarolo Group
In Europe, the return to stockpiling began in September 2014, and by December had reached 17,000 tonnes. The use of
warehousing, after years of no such use, can be interpreted as a way of containing a slowdown in powder sales, as
powder production remained strong, fuelled by high milk production. The purpose of using warehouses before the
intervention price was reached seems to have been aimed at slowing supply and, accordingly, halting the drop in prices
for as long as possible.
On the other hand, in the US, this stock policy has been used over the years, sustaining sales prices when demand
drops, and prices are favoured by the fact that production is mainly for the domestic market, with a lower cost structure
than that in Europe.
Powder warehouses: EU - US
250,000
200,000
150,000
Tonnes
100,000
50,000
0
2006
2007
2008
Source: EU - Steering Committee
Source: USDA
2009
2010
EU
2011
2012
2013
2014
US
The consumption of milk powder has grown gradually and consistently over the past five years. It is clear that this
product attracts market speculation, private stocking and sales using future contracts with bets on a falling or rallying
market.
World production and consumption of whole and skim milk powder
000 t
2010
2011
2012
2013
Powder production
7,377
8,066
8,437
8,475
Powder consumption
6,058
6,354
6,718
6,974
Source: FAS - USDA
2014*
9,243
7,298
delta %
9.1%
4.6%
* estimates
32
Granarolo Group
Wholesale price comparison of skim milk powder (SMP)
4,500
4,000
3,500
3,000
2,500
Eur o / tonne
2,000
1,500
1,000
Jul-10
Jan- 10
Sept- 10
Jul-11
Nov-
Mar-10
May-10
Jan- 11
Sept- 11
Jul-12
Nov-
Mar-11
Jan- 12
Sept- 12
Jul-13
Nov-
Mar-12
May-11
Jan- 13
Germany
US
Sept- 13
Jul-14
Nov-
Mar-13
May-12
May-13
Jan- 14
Sept- 14
Nov-
Mar-14
May-14
Oceania
Source: ZMP; “Süddeutsche Butter - und Käsebörse eV, Kempten”, USDA AMS Dairy Market News
Milk powder price trends in Oceania reveal why the US and Europe (Germany, in particular) have gained market shares
in exports to China and Southeast Asia. For years, Oceania was the privileged supplier of milk powder to Asian markets,
and its prices benefited from this status. However, in the last few months of 2014, France and Germany ramped up
production and, accordingly, as mentioned earlier, prices fell.
New Zealand’s skim milk powder exports were penalized by the price trend, and is especially seen in the country’s
powder prices from June 2013 to April 2014.
In general, sales agreements are signed 6/8 months in advance, and as European powder was less expensive
from the second half of 2013, prices and product availability clearly favoured the expansion of Europe’s global market
share, to the detriment of traditional producers.
As illustrated below (sources: GTIS and CLAL), in 2014, China’s imports rose by over 20% and European and Australian
producers benefited the most from this growth.
Considering this growth rate, China is pursuing a policy to increase domestic production and reduce its dependence on
foreign milk: provisional data for 2014 show a growth rate of approximately 5.0%.
33
Granarolo Group
Tonnes
Chinese SMP imports
Main SMP suppliers
Tonnes
330,000
140,000
280,000
120,000
230,000
100,000
-13.4
80,000
180,000
-9.4
60,000
130,000
40,000
80,000
23.0
130.9
-4.2
20,000
30,000
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
New Zealand
Tonnes
US
Australia
2014
France
Germany
2013
Butter
In 2009, the European Commission decided to return to allowing the accumulation of butter stocks, guaranteeing a
minimum set price of €2.46/kg. Following this policy, already from the end of 2009, the market price had exceeded the
intervention price, and has remained high.
The average price of butter in 2014 shows an average decrease of 14.8% compared to 2013, with a constant decline
over the months from €3.92/kg in January to €2.88/kg in December. This trend is what pushed the European
Commission to once again allow the butter stock policy.
Average annual EU butter price
Market price
Year
Year
Year
Year
Year
€ kg
3.46
3.98
3.06
3.95
3.36
2010
2011
2012
2013
2014
Intervention
price
€ kg
2.46
2.46
2.46
2.46
2.46
Delta%
40.7%
61.8%
24.4%
60.5%
36.6%
Source: ZMP
Butter Hannover/Köln - monthly market price
Month
January
February
March
April
May
June
July
August
September
October
November
December
Average
Change¹ %
2010
2011
2012
2013
2.96
2.82
2.85
3.09
3.67
3.78
3.80
3.72
3.76
3.76
3.68
3.63
3.46
3.67
4.09
4.23
4.00
4.00
4.16
4.17
4.03
4.03
3.97
3.81
3.57
3.98
14.96%
3.49
3.31
3.08
2.68
2.55
2.68
2.73
2.90
3.25
3.35
3.35
3.35
3.06
-23.07%
3.37
3.35
3.41
3.93
4.07
4.12
4.20
4.24
4.29
4.18
4.12
4.11
3.95
29.06%
2014 Diff. 14 vs 13
3.92
3.64
3.65
3.55
3.41
3.47
3.52
3.22
3.04
3.05
3.02
2.88
3.36
-14.81%
16.3%
8.7%
7.0%
-9.7%
-16.2%
-15.8%
-16.2%
-24.1%
-29.1%
-27.0%
-26.7%
-29.9%
34
Granarolo Group
Butter warehouses (t) - 2014 stocks
Month
European Union
2013
2013
January
23,507
14,195
February
8,335
14,196
March
40,361
17,110
April
56,117
32,979
May
83,468
50,663
June
101,977
66,138
July
118,277
81,494
August
118,491
82,042
September
95,834
65,421
October
65,388
44,432
November
38,496
24,742
December
33,518
11,332
Average
65,314
42,062
2014
5,409
155
11,822
18,175
20,518
21,555
6,470
2012
77,269
93,065
94,463
115,297
118,655
110,331
106,301
91,234
88,823
65,816
57,735
69,413
90,700
U.S.A.
2013
93,929
108,111
115,663
140,488
146,037
144,649
134,152
119,717
105,702
82,463
55,170
50,551
108,053
2,014
62,039
74,026
81,680
78,915
87,349
84,378
77,205
74,834
66,265
62,680
45,775
72,286
Source: USDA; EU Steering Committee
The progressive decrease in stocks of European butter in warehouses and the price level in recent years can be
associated with the ratio of world production to consumption. Indeed, while in the milk powder segment, production and
consumption expanded in favour of production, in the butter segment, the difference registered in the past five years is
negligible.
In 2013, global demand for butter grew 2.8%, while production rose 1.9%, exceeding consumption by 321 thousand
tonnes, and therefore 3.17% more than current requirements. In 2014, global demand rose 3.1%, while production was
up 3.2% exceeding consumption by only 302 thousand tonnes, equal to 3.26% more than current requirements. The gap
between production and consumption does not appear to justify the use of warehouses, except for price speculation.
000’Tonnes
2010
Butter production 7,999
Butter consumption 7,838
2011
8,373
8,119
2012
8,718
8,435
2013
8,969
8,684
2014*
9,253
8,951
delta %
3.2%
3.1%
Source: Processing of FAS-USDA data
* estimates
Source:
ZMP; Amtliche Notierungskommissionen für Butter und Käse, Hannover - Source: USDA AMS Dairy Market News
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In the first few months of 2014, the price of butter began gradually dropping, particularly in Oceania.
On the other hand, US butter prices rose considerably until September, before they too began to fall.
Globally, vegetable fats can be used in place of butter, especially in countries boasting large-scale extensive farming
(such as the US) which no longer export butter as a primary business. It follows that once certain prices have been
reached, butter can be replaced with less expensive vegetable oils.
Edamer, Gouda and Cheddar cheese
Global cheese consumption trends remained positive and forecasts for 2014, as actual figures are not yet available,
show 0.8% growth in consumption and 1.7% growth in production.
000’Tonnes
Cheese production
Cheese consumption
2010
16,393
16,383
2011
16,487
16,571
2012
16,940
16,942
2013
17,044
17,075
2014*
17,332
17,211
delta %
1.7%
0.8%
Source: FAS - USDA
* estimates
During the year, production slightly exceeded consumption (+0.64%), showing how most demand is met by current
production. Demand grows constantly each year.
The gap between production and consumption volumes is fairly narrow, and this makes the market vulnerable to small
shifts in cheese demand and in the availability of the raw material. Until 2014, demand for cheese rose faster than
production capacity and, in particular, than the physiological adjustment in milk production. This is why, since 2013,
cheese prices have been slowly and gradually rising, to the point where Gouda is now sold at €3.75/kg, Edamer at
€3.77/kg and Oceania Cheddar at €3.80/kg.
This particular trend is due to the following factors:
-
the increase in milk production beginning in late 2013, pushed by greater demand for milk powder, led to a lack of milk
for cheese production;
-
the reduced availability of cheese products, along with the growth in demand for cheese, caused a gradual and
progressive rise in prices that lasted until the start of 2014.
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Granarolo Group
Source: USDA / ZMP
The 2014 trends underscore how the cheese market and its chain are extremely sensitive to demand for products and
the availability of the raw material considering requirements in real time. Indeed, it is impossible to synchronise the
physiological timing of livestock production with the market.
The growth in global milk production from the first few months of 2014 was due to the increase in demand for finished
products, which began in the second half of 2013, and to the higher price of milk. In the second half of 2014, the positive
trend in global milk production continued, even when the prices of products that had boosted it began to fall. It is clear
that milk production, which is influenced by physiological and seasonal cycles, cannot be adjusted in real time to meet
increases or decreases in demand and consumption. If other factors, such as stocks, economic and production situations
in the individual countries and climatic variables are added, it is likely that sudden market changes or fluctuating trends
could arise more frequently.
In any case, global consumption and use of dairy products is gradually and constantly rising, and this leads us to
presume that milk production will follow this trend in the medium term. It is also foreseeable that there will be a slow and
gradual change in the areas where milk is produced.
The following chart gives an overall view of the production and consumption of SMP, WMP, butter and cheese.
37
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World consumption (000'Tonnes)
of WMP - SMP - Butter - Cheese
World production (000'Tonnes)
of WMP - SMP - Butter - Cheese
35,000
35,000
30,000
30,000
25,000
17,044
16,940
16,487
16,393
17,332
25,000
16,571
16,383
16,942
17,075
17,211
20,000
20,000
15,000
7,999
10,000
5,000
3,393
3,683
3,933
3,984
4,383
4,504
9,253
8,969
8,718
8,373
15,000
7,838
8,119
8,435
8,684
8,951
10,000
5,000
3,005
3,192
3,447
3,482
3,606
3,053
3,162
3,271
3,492
3,692
4,264
3,863
4,979
4,612
0
0
2010
2011
WMP
2012
SMP
2013
Butter
2014
Cheese
2010
2011
WMP
2012
SMP
2013
Butter
2014
Cheese
Source: CLAL processing of FAS USDA data
The chart shows how total production of milk-based products exceeds requirements, with total production coming to
35,828,000 tonnes in 2014, while consumption amounted to 33,460,000 tonnes.
The gap is 2.368 million tonnes, with production 7.07% higher than consumption.
European exports
2014 saw a sharp increase in exports, with a positive balance of 10.4%, although the Russian embargo significantly
penalised the cheese segment, which lost 8.5% (Source: GITIS).
As noted earlier, considering the rather steady trend in Europe’s domestic consumption, exports are clearly a strategic
lever for European dairy businesses and export trends can affect the farm-gate price of raw milk and the volumes
produced.
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EU-28 exports- of WMP- SMP - Butter-Cheese*
000’Tonnes
2100
1800
1500
5.8
3.5
-5.8
520
376
407
515
10.4
610
1200
445
386
374
768
787
388
400
900
600
667
673
720
300
0
156
126
127
128
142
Jan-Dec 2010
Jan-Dec 2011
Jan-Dec 2012
Jan-Dec 2013
Jan-Dec 2014
SMP
Source: GTIS
WMP
Cheese
Butter
* 2014 data are estimated
General export data on the rise encouraged, at least in the first half of the year, prices applied to products and, in
particular, the raw material.
Farm-gate raw milk price in the EU
The farm-gate price of milk began progressively rising already midway through 2013 in major European producer
countries and continued to do so until into the second half of 2014.
It is clear that, for over a year, farm-gate raw milk prices encouraged widespread growth in milk production, even from
July on, when the Russian embargo began to adversely impact the prices of cheese and milk derivatives and,
consequently, the price of milk as well.
Despite the slow and gradual drop in milk prices beginning in the fourth quarter, 2014 saw an increase in average milk
prices in all European countries (between 2.0% and 7.0%).
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Granarolo Group
Lombardy (Italy) * (€/100 lt.)
Month
January
February
March
April
May
June
July
August
September
October
November
December
Average
Change¹ %
2010
2011
2012
2013
2014
33.16
33.16
33.16
33.16
33.16
33.16
36.60
37.00
37.00
37.00
37.50
38.00
35.17
39.00
39.00
39.00
39.00
39.00
39.00
40.20
40.20
40.20
40.30
40.30
40.30
39.63
12.66%
40.70
40.70
40.70
36.00
36.00
38.00
38.00
38.00
38.00
38.00
38.00
39.50
38.47
-2.92%
40.00
40.00
40.00
40.00
40.00
40.00
40.00
42.00
42.00
42.00
42.00
42.00
40.83
6.15%
42.00
44.50
44.50
44.50
44.50
44.50
42.00
42.00
39.00
39.00
38.50
38.00
41.92
2.65%
± % on
2013
5.0%
11.3%
11.3%
11.3%
11.3%
11.3%
5.0%
0.0%
-7.1%
-7.1%
-8.3%
-9.5%
Last update: 19-01-2015
1) change on the previous year
*: Euro per 100 litres 3.7% p.v. 3.25% p.v.
(e) = estimated price
Source: CLAL processing
Bavaria (Germany) * (€/100 lt.)
Month
January
February
March
April
May
June
July
August
September
October
November
December
Average
Change¹ %
2010
2011
2012
2013
2014
28.57
28.62
29.04
29.59
30.71
31.71
32.84
33.53
34.01
34.35
34.77
34.79
31.88
34.32
34.53
35.00
35.57
36.06
36.31
36.40
36.44
36.54
36.84
36.96
36.68
35.97
12.84%
36.29
36.16
35.59
34.74
33.24
32.37
31.62
31.74
32.36
33.60
34.44
34.92
33.92
-5.69%
35.14
35.40
35.56
36.07
37.22
37.80
38.52
39.10
40.20
41.34
42.11
42.33
38.40
13.20%
41.84
41.87
41.73
40.81
39.90
39.44
39.24
38.96
38.17
36.75
35.64
± % on
2012
19.1%
18.3%
17.4%
13.1%
7.2%
4.3%
1.9%
-0.3%
-5.0%
-11.1%
-15.4%
39.49
2.83%
*: Euro per 100 litres 3.7% p.p. 3.40% p.p.
(e) = estimated price
40
Granarolo Group
Rhône Alpes (France) * (€/100 lt.)
Month
January
February
March
April
May
June
July
August
September
October
November
December
Average
Change¹ %
2010
2011
2012
2013
2014
29.32
29.55
28.78
27.21
27.99
30.31
31.35
33.66
31.07
30.07
29.85
30.08
29.94
31.83
32.33
31.09
30.58
30.71
35.34
35.85
35.99
36.33
32.00
32.05
31.45
32.96
10.11%
33.69
33.77
31.93
29.16
28.53
33.54
33.36
32.72
31.54
29.11
30.58
30.10
31.50
-4.43%
31.46
31.73
30.48
32.18
32.27
36.63
37.35
37.48
37.60
34.87
34.92
37.87
34.57
9.74%
39.96
36.97
36.28
34.75
33.63
35.33
37.22
39.67
39.90
39.13
34.52
± % on
2012
27.0%
16.5%
19.0%
8.0%
4.2%
-3.5%
-0.3%
5.8%
6.1%
12.2%
-1.1%
37.03
7.12%
*: Euro per 100 litres m.g. 3.8% p.v. prot. 3.2% p.v. = 3.38 MAT p.v.
Source: FranceAgriMer
To understand the increase in the price of milk and the consequent increase in milk production, the following, interrelated aspects should be considered:
-
at the start of 2013, milk powder and cheese export prices grew gradually and remained high until the first few months of
2014. This had a positive impact on the price paid to dairy farmers at the start of 2013 and throughout most of 2014;
response times in farming differ from those of the market;
If we consider the farming year (April 2013 - March 2014), we see how average prices in the period favoured milk
production:
2010-2014 farm-gate raw milk price comparison in Italy, Germany and France
47.00
44.00
41.00
38.00
€/hl
-
35.00
32.00
Italy
Germany
France
29.00
26.00
23.00
Source: CLAL, ZMP and FranceAgriMer processing
The chart shows how the price of European milk began to rise midway through 2013 and remained above €0.39 until
September 2014 (in Italy, it exceeded €0.44).
Fluctuations in commodity prices have a gradual effect on the farm-gate raw milk price, which responds a few months
later. On the other hand, the spot milk market (volumes traded weekly on the free market) adjusts in real time to
commodity prices and current liquid milk demand (this market is based solely on the ratio of raw material availability and
41
Granarolo Group
demand for the same raw material each week). Accordingly, excess milk production or a lack of production affect spot
milk prices immediately.
Farm-gate/spot milk price comparison in Germany and France
0.600
0.550
€/Li tre
0.500
German farm-gate price
0.450
German spot price
0.400
0.350
0.300
France farm-gate price
France spot price
0.250
Source: Lodi chamber of commerce, France AgriMer-ZMP
For most of 2013, farm-gate raw milk production was in the normal range, while non-EU demand for cheese began to
rise.
This demand was not readily met, meaning that the spot milk price remained high for all of 2013 and into the first few
months of 2014. It follows that the farm-gate raw milk price also very gradually increased, peaking between November
2013 and May 2014.
European milk production in 2014 was influenced by prices paid to dairy farmers between spring 2013 and autumn 2014.
Milk production trends: in Italy, Europe and the world
European production
Although milk production in 2014 maintained its seasonal trends (with the customary spring peak and summer decline), it
was the diametrical opposite of 2013. Indeed, while production in the first half of 2013 was lower than 2012, production in
2014 was the highest ever, in both halves. It is clear that commodity market prices affected the price of milk paid to dairy
farmers, who realized that it was more profitable to produce milk and expanded production.
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UE28 - Milk deliveries (000’Tonnes)
13,600
13,100
12,600
12,100
11,600
000’Ton ne
11,100
10,600
10,100
1
2
3
2011 deliveries
4
5
6
7
2012 deliveries
8
2013 deliveries
9
10
11
12
2014 deliveries
Source: CLAL processing of Eurostat, *AGEA and Productschap Zuivel data
Provisional data for deliveries of milk produced up to December 2014 show an increase in European production,
estimated to be around 4.71%.
European production trends
2011
151,854
2012
152,198
2013*
153,402
2014*
160,629
±% on ‘13
4.71%
* provisional data
Euro source: Eurostat
Global demand for milk-based products and milk derivatives encouraged an increase in European production, taking it to
the highest levels ever recorded. However, Europe is not the only global player to have ramped up production.
World production
World milk production data confirm the growth in global demand for milk and milk derivatives. All major producer
countries and, in particular those that mainly export, show an increase in production, as shown in the table below:
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Granarolo Group
Countries
2007
2008
EUROPEAN UNION
EU*
147,990
148,459
EUROPE (OTHERS - NON-EU)
Russia*
31,988
32,364
Ukraine*
12,262
11,761
NORTH AMERICA
Canada
8,212
8,270
United States*
84,189
86,180
AMERICA - SOUTH, CENTRAL AND THE CARIBBEAN
Argentina*
9,527
10,010
Brazil
26,750
27,820
Mexico
10,657
10,907
OCEANIA
Australia* (1)
9,582
9,213
New Zealand*(2)
15,586
15,232
ASIA
India
42,890
44,500
SOUTHEAST ASIA
China
35,252.00 34,300.00
Japan
8,007.00
7,982.00
Philippines
13.00
14.00
South Korea, ROK
2,188.00
2,139.00
Taiwan
322.00
325.00
REST OF THE WORLD
Others
n.a.
n.a.
TOTAL PRODUCTION
445,415
449,476
2009
2010
2011
2012
2013
2014
±% on '13
146,190
149,863
151,854
152,198
153,402 (p)
160,629 (p)
4.71%
32,570
11,604
31,847
11,249
31,646
11,086
31,756
11,378
30,529
11,488
29,900 (p)
11,499 (p)
-2.06%
0.10%
8,280
85,875
8,350
87,462
8,400
89,016
8,614
90,867
8,443
91,272
8,409
93,532 (p)
-0.40%
2.48%
10,055
28,795
10,866
10,308
30,716
11,033
11,206
32,091
11,046
11,339
32,304
11,274
11,184
33,217 (p)
11,255
11,072 (p)
34,212 (p)
11,442
-1.00%
3.00%
1.66%
9,387
16,583
9,067
17,123
9,273
18,915
9,509
20,517
9,044
20,148
9,333 (p)
21,686 (p)
3.20%
7.63%
48,160
50,300
53,500
55,500
57,500
60,500
5.22%
28,445.00
7,910.00
15.00
2,110.00
322.00
29,300.00
7,720.00
2,073.00
16.00
346.00
30,700.00
7,474.00
1,888.00
17.00
336.00
32,600.00
7,630.00
2,111.00
18.00
348.00
34,300.00
7,508.00
2,093.00
19.00
358.00
36,000.00
7,315 (p)
2,073.00
20.00
347.00
4.96%
-2.57%
-0.96%
5.26%
-3.07%
n.a.
447,167
n.a.
456,773
n.a.
468,448
n.a.
477,963
n.a.
481,760
497,969
3.36%
Production in Italy
Italian milk production also increased on 2013.
The progressive value of milk deliveries up to October shows an average increase of 3.2% on the 2013 average. In Italy,
although milk prices peaked at levels higher than the highest European prices, production grew less than the European
average.
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Italy - Milk deliveries (000’Tonnes)
1050
1000
950
900
000’Tonnes
850
800
750
1
2
3
4
2011 deliveries
5
6
2012 deliveries
7
8
2013 deliveries
9
10
11
12
2014 deliveries
Source: AGEA
The average price paid to dairy farmers was about €0.01 per litre higher than in 2013, but the most interesting aspect is
that in the first half of 2014, the price paid was €0.045/litre higher than that in the first half of the previous year
(€0.445/litre compared to €0.400/litre).
In Europe, prices paid to dairy farmers in the first half of the year led to an increase in production, which lasted the entire
year. In Italy, although production continued to grow, it weakened in the second half of the year.
Italy presents a particular situation that makes it difficult for production to perform like Northern Europe, and one of these
is the ratio between the number of cows per cowshed and the farm land available.
Spot milk prices
Spot prices for milk (traded on the free, day-by-day market) reflect the relationship between supply and demand in real
time.
Since mid-2013, when global demand for the commodity led to the purchase of this raw material from Europe, spot milk
prices reached peaks of over €0.50, remaining above €0.45 until February 2014.
Demand for volumes and the corresponding spot milk, powder, butter and cheese prices contributed to raising the farmgate price of milk and increasing quantities produced.
As demand was gradually met, which began by expanding milk production in 2014, spot milk prices began to gradually
fall. In particular, from March to the end of the year, the spot milk price never exceeded the price paid to dairy farmers.
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Farm-gate raw milk price
Spot milk price
Farm-gate raw milk in Lombardy (€/100 lt.)
Average Lodi spot milk price * (€/100 lt.)
± % on
2013
Month
2012
2013
2014
± % on
2013
January
38.79
41.88
47.68
13.8%
February
37.63
41.50
45.88
10.6%
11.3%
March
35.83
40.72
42.79
5.1%
44.50
11.3%
April
31.70
42.01
39.44
-6.1%
40.00
44.50
11.3%
May
32.09
43.43
37.63
-13.4%
40.00
44.50
11.3%
June
33.51
45.24
42.40
-6.3%
38.00
40.00
42.00
5.0%
July
37.81
46.65
41.24
-11.6%
August
38.00
42.00
42.00
0.0%
August
39.18
48.97
40.60
-17.1%
September
38.00
42.00
39.00
-7.1%
September
40.98
50.52
38.15
-24.5%
October
38.00
42.00
39.00
-7.1%
October
42.92
51.89
37.55
-27.6%
November
38.00
42.00
38.50
-8.3%
November
43.82
52.97
37.76
-28.7%
December
39.50
42.00
38.00
-9.5%
December
42.40
50.65
35.70
-29.5%
Average
38.47
40.83
41.92
2.65%
Average
38.06
46.37
40.57
-12.51%
Month
2012
2013
2014
January
40.70
40.00
42.00
5.0%
February
40.70
40.00
44.50
11.3%
March
40.70
40.00
44.50
April
36.00
40.00
May
36.00
June
38.00
July
Sources: CLAL - Lodi chamber of commerce
In 2014, the greater availability of the raw materials mitigated spot milk demand and pushed prices down. At the same
time, the farm-gate price of milk began its slow and gradual decline.
This trend reflects the change in recent years: the time has passed when industrial and farming political groups sat down
together to negotiate a fair, long-term price. Now negotiations are held between producers and buyers for time periods of
no more than three months.
Significant market volatility, fierce competition and the globalisation of the dairy product market have made it difficult to
obtain guaranteed, long-term prices.
Italian protected designation of origin (“DOP”) cheese
Grana Padano production increased on 2013 by 6.2%, for a total of 4.8 million wheels produced, with monthly production
constantly above that registered in 2013 and peaking at +20% in July and August. Exports were the main factor for this
growth in production.
Parmigiano Reggiano remained substantially steady (+0.6%), with a total of 3.3 million wheels produced.
As shown below, despite positive exports, prices for these two DOP products fell by an average of 7.0% for Parmigiano
Reggiano and 2.3% for Grana Padano.
In both cases, the price decrease was most dramatic at year end.
46
Granarolo Group
Month
January
February
March
April
May
June
July
August
September
October
November
December
Average
Change %
Parmigiano Reggiano prices
Aged 12 months and longer (€/kg)
± % on
2012
2013
2014
2013
10.32
8.80
n.a.
10.06
8.75
8.82
0.8%
9.94
8.75
8.80
0.6%
9.49
8.75
8.65
-1.1%
9.05
8.74
8.56
-2.1%
8.98
8.68
n.a.
8.93
8.65
8.09
-6.5%
8.93
8.65
7.95
-8.1%
8.93
8.70
7.79
-10.5%
8.92
8.78
7.58
-13.7%
8.89
8.80
7.50
-14.8%
8.85
8.80
7.50
-14.8%
9.27
8.74
8.12
-5.79%
-7.02%
Grana Padano prices
Aged 9 months and longer (€/kg)
± % on
2012
2013
2014
2013
8.11
7.03
n.a
7.91
6.93
7.25
4.6%
7.79
6.93
7.21
4.0%
7.55
6.93
7.05
1.7%
7.35
6.84
6.98
2.0%
7.28
6.78
n.a.
7.23
6.75
6.89
2.1%
7.23
6.78
6.80
0.3%
7.23
7.00
6.64
-5.1%
7.22
7.20
6.48
-10.0%
7.16
7.23
6.40
-11.5%
7.11
7.23
6.40
-11.5%
7.43
6.97
6.81
-6.21%
-2.28%
Source: Milan chamber of commerce
Last update
12.01.2015
European and Italian cheese exports
Global demand for milk derivatives is up, although European cheese exports fell 8.5% in 2014. Indeed, in 2014,
European countries exported 720,000 tonnes, compared to 787,000 tonnes in 2013 (Source: GTIS on CLAL processing).
The Russian embargo blocking European products is the main reason for this decrease, as exports to Russia have
always involved substantial amounts of cut cheese, such as Gouda and Edamer.
In this scenario, in terms of volumes, typical Italian cheeses fare well, but prices were impacted.
Actual data on Italian exports at 30 October (ISTAT-CLAL data) show a trend that diametrically opposes the European
figures, confirming an increase in global exports of 2.86%, with forecasts for 31 December 2014 projecting volumes of
80,301 tonnes, compared to actual 2013 volumes of 78,064 tonnes.
This is an increase of 2,237 tonnes (ISTAT-CLAL data updated to 30 October 2013).
47
Granarolo Group
Italy - World Grana and Parmigiano Reggiano exports
12.00
90,000
80,000
10.00
70,000
8.00
/kg
60,000
50,000
6.00
40,000
€
4.00
Tonnes
30,000
20,000
2.00
10,000
0.00
0
Tonnes
€ /kg
Source: CLAL processing of ISTAT data
As shown, the trend in Italian cheese exports countered that for Europe.
First, this is because Russia is not one of the main markets for Italy’s aged DOP cheese.
48
Granarolo Group
Forecasts for Italian cheese exports to the rest of the world show 2.9% growth. The main buyers remain European
countries and the US. The aggregate balance for these countries is positive (+2.08%), although exports to the US have
dropped 3.5%.
We have seen how exports of aged cheese have held strong in terms volumes, but prices have been affected by the
increase in production resulting from the greater availability of milk.
The following chart shows how, in 2014, average production was higher than in previous years, both at the highest spring
peak and when production slows in summer.
Grana and Parmigiano production/price comparison
€ 550,000.00
€ 12.00
€ 500,000.00
€ 10.00
€ 450,000.00
€ 8.00
€ 400,000.00
€ 6.00 €/Kg
€ 350,000.00
€ 300,000.00
€ 4.00
€ 250,000.00
€ 2.00
€ 200,000.00
No. of Parmigiano wheels
No. of Grana wheels
Price of Parmigiano aged 12 months longer
Price of Grana aged 9 months longer
De c-14
Oc t-14
No v-14
Sep-14
Jul-14
Aug-14
Jun-14
Ap r-14
Ma y-14
Ma r-14
Jan-14
Feb-14
De c-13
Oc t-13
No v-13
Sep-13
Jul-13
Aug-13
Jun-13
Ap r-13
Ma y-13
Ma r-13
Jan-13
Feb-13
De c-12
Oc t-12
No v-12
Sep-12
Jul-12
Aug-12
Jun-12
Ap r-12
Ma y-12
Ma r-12
Jan-12
€-
Feb-12
€ 150,000.00
Source: Milan chamber of commerce, Consorzio per la tutela del Grana Padano and Consorzio tutela Parmigiano
Reggiano
2014 confirmed what seems to be the trend of recent years, i.e., the progressive increase in global consumption and how
such consumption has fuelled milk production year after year (with milk production appearing to be extremely price
sensitive since a change of just a few Eurocents in the farm-gate price leads to almost immediate surges in production).
In countries like China and India, production is growing rapidly, stimulated by prices and demand. Production costs are
far lower than the global average, and are therefore competitive on a globalised market, where a commodity’s most
important feature is its price.
In this context, Europe and Italy find themselves fighting on two fronts: on the milk production side now that production
limits have been eliminated while competing on commodities markets.
49
Granarolo Group
The territory and the availability of new land remain the factors affecting the performance of production in line with the
performance of Asian countries.
It will be interesting to see which European areas will manage to compete on the commodities market and which will
grow through cheese exports (i.e., added value products) and how much growing consumption and new consumers on
the global market will be able to pay for cheese products, particularly the excellent products that Italy can offer.
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Granarolo Group
GROUP STRATEGIES
For upcoming years, the Granarolo Group confirms the strategic guidelines and growth path it launched in 2012 when it
approved the 2012-2016 Plan, with specific regard to initiatives to succeed on an increasingly competitive market.
Moreover, it revised acquisition targets to take advantage of the opportunities arising in the sector.
The Group’s development lines relate to the following:
-
the consolidation and growth of all High Quality products throughout the entire range. Granarolo is the only
player capable of offering a guaranteed and certified chain at national level, which it plans to maintain and
expand;
-
the competitive positioning of its products. The Granarolo Group’s products must maintain their premium status
in terms of quality, innovation and service;
-
business growth. Growth plans must be strengthened through specific campaigns on Italian and foreign
markets;
-
focussing on profitability. Growth processes must be focused on generating profit by developing markets,
seeking efficiencies and forging partnerships that exploit economies of scale;
-
the growth of new products and new markets. In particular, this growth must be achieved by diversifying the
range and expanding on foreign markets;
-
making the most of the Group’s special distribution system that exploits the opportunities of a business model
increasingly oriented towards centralisation, while keeping distribution widespread and efficient, and considering
the economies of scale that arise when operating in significantly large distribution areas.
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Granarolo Group
Business strategy
The Granarolo Group business strategy for 2014 focuses on pursuing the path taken in 2008, aimed at optimising raw
material and finished good procurement and reducing transformation costs by improving transformation efficiencies, all
while making the continuous improvement of its product quality and safety in the workplace an ongoing priority.
In the light of the increase in domestic raw material prices in the first half of the year, the focus on production structures
was even more closely directed towards containing fixed transformation costs, with particular attention to energy costs,
the insourcing of product categories previously produced by copackers by investing in production lines or strengthen
existing lines and speeding up the development of plant to meet the increase in cheese transformation yields.
In particular, the areas in which specific inter-functional projects were developed included:
-
searching for utmost synergy between production planning, raw material procurement and raw material allocation;
-
redefinition of the strategy for the procurement of raw materials, semi-finished products and finished goods;
-
optimisation of production and technical support for product innovation;
-
maximised internal use of milk components (transformation yield);
-
optimisation of production structures with the reallocation of cheese production;
-
saturation of production lines with production on behalf of third parties or private labels;
-
boosting the efficiency of production lines through WCM methods;
-
improving energy efficiency with specific regard to reducing waste;
-
supporting international business development projects;
-
supporting the diversification of raw materials;
-
developing quality, food safety, safety in the workplace and environmental improvement plans;
-
ongoing search for utmost production flexibility through specific agreements with trade unions.
The 2014-2016 business plan
In 2014, specific attention was devoted to the following projects:
-
relocation of ricotta and mascarpone production lines to the Usmate site;
-
development of innovative cheese technologies, with the redesign of production lay-out;
-
optimisation of production processes for semi-finished products and finished goods, with specific regard to cheese
yield and dairies’ production scraps;
-
roll-out of the UHT PET line in Gioia del Colle;
52
Granarolo Group
-
design and roll-out of the new UHT line for lactose-free milk in Soliera;
-
development of internal production of baby and children’s products (milk and yogurt);
-
development of internal production of the lactose-free line, including both cheese and yogurt-based products;
-
focus on integrating sales, planning, procurement and production functions with new, specific organisational
structures;
-
internal development of hard aged cheese production and packaging;
-
boosting the efficiency of production lines and improving quality at the French sites;
-
completion of the integration of Casearia Podda with all supply chain structures;
-
launch of the integration of the Amalattea Italia S.r.l. and Pinzani S.r.l. production structures.
Cheese production was developed through projects to concentrate production in Usmate (ricotta and mascarpone) and
growth in the production capacity at Bologna (mozzarella). Significant focus was placed on the quality of soft pulled curd
cheese, with support from the quality assurance structure for the development of innovative and industrially efficient
control methods. The organisation of labour also lent flexibility to production schedules, in line with commercial
requirements.
In the UHT/ESL (extended shelf-life) segment, the Group focused on promoting the use of Italian raw materials, while
also rationalising the packaging. The new bottling line in Gioia del Colle made it possible to discontinue the use of third
party copackers and fully use Italian raw materials from the local area. Yogurt production lines at the Pasturago site were
strengthened, especially the lines for packages including different types and flavours, in which greater flexibility and
responsiveness in production are required.
This process innovation applied to all product families (fresh milk, UHT products, yogurt and cheese), including with the
launch of children’s products and lactose-free products.
Improvement of production standards
Each production site kicked off campaigns to maximise transformation yields and reduce scraps, using WCM (world
class manufacturing) methods and especially through the monitoring of each day’s results, and the effects of these
campaigns on results have been consolidated over the years.
At production sites where improvement processes have been in place the longest, the target KPIs (key performance
indicators) were achieved in relation to both reducing raw material waste and the efficient use of packaging and
ingredients. Thanks to the price effect, combined with improved transformation yields, the reduction in the cost of raw
53
Granarolo Group
materials was more than 2% below the budgeted cost. The impact of labour per tonne of product remained in line with
the budget, both in terms of the Euro per tonne indicator and the Euro per FTE indicator, the latter in part due to the
growth in total production volumes (+1.8%).
Indicators for the use of energy in production outperformed the budget, as the cost of natural gas and Kwh fell and new
cogeneration systems installed at the main production sites were used for the full year in 2014. The impact of the cost of
energy per tonne of product was over 7%. The Group will pursue energy savings projects for both natural gas and
electrical energy consumption in 2015 as well.
An additional rationalisation of general costs reduced the impact on the budget indicator, offsetting the greater
maintenance costs that were necessary for newly acquired production sites.
Overall, transformation costs decreased by more than 2%.
In terms of safety, the Group decided to extend the pilot project implemented at Pasturago and based on the Du Pont
method to its other sites as well. The project will continue throughout 2015, but has already led to considerable
improvements in the Group’s indicators.
The identified objectives were achieved, thanks to an extensive training and target investment plan (18% of total capex
was allocated to quality, safety and the environment).
Structural reorganisation
The turnover and change management project continues to incorporate the value of industrial efficiency in management
culture through the use of accounting and management tools.
A daily factory yield reporting system was introduced, even at the recently acquired sites, and, more importantly, the SAP
system was fully rolled out and is leading to an increasingly complete and rapid understanding of production processes,
speeding up decisions and improving outcome analysis.
The site organisational charts were updated, to better define the organisational aspects among the individual roles and
responsibilities.
The progressive roll-out of SAP in production structures required an in-depth analysis of processes and roles, along with
changes in the organisation of both production staff and managers. Particular emphasis was given to strengthening
management and results control duties.
54
Granarolo Group
Combination of the Amalattea Italia S.r.l. and Pinzani 1969 S.r.l. sites
In August 2014, the combination of the Villagrande and Montemiccioli sites in the Granarolo Group’s production system
began.
Again in this case, particular attention was devoted to all production process quality issues, coordinating internal
functions with those in other sites in Central and Southern Italy.
Certain specific activities were commenced and will continue into 2015:
-
analysis and rationalisation of suppliers of cow, sheep and goat raw materials;
-
improvement of cheese yield and rationalisation of the cheese making system;
-
analysis of logistics flows, with a reorganisation of logistics assets;
-
improvement in the food safety and quality of products made;
-
improvement and strengthening of environmental management and products made;
-
improvement of SAP manufacturing and product costing;
-
expansion and rationalisation of the logistics platform.
Sales strategy
Supermarket chains
Retail sales of fast moving consumer goods remained critical in 2014. The performance of grocery products, with the
current sales network, lost 0.7% in terms of value on 2013, with a less dramatic decrease in terms of volumes, i.e., 0.5%
on 2013. However, the different channels showed varying performances, with a considerable drop in the value of sales to
hypermarkets (-4% on 2013), self-service stores (-4.2% on 2013) and traditional shops (-6% on 2013), while supermarket
and superstore sales held strong (+0.5% on 2013) and discount stores grew significantly (+2.1% on 2013) and specialist
drug stores showed substantial growth (+6.0% on 2013).
Two aspects merit mention: the further growth in the pressure to offer promotional discounts, which in 2014 reached
29.3% (+0.7% on the previous year) with peaks of 35.3% at hypermarkets (+0.5% on the previous year), and the
downturn in the private label market share, now at 18.2% (-0.2% on the previous year).
Source: Nielsen Top4Top December 2014
In this critical context, Granarolo’s development runs in three directors:
1)
greater focus on profit margins;
55
Granarolo Group
2)
focus on new markets and opportunities in soft cheese, aged cheese and yogurt in growing segments (Greek
yogurt and children’s yogurt);
3)
implementation of a growth plan that focuses on innovation and meeting consumers’ actual needs (e.g., lactosefree and light product range).
Normal trade
Zeroquattro manages sales for the normal trade channel, i.e., traditional retail sales and food consumption outside the
home. In 2014, it consolidated business and turnover in the core businesses (milk, yogurt and soft cheese), developed
the aged cheese market (Grana and Pecorino) and completed the range of big brand products sold. Particular attention
was devoted to specific sales policies for distribution sub-channels (traditional POS, bars, ice cream shops and
restaurants/pizzerias) to maximise promotional investments and make product ranges more efficient.
Food service
During the year, Granarolo intensified its focus on its customers operating food service chains with POS throughout the
country. It increased revenue from dairy products, and mozzarella in particular, which now accounts for nearly 30% of
food service turnover.
Private labels
In 2014, Granarolo strengthened its position among Italy’s private labels, prioritising high-value contracts (and therefore
suspending contracts presenting low profit margins and/or small volumes, which created production inefficiencies) and
increasing turnover at double-digit rates compared to average private label growth in the main milk and cheese segments
in which it operates.
Foreign markets
The incorporation of Granarolo International demonstrates how the sales development of all the Granarolo Group’s
products beyond national borders has taken on growing strategic importance and relevance.
The growth plan is essentially based on three pillars:
-
forging partnerships with producer companies on foreign markets;
-
creation of new companies/sales branches for Granarolo products (the most recent are Granarolo UK LTD. in
56
Granarolo Group
2015 and the office in China);
-
development and strengthening of the foreign distribution network.
Logistics/distribution strategy
After the decline in 2013, milk sales volumes decreased further in 2014, down roughly 6,500 tonnes. Accordingly, the
systematic, comprehensive streamlining of costs throughout all business areas became necessary in order to maintain
balanced results.
In particular, a process was launched in 2014 to centralise the delivery of fresh milk to a few of the major chains that
Granarolo S.p.A. serves through Zeroquattro S.r.l., which no longer delivers directly to the POS (hypermarkets and
supermarkets) but instead to distribution centres, with the consequent transfer of over 20,000 tonnes of fresh milk
(annual), i.e., replacing the fractioned distribution system to individual POS with bulk delivery directly to secondary
distribution centres. Accordingly, this required the reorganisation of the door-to-door sales territories, which particularly
affected the sales network in the Emilia Romagna and Lombardy regions. In this way, the Group has adjusted its
distribution system to meet the developments of supermarket chains, in which ever larger product volumes are
concentrated (especially fresh milk) into delivery flows that are shorter and therefore also easier and special price lists
are negotiated with leading chains as part of the service.
In conjunction with the above process, in 2014, Zeroquattro S.r.l. directly contributed to Group revenue with the
distribution of non-dairy products that it purchased as finished goods, generating approximately €5.2 million, and by
developing logistics services to third party customers, generating another €6.3 million in the year.
In terms of costs, in addition to the ongoing streamlining of the logistics/distribution network, to ensure business
sustainability and narrow the gap between the continuous and progressive decline in volumes and the inflation of specific
costs, the Group found it necessary to implement another internal reorganisation plan involving, in particular, door-todoor sales delivery. As supermarket chains have centralised deliveries to distribution hubs, the company has reorganised
its distribution network. Consequently, it has commenced the procedure pursuant to article 4 of Law no. 223/91, entailing
the redundancy of 61 door-to-door salespeople in the various local units between September 2014 and December 2015.
Seventeen workers were let go in 2014 and another 20 are expected to be let go in 2015. The 2014 costs of this
reorganisation plan amount to approximately €1 million.
57
Granarolo Group
The plan for the demerger of Zeroquattro S.r.l. was approved in 2014, effective as from 1 January 2015, with the division
of logistics from distribution and sales and the creation of Zeroquattro Logistica S.r.l., which received transport and
deposit management activities (platforms and transit points).
Along the same lines, the following strategic prospects are increasingly taking shape:
-
a commercial company capable of operating on a global scale in the food industry, with expertise in traditional retail
channels and consumption outside the home, specifically with a non-exclusive emphasis on the fresh food chain,
specialised and part of the parent’s development strategies in the soft, very soft and aged cheese segment.
Zeroquattro S.r.l.’s challenge will be to develop its organisational model to improve its specific skills in the
independent retailer market (i.e., normal trade and Ho.re.ca.);
-
a logistics company (Zeroquattro Logistica S.r.l.) that can independently perform porterage and integrated logistics
services in Italy and abroad as well as domestic and international shipments and transport.
Human resources strategy
The strategy for human resources has continued in two key directions, which were identified when the Granarolo Group’s
2012-2016 business plan was defined: supporting the Group’s competitive position on the Italian market, undergoing a
highly critical phase, including with respect to food consumption, and supporting the Group as it grows in size and
expands internationally, with particular focus on the effective and efficient integration of the companies that have
progressively joined - and which will join - the Group in Italy and abroad.
The crucial aspect for the Group, which has gone from five to ten production sites, including two abroad, in a few short
years and has seen an overall rise in the complexity of its organisation due to its diversification into new markets and
products has been - and will remain - adequately managing this new size, both in terms of costs and managerial
efficiency. Similarly, it is – and will be - a strategic goal for the Human Resources Department to support and adequately
accompany this unprecedented cultural change for the Group, fuelled by extremely rapid internationalisation processes
that today, unlike previously, are not only of a much greater breadth – almost generic – but also affect commercial
interaction with new foreign markets. Moreover, these interactions directly involve the Group’s structure itself, which in
this growth process has acquired companies abroad, or created brand new ones, bringing in coworkers and stakeholders
who speak different languages and come from a different cultural background.
In terms of operations, this has required evaluating and integrating the new resources that the acquisitions have brought
with them and, more generally, involving many workers in new roles and responsibilities, accompanying their
58
Granarolo Group
professional development with adequate policies to support skills and motivate resources. From an organisational
standpoint, the substantially functional structure of the Group’s organisation has become multi-faceted with many
different differentiating elements, i.e., the increasingly frequent identification of separate units with their own
responsibilities for meeting targets.
The market context is increasingly difficult and mutable, making it crucial for the Group to be able to adapt its
organisation and business sense, even in terms of the personal assumption of new professional risks. Key managerial
expertise must be supported and developed at all organisational levels, promoting potential opportunities, including in
new contexts (which is emblematic of the new challenges/opportunities posed by internationalisation), ensuring an
organisational framework that is focused on precise business targets and supporting new personal challenges in line with
business policies, in terms of both training and promotions and raises.
With respect to training, these guidelines must be translated into excellent programmes, including long-term courses, that
develop the core skills of the individual resources and professional groups, as required by the Group’s changes, and into
adequate internal communications and involvement policies.
Along these lines, remuneration policy guidelines that focus more on business targets involving changes in each
resource’s commitment were confirmed.
In terms of relationships with the trade unions, given the Italian labour law reform and substantial change in the welfare
system, with government assistance supporting the Group’s previous rationalisation plans for its production and
logistics/commercial structures, the ability to manage reorganisation and/or production focus plans is becoming an
increasingly key factor for success. Moreover, these plans are necessary as the Group continues to acquire new
companies, and they are pursued in close connection with new product/market development plans, in part to ensure
socially sustainable models. This is without prejudice to the objective of creating a widespread company culture that is
consistent with the change in the business model to reflect the new competitive scenario on the market, where traditional
values of quality and safety of Granarolo products remain essential factors for its success, but must be combined with
efficiency and profitability in order to ensure the balance of resources required by development plans.
From an operational standpoint, this target entails the need to adopt managerial approaches focused on instilling a sense
of belonging and pride in one’s work for the sake of achieving the results assigned, a labour approach that transparently
and scrupulously focuses on effective labour organisation in line with the organisations implemented by main
competitors, with attention to drawing up contracts that reflect, as closely as possible, the Group’s ability to remunerate
its workers at the value they generate. The Group’s supplementary agreement, which was renewed in 2014, contains
59
Granarolo Group
improvements in this sense, which will be further developed with the trade unions.
Finally, even the Human Resources Department has been asked to meet the challenge of this unprecedented
internationalisation experience with a context made up of the rules, practices and issues in place on labour markets
outside Italy, both within Europe and, increasingly in the future, beyond.
IT system strategy
In 2014, the Group’s IT systems were mainly involved in business combinations.
The following activities were performed in the various areas:
Infrastructures
The Group’s secondary data centre (DC 2) was restructured to improve security standards, with particular focus on
energy efficiency. In this way, the two-year restructuring project for both of the Group’s data centres was completed.
In terms of the governance of the Group’s IT systems, an assessment project was completed on the segregation of
duties (SOD).
Processes
In line with the business plan, activities focused mainly on integrating all the business processes of the French
companies acquired in 2013, ensuring they were fully operational within the scope of the Group’s shared service-based
model.
In terms of logistics, the delivery flows processes were fully consolidated, with particular emphasis on transports and
logistics.
As for Administration, finance and control, new inter-departmental workflow management projects were launched for the
management of masterdata, and an expense note management system was introduced.
In the Sales area, a two-year project was implemented entailing the revamping of the computer applications and
infrastructure of the entire door-to-door sales force, which will also be used to computerise new processes that are not
currently managed in this way.
60
Granarolo Group
THE GROUP’S RESULTS OF OPERATIONS
Granarolo Group turnover exceeded one billion Euros in 2014, coming to €1,037 million.
The contribution of mergers and acquisitions to this growth in turnover is illustrated in the table below:
Growth in turnover on a like-for-like basis (+2.9%) reflects the net balance of 2.0% growth on the Italian market and 0.9%
growth abroad.
Growth on the Italian market was achieved despite the sharp decline in consumption, with sales of fresh milk down 5.2%
and soft cheese down 1.9% (Source: AC Nielsen I+S+LS and IRI Infoscan).
The Codipal Group’s activities entered the consolidation scope in March 2013, and Centro Sperimentale del Latte S.r.l.
was sold in the same month. In August 2014, the newco Amalattea Italia S.r.l. entered the consolidation scope.
The Group’s gross operating profit (EBITDA) amounts to €59.8 million, equal to 5.8% of revenue from sales, up by €9.6
million on 2013, thanks to product innovation and the strength of the Group’s brands, which made it possible to increase
prices to offset the greater cost of raw materials, without penalising volumes. Indeed, global volumes grew 1.6% on the
previous year, contributing to a significant increase in market shares in nearly all segments.
The gross operating profit (EBIT) totals €26.3 million, equal to 2.5% of sales revenue, €9.3 million higher than in 2013.
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Granarolo Group
In 2013, EBIT benefited from the €13.0 million gain generated by the sale of the Centro Sperimentale del Latte’s assets
and liabilities.
During the year, the useful life of plant and machinery at Granarolo S.p.A.’s main production sites was adjusted from 10
to 18 years to reflect valuations and technical appraisals, considering their actual operational efficiency. The effect of the
change in rates compared to 2013 was roughly €8.0 million.
The consolidated profit for the year amounts to €8.6 million.
The Group improved its net financial debt by €5.3 million, reporting net financial debt of €122.3 million at the end of 2014.
Equity increased by €4.0 million and now exceeds €200 million.
62
Granarolo Group
RESULTS OF OPERATIONS
The consolidated income statement is reclassified by nature below.
(thousands of Euros)
2014
2013
Change % change
Revenue from sales
Direct production costs
Contribution margin
1,037,218
(766,166)
271,053
100%
-73.9%
26.1%
989,939
(739,705)
250,234
100%
-74.7%
25.3%
47,280
(26,460)
20,819
4.8%
3.6%
8.3%
Selling, marketing and commercial costs
Indirect personnel expense
Other overheads
Other income and expense
Gross operating profit (EBITDA)
Amortisation of trademarks
Amortisation of other intangible assets
Depreciation of property, plant and equipment
Impairment losses
Non-recurring income / (expense)
Operating profit (EBIT)
Net financial expense
Actuarial loss on post-employment benefits
Gains / (losses) on equity-valued investees
Pre-tax profit
Income taxes
Profit for the year
(145,035)
(38,101)
(25,893)
(2,232)
59,791
(5,611)
(5,791)
(19,968)
(195)
(1,962)
26,264
(12,781)
(576)
(400)
12,507
(3,932)
8,575
-14.0%
-3.7%
-2.5%
-0.2%
5.8%
-0.5%
-0.6%
-1.9%
0.0%
-0.2%
2.5%
-1.2%
-0.1%
0.0%
1.2%
-0.4%
0.8%
(141,544) -14.3%
(34,795)
-3.5%
(24,377)
-2.5%
636
0.1%
50,154
5.1%
(5,425)
-0.5%
(4,100)
-0.4%
(27,319)
-2.8%
(5,001)
-0.5%
8,698
0.9%
17,007
1.7%
(10,700)
-1.1%
(514) - 0.00
1
0.00
5,794
0.6%
2,712
0.3%
8,506
0.9%
(3,491)
(3,307)
(1,517)
(2,868)
9,637
(186)
(1,691)
7,351
4,806
(10,660)
9,257
(2,081)
(62)
(401)
6,712
(6,644)
68
2.5%
9.5%
6.2%
n.s.
19.2%
3.4%
41.2%
-26.9%
n.s.
n.s.
54.4%
19.5%
12.1%
n.s.
115.8%
-245.0%
0.8%
EBITDA and EBIT are not standard financial statements captions under Italian GAAP or the IFRS endorsed by the European Union. Accordingly, the way in
which they are calculated is not necessarily unequivocal and the Group’s calculation criterion could differ from that adopted by other groups. Consequently,
EBITDA and EBIT may not be comparable with captions of the same name presented by others.
63
Granarolo Group
REVENUE FROM SALES
Revenue from sales in the year is reported below for the two operating segments, compared with prior year figures:
Revenue by CGU
Milk and beverages
Milk derivatives and other
Total
2014
472,927
564,292
1,037,218
2013
459,293
530,646
989,939
Change
13,634
33,646
47,279
In 2014, revenue grew €47.3 million, or 4.8% on 2013.
On a like-for-like consolidation basis, the growth in sales came to €29.4 million, or 2.9%.
For a clearer presentation, a reconciliation of the above revenue data is provided below, with indication of the effects of
changes in the consolidation scope.
Revenue from sales
2014
1,037,218
Group total
of which CSL
of which Codipal Group - cons. scope
of which Amalattea - cons. scope
Pro forma Group total
1,037,218
2013
989,939
1,649
(15,370)
(4,092)
Change
47,279
(1,649)
15,370
4,092
1,007,752
29,466
The Milk and Beverages CGU shows 3.0% growth in turnover due to the sound performance of its market.
The Milk Derivatives and Other CGU shows 6.3% growth, partly due to the fact that the Codipal Group was included in
the consolidation scope for all 12 months of 2014, compared to only 10 months in 2013, and partly to the consolidation of
Amalattea Italia S.r.l. as from 1 August 2014 and Pinzani 1969 S.r.l. as from 16 October 2014.
64
Granarolo Group
2014
2013
54%
54%
46%
46%
Milk and beverages
Milk derivatives and
other
Group sales are traditionally concentrated in Italy (84% of revenue), although the percentage of foreign sales grew in
2014 compared to the previous year.
The acquisition of the Codipal Group and the development of the group company Granarolo UK’s sales have boosted EU
sales by 20.2% in 2014 compared to the previous year.
The decrease in sales on non-EU markets is mainly due to the Russian embargo following political developments.
Revenue by geographical segment
(€'000)
2014
2013
Italy
870,972
849,230
European Union
157,946
131,362
26,584
8,300
9,347
(1,047)
1,037,218
989,939
47,279
Non-EU
Total revenue from sales
2014
15%
Change
21,742
2013
1%
13%
84%
1%
86%
Italy
European Union
Non-EU
65
Granarolo Group
ANALYSIS OF MAIN COST CAPTIONS
Direct production costs
In 2014, direct production costs rose by 3.6%. Their total impact on the Group’s sales is down by nearly 1% on 2013.
Direct selling, marketing and commercial costs
These costs constitute one of the most significant composite captions: they are closely related to the type of service
required of the sales organisation and the distribution structure, including marketing costs.
In 2014, direct selling costs rose 2.5% on 2013, with an impact on turnover down from 14.3% to 14.0%.
This caption includes the cost of transporting products from production sites to customers, such as:
-
primary logistics costs incurred to move products from sites to distribution platforms, and from such platforms to the
Group’s transit points or to customers with proprietary distribution centres;
-
distribution costs incurred to carry products from transit points to customers’ POS;
-
operating costs for logistics structures: costs incurred to manage the platforms, transit points and for the handling of
products within the structures;
-
marketing costs incurred for communications campaigns and the cost of trade marketing initiatives based on
promotions at POS.
The increase in direct selling costs in 2014 was due to the growth in turnover and the increase in investments in
communications and marketing to support the launch of new product ranges.
Indirect personnel expense
In 2014, the personnel expense increased due to the change in the consolidation scope from 2013, as the Codipal Group
was consolidated for twelve months of the year, and to the greater weight of performance-based remuneration. The
impact on revenue increased 0.2%.
Overheads
In 2014, overheads have the same impact on revenue as in 2013, 2.5%, and are up €1.5 million on 2013, mainly due to
the consolidation of the Codipal Group and the inclusion of Amalattea Italia S.r.l. and Pinzani 1969 S.r.l. in the
consolidation scope.
66
Granarolo Group
This caption includes:
-
the commercial structures’ operating costs: costs incurred for the sales force’s travel throughout Italy;
-
the marketing structures’ operating costs: costs incurred for market analysis and the area managers’ operational
management activities;
-
central structures’ operating costs: administrative costs of the structures responsible for quality control, research
and development, IT system management and personnel management.
Amortisation and depreciation
Amortisation and depreciation total €31.4 million (2013: €36.8 million).
In 2014, Granarolo S.p.A. reviewed the useful life of the Les Fromagers de Sainte Colombe and Maison Bernard brands,
shortening them from 10 to five years, and took inventory and had a technical appraisal conducted by a leading
independent expert specialised in the valuation of industrial plant of the conditions of its generic and specific plant and
machinery. Following this analysis, it lengthened the useful life of most generic and specific plant from 10 to 18 years.
Additional information is given in the Group’s annual report.
Impairment losses
Impairment losses mainly relate to uncompleted development projects of €195 thousand.
Non-recurring expense
Net non-recurring expense of €1,962 thousand consists of:
-
the €4,200 thousand gain due to the difference between the estimated consideration of €19.2 million, recognised in
the 2013 consolidated financial statements for the acquisition of 30% of S.A.S. Compagnie du Forum and the
consideration actually agreed with the counterparty, amounting to €15.0 million;
-
the €1,500 thousand accrual for the non-recurring revamping of the distribution structure, which will be completed in
2015;
-
the €1,940 thousand accrual for restructuring plans and termination benefits;
-
costs of €2,721 thousand for advisory services and other costs relating to business combinations.
67
Granarolo Group
Net financial expense
The overall increase in this caption is mainly due to the voluntary early repayment of the €100 million syndicated loan
agreed in October 2012. The repayment of this loan, which provided for a spread far above current market rates,
generated non-recurring expense of approximately €1.0 million (reversal of the impact of IFRS adoption and fines for
prepayment). This greater financial expense also reflects Granarolo’s strategy of implementing longer debt maturity by
agreeing non-current committed credit facilities. This strategy includes the bond issue which only took place in late 2013
(with an impact on 2014 financial expense) and the increase in the spread on current credit facilities when the stand-by
lines with a 12/18-month commitment were used.
Income taxes
This caption totals €3.9 million and includes:
-
income taxes of the year of €8.4 million;
-
net deferred income of €2.9 million on temporary tax differences;
-
other tax income of €1.5 million, mainly due to the release of over-accruals to the provision for tax risks in previous
years.
The increase on the previous year is mainly due to Granarolo S.p.A.’s greater taxable profit. In 2013, the parent reported
a tax loss for IRES (corporate income tax) purposes as a result of significant non-recurring decreases, such as the gain
on the sale of the investment in Centro Sperimentale del Latte S.r.l. which, pursuant to law (the “Pex” law), was subject
to limited taxation and a result of the release of a portion of the over-accruals to the provision for tax risks after a dispute
was settled in 2013.
A more detailed examination of this caption is given in section “10.11 Income taxes of the Granarolo Group’s annual
report.
68
Granarolo Group
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
The reclassified statement of financial position is given below, showing total net invested capital and the corresponding
sources of financing, i.e., equity and debt:
Trademarks
Goodwill
Intangible assets
Property, plant and equipment
Equity investments
Other non-current assets
A
Total non-current assets
Inventories
Trade receivables
Trade payables
Payables to employees and social security
charges payable
Other assets
Other liabilities
Current and deferred tax assets and liabilities
B
Total other assets and liabilities
Post-employment benefits
Provisions for risks and charges
C
Total provisions
D=A+B+C Net invested capital
E
Assets and liabilities held for sale
F=D+E
Total net invested capital
G
H
I=G+H
Paid-up share capital
Reserves, retained earnings
Profit for the year
Equity
Non-current financial debt
Current financial debt
Financial assets and cash and cash equivalents
Net financial debt
Own funds and debt
31/12/2014
80,059
55,953
14,897
293,474
416
1,572
446,371
64,230
158,894
(316,940)
31/12/2013
85,715
55,922
17,493
292,603
517
1,988
454,238
53,991
163,116
(316,435)
Change
(5,656)
31
(2,596)
871
(101)
(416)
(7,867)
10,239
(4,222)
(505)
(19,861)
18,825
(11,132)
30,937
(75,047)
(22,708)
(24,637)
(47,345)
323,979
323,979
(18,811)
18,088
(20,236)
40,591
(79,697)
(19,920)
(29,396)
(49,316)
325,225
325,225
(1,050)
737
9,104
(9,654)
4,650
(2,788)
4,759
1,971
(1,246)
(1,246)
157,939
35,194
8,575
201,708
126,563
86,224
(90,516)
122,271
323,979
157,939
31,174
8,506
197,619
139,621
97,259
(109,274)
127,606
325,225
4,020
69
4,089
(13,058)
(11,035)
18,758
(5,335)
(1,246)
Notes to the individual captions of consolidated net invested capital and equity are provided in the more comprehensive
section “Notes to the statement of financial position” in the Granarolo Group’s annual report.
69
Granarolo Group
NET FINANCIAL DEBT
Net financial debt is detailed below.
31/12/2014
31/12/2013
Change
Bank loans and borrowings
Bond
Loans and borrowings from other financial backers
Liabilities to non-controlling owners
Derivatives
Payables to lease companies
Non-current financial liabilities
(61,254)
(49,573)
(992)
(1,162)
(1,881)
(11,701)
(126,563)
(70,714)
(49,395)
(1,472)
(1,132)
(2,507)
(14,399)
(139,621)
9,460
(177)
480
(29)
626
2,698
13,058
Bank loans and borrowings
Loans and borrowings from other financial backers
Liabilities for non-recurring transactions
Derivatives
Payables to factoring companies
Payables to lease companies
Current financial liabilities
(57,442)
(529)
(580)
(25,360)
(2,313)
(86,224)
(40,014)
(7,147)
(24,200)
(561)
(23,326)
(2,011)
(97,259)
(17,428)
6,618
24,200
(19)
(2,034)
(302)
11,035
1,400
1,400
4,136
1,902
11
6,049
(4,136)
(502)
(11)
(4,649)
712
43
755
48
47
94
664
(4)
661
88,361
103,131
(14,770)
(122,271)
(127,606)
5,335
Securities classified as non-current assets
Non-current loan assets
Derivatives
Non-current financial assets
Securities
Current loan assets
Current financial assets
Cash and cash equivalents
Net financial debt
The Granarolo Group’s net financial debt decreased by €5.3 million, as the combined effect of cash flows generated by
operations and faster collection times for the VAT credit, offset by greater use of cash flows to fund working capital due
to the increase in inventories in connection with the growth of the hard cheese business and the change in the timing of
trade payables, in addition to the environmental reclamation of production sites, investments of €30.0 million and the
payment of dividends of €3.4 million.
Non-current bank loans and borrowings decreased due to the repayment of principal for loans in place and the voluntary
early repayment of the €100 million syndicated loan agreed in 2012 (the outstanding amount of €50.0 million was repaid
in advance), partially offset by the agreement of two new loans totalling €60.0 million.
Liabilities for non-recurring transactions decreased to nil in 2014 following the payment of the second tranche and the
earn-out on the acquisition of the Codipal Group.
The current portion of bank debt increased, as the repayment of certain non-current loans occurred in the first few
70
Granarolo Group
months of 2015.
The high balance of cash and cash equivalents reflects the significant concentration of collections in the last two days of
the year. The greater amount at 31 December 2013 is due to the €50.0 million bond, which Granarolo S.p.A. issued on
23 December 2013, exceeding the €30.0 million bilateral bank loan agreed in late 2014 with a leading Italian bank.
Payables to factoring companies mainly consist of Granarolo S.p.A.’s collections of receivables in accordance with
factoring without recourse arrangements (a targeted without recourse securitisation programme plan agreed in late 2014
will replace these arrangements in 2015). These payables, which impact cash and cash equivalents, have not yet been
paid to the factoring companies, as the related amounts were collected in the last few days of 2014. This caption also
includes receivables of €6.6 million transferred by Codipal with recourse to a leading French bank.
71
Granarolo Group
Summarised statement of cash flows
The Group’s statement of cash flows is summarised below and a reconciliation of the change in the net financial debt
and the statement of cash flows is provided as well.
Cash flows from operations
Cash flows used in investing activities
Cash flows used in financing activities
Effect of exchange differences
Net cash flows
Opening cash and cash equivalents
Closing cash and cash equivalents
Closing cash flows
31/12/2014
36,164
(34,598)
(16,400)
63
(14,770)
103,131
88,361
(14,770)
Cash and cash
equivalents
Opening balance at 31 December 2013
Gross operating cash flows
Changes in net working capital
Other changes in working capital
Net investments in non-current assets
Interest and dividends collected
Payment of call options
Codipal Group acquisition
Gain on the Codipal acquisition
Sale of Centro Sperimentale del latte
Financial expense paid
New non-current loans
Repayment of non-current loans
New/repayment of current loans
Payment of dividends
Injections of own capital
Fair value measurement of securities and derivatives
Translation differences
Opening balance at 31 December 2014
103,131
68,893
(14,818)
(17,911)
(17,822)
934
(710)
(20,000)
3,000
(13,486)
59,495
(96,348)
37,349
(3,411)
2
63
88,361
31/12/2013
86,212
(21,477)
(28,497)
36,237
66,894
103,131
36,237
Financial
assets
6,143
(3,983)
(44)
39
2,156
Gross financial
debt
Net financial debt
(236,880)
(24)
710
20,000
4,200
(246)
(59,495)
96,375
(37,427)
(212,788)
(127,606)
68,893
(14,818)
(17,936)
(21,804)
890
4,200
3,000
(13,732)
27
(78)
(3,411)
2
39
63
(122,271)
72
Granarolo Group
RISK ANALYSIS
The main risk factors or uncertainties that could have a material effect on Granarolo S.p.A. and its subsidiaries are
described below.
Additional risks and uncertain events which are not currently foreseeable or that are presently deemed improbable could,
in any case, affect the Granarolo Group’s business, financial situation and prospects.
Commercial risks
The Group operates in the dairy sector, which is highly competitive with a vast number of operators. Its main competitors
are large international groups undergoing concentration, often equipped with greater financial resources and more
diversified brands and geographical areas, in addition to commercial distributors operating with their own brands (private
labels) that implement aggressive competitive strategies.
The Granarolo Group’s competitive positioning, as leader, or just behind the market leader, exposes it to particularly
significant risks typically related to market competition.
To mitigate these risks, the Group differentiates its product range, quality/price and commercial positioning.
Consumer product compliance and safety risks
Product quality is a crucial priority for the Granarolo Group. It has implemented control procedures to ensure compliance
and safety in terms of the quality and healthiness of the products produced at group sites, in accordance with current
legal requirements and voluntary certification standards.
In addition, guidelines have been defined to manage accidents, such as the withdrawal and recall of products from the
market.
Raw material price risks
The Group is exposed to the price risk with respect to raw materials. To manage this risk, it does not use financial
markets for hedging purposes, but prefers to partially hedge the risk of fluctuations in the cost of its main raw material –
milk – by signing contracts with suppliers that entail setting valid prices on a periodic basis (quarterly/half-yearly).
73
Granarolo Group
Environmental risks
The Group’s production activities do not entail specific environmental risks. However, the Granarolo Group pays specific
attention to safety, preventing environmental pollution and disposing of waste and water, with specifically assigned
personnel.
Employee risks
Relationships with employees are regulated and governed by the national labour agreements and current legislation. Any
reorganisations and restructuring, if strategically necessary, are defined on the basis of plans that are agreed and
discussed with workers’ representatives. The Group constantly monitors the safety of work areas and implements
procedures and invests to continuously reduce the workplace injury rate at sites.
Financial risks
The Group’s main financial instruments are current and non-current bank loans and borrowings, financial leases and
bank deposits. The main purpose of these instruments is to support the parent’s operating activities and those of its
subsidiaries.
Granarolo S.p.A. has various other financial instruments, such as trade payables and receivables, arising from
operations.
Furthermore, it has traded in hedging derivatives, mainly interest rate swaps and caps to manage the risk of fluctuations
in interest rates. The Granarolo Group does not hold derivatives for speculative purposes.
The risks related to the financial instruments used by the Group are interest rate risk, currency risk, price risk, credit risk
and liquidity risk.
Interest rate risk
The Group has floating rate financing in place and believes it is exposed to the risk that a potential rise in interest rates
could increase financial expense. To mitigate this risk, it has entered into hedging derivatives that cover a portion of its
debt and provide for the exchange of a spread between the floating rate and one or more previously established fixed
rates applied to a notional amount, or that set a maximum limit to a floating rate.
74
Granarolo Group
Currency risk
The Group’s exposure to currency risk is considered limited, given the small number of purchase and sale transactions
performed in foreign currency.
Credit risk
Credit risk consists of the Group’s exposure to potential losses arising from breach of obligations by a counterparty.
The Group is not particular exposed to credit risk with respect to its customers, because it mainly deals with well-known,
reliable customers, particularly supermarket chains.
At the end of 2014, as part of its financial diversification policy, the Group implemented an IFRS-compliance without
recourse securitisation programme to replace the arrangement for the factoring of trade receivables without recourse in
place since 2012. In 2014, it also signed two more trade receivable factoring agreements without recourse with two major
Italian customers.
The maximum amount of credit risk on other financial assets, which include cash and cash equivalents, is equal to the
carrying amount of these assets in the event of the counterparty’s insolvency.
The Group has credit control processes in place providing for the analysis of customer reliability, the granting of credit
and monitoring each customer’s exposure, through an aging reporting system, and average DSO (days sales
outstanding). The SAP customer management system also receives all public data (financial statements, payment
rejections, etc.) that, together with internal evaluations, are considered in the Group’s internal rating system.
This process provides for ongoing monitoring and discussion each month between the administrative and commercial
department. Customers with turnover below a minimum threshold are mostly asked to pay upon delivery. In addition to
credit control, the process includes an administrative customer service employee who manages and responds to
customers’ complaints about prices, which makes it possible to more rapidly resolve problems and, accordingly, collect
payment.
Liquidity risk
Liquidity risk is the risk that available financial resources will not suffice to cover financial obligations with the agreed
terms and due dates.
The Group has adopted policies to optimise the management of financial resources by maintaining suitable liquidity
levels, agreeing adequate credit lines and continuously monitoring prospective liquidity conditions. To prevent
75
Granarolo Group
unexpected cash outlays from becoming a critical issue, the Group’s objective is to maintain a balance between funding
and flexibility though the use of available cash and credit lines.
A portion of bank debt is subject to financial covenants that refer to EBITDA, net debt, equity and financial expense, as
defined in the specific loan agreements. This obligation is not expected to jeopardise the Group’s financial stability and
was complied with in 2014.
Furthermore, the current portion of bank debt is covered by cash and cash equivalents, while non-current debt is evenly
distributed over future years.
76
Granarolo Group
INVESTMENTS
Investments in operating assets in 2014 amount to roughly €18.5 million.
Environment
6%
Safety
3%
Quality
assurance
10%
Saint Genix sur
Guiers
3%
New product
development
16%
Usmate
26%
Gioia Del Colle
4%
Sestu
2%
Anzio
2%
R&D and QA
6%
Soliera
21%
Pasturago
12%
Maintenance
47%
Productivity
18%
Campagne-lès
Wardrecques
1%
Castrovillari
2%
Bologna
21%
In 2014, most of these investments related to maintaining existing plant, through extraordinary maintenance activities.
Restructuring activities began at the Bologna site to incorporate plants for the packaging of pre-portioned and grated
DOP hard cheese. This will make it possible to take over most of the volumes currently handled by copackers.
Furthermore, the cogeneration system was strengthened, in addition to the other two systems active since 2011, bringing
total capacity to 3.6 MW. At the same time, activities began to install plants to recover low temperature warmth (hot
water) from the additional engine.
Activities also began at Usmate and Pasturago to install plants to recover low temperature warmth (hot water) from their
cogenerators.
The Soliera site saw the completion of the TEA (Tetra Evero Aseptic) line, the carton bottle, which combines the design
of a bottle with the environmental benefits of polylaminate packaging. Activities began to upgrade the formula production
plant, which will cover the 0 to 6 month and 6 to 12 month segments as well. To meet rising demand for 200 ml box drink
sizes, the related secondary packaging line was strengthened and can manage several different types formats.
At the Anzio site, the heads and tails recovery line was automated, improving product management
Substantial investments were carried out at the Usmate Velate site to strengthen the Mascarpone production area, which
have enabled the transfer of volumes previously produced in Bologna. Other significant investments, some of which have
77
Granarolo Group
already been carried out, were directed towards the secondary wet packaging of mozzarella to increase production
efficiency.
Steps continue at all production sites to continuously improve safety, quality and the environment. To this end, the
installation of metal detectors and x-ray machines continues at various sites. These investments, along with other
specific investments, have enabled the subsidiary Casearia Podda S.r.l. to obtain British certification BRC.
Investments have been carried out for structural and infrastructural upgrades at the main sites to meet export
specifications required by Anglo-Saxon and Far East markets.
Construction work on a new office building and the renovation of the previous building that housed Granarolo S.p.A.’s
offices were completed in Bologna.
At the Saint-Genix-sur-Guiers and Campagne-lès-Wardrecques sites, investments were carried out to improve
productivity and implement environmental and infrastructural upgrades to meet quality standards.
78
Granarolo Group
HUMAN RESOURCES POLICIES
Employment
At 31 December 2014, the Group has 2,074 employees, compared to 2,071 at 31 December 2013.
The increase in the number of employees is due to the consolidation of the subsidiaries Amalattea Italia S.r.l. (34
employees), Pinzani 1969 S.r.l. (14 employees) and Centrale del Gusto (10 employees), partially offset by the
reorganisation at various group sites and the conclusion, in May 2014, of the redundancy process at Zeroquattro S.r.l.
(reorganisation commenced in mid-2013).
On the other hand, employee turnover showed a total of 139 outgoing employees and 84 incoming employees, with a net
decrease of 55.
A total of 84 new employees were hired (compared to 56 in 2013), 42 of whom with open-ended contracts (up on the 28
of 2013), due to, as in the previous year, the prudent management of natural employee turnover and new professional
requirements.
The number of active employees at 31 December is no different from the total number of employees, as no one has been
put on government-sponsored temporary lay-off with no hours of work.
The Group’s human resources at 31 December 2014 are analysed in the tables below:
Company
Granarolo S.p.A.
Calabrialatte S.p.A.
Zeroquattro S.r.l.
Centrale del Gusto S.r.l.
Casearia Podda S.r.l.
Amalattea Italia S.r.l.
Pinzani 1969 S.r.l.
Granarolo Iberica S.L.
S.A.S. CIPF Codipal
S.A.S. Compagnie du Forum
S.A.S. Les Fromagers de Saint Omer
S.A.S. Les Fromagers de Sainte Colombe
Parma Frais S.A.R.L.
Total Granarolo Group
Position
Managers
Junior managers
White collars
Blue collars
Group total
2014
42
137
936
959
2,074
2014
1,265
55
523
10
38
34
14
4
31
11
55
27
7
2,074
2013
45
137
959
930
2,071
2013
1,274
56
567
40
3
28
14
53
28
8
2,071
Change
(9)
(1)
(44)
10
(2)
34
14
1
3
(3)
2
(1)
(1)
3
Change
(3)
(23)
29
3
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Granarolo Group
Position
Managers
Junior managers
White collars
Blue collars
Group total
Men
37
98
667
855
1,657
Women
5
39
269
104
417
Total
42
137
936
959
2,074
Position
Managers
Junior managers
White collars
Blue collars
Group total
EU
42
137
920
863
1,962
Non-EU
16
96
112
Total
42
137
936
959
2,074
Position
Managers
Junior managers
White collars
Blue collars
Group total
20-30
4
55
67
126
30-40
3
23
191
216
433
40-50
18
58
311
342
729
50-60
18
44
349
303
714
60+
3
8
30
31
72
Totale
42
137
936
959
2,074
Training
The 2014 trend in training confirmed that of previous years. Similarly, the number of training hours focused on
specialisation tied to specific positions grew.
A total of 28,326 training hours were provided (+7% on 2013) to 1,542 workers, for a total of 3,496 individual
attendances.
Training activities mainly related to the following areas:
-
languages, accounting for roughly 40% of the training hours;
-
quality, safety and the environment, accounting for nearly 30% of the training hours;
-
specialised technical training, coming in at just under 30%;
-
managerial training making up the residual hours.
Activities organised in 2014 include specific training for maintenance operators and shift managers at the Italian and
French sites. They included an important project with many days of training, totalling over 3,000 training hours focused
on the consolidation and development of technical and plant-related skills and the standardisation of the problem solving
process to minimise the time needed to resolve breakdowns.
Technical/specialised training also included 934 hours devoted to sales management, with 508 hours of internal training
focused on typical aspects for the sales force.
Total training hours related to the development of expertise on quality, safety and the environment came to 11,432 hours,
equal to 40% of total training provided. Even though the important training campaign in connection with the obligations
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Granarolo Group
under the State-Region Agreement, which was completed in 2013, the Group has continued to devote much attention to
these aspects, which are crucial factors in the successful creation of products and management of business processes.
29% of the total hours was devoted to language training, which involved 164 employees for a total of 8,118 hours. The
focus was on English (over 80% of language training hours), which remains the most important foreign language, in line
with the Group’s internationalisation strategy.
As in previous years, the number of training hours provided using e-learning and blended (e-learning + classroom)
methods continued to grow. Over 25% of the hours were provided remotely.
Teaching methods
Mentoring
Classroom
Classroom + on-the-job training
Blended
Documentation
E-learning
Total
Total hours
619
18,886
2,550
2,978
123
1,320
26,476
% hours out
of total
2.3%
71.3%
9.6%
11.2%
0.5%
5.0%
100%
The organisation and trade unions
Organisational initiatives were began in 2014 to integrate two new companies into the Group. The inclusion of Amalattea
Italia S.r.l. and Pinzani 1969 S.r.l., together with Casearia Podda S.r.l., has resulted in a structured production chain for
sheep and goat milk products. At the same time, the Group’s foreign business strategies successfully integrated
Compagnie Du Forum S.A.S., the French group acquired in 2013 and which underwent staff redundancy programmes.
Since April 2014, with the opening of the pastry, ice cream and coffee shop in central Bologna, managed by Centrale del
Gusto S.r.l., the Group’s organisation has expanded to include the retail sale of food products.
The Commercial Department underwent additional organisational projects to strengthen the management of structures
and to streamline them. These projects involved both the supermarket chain sales and marketing areas (which includes
Foreign Marketing) and Operations, in addition to the Budgeting and Management Control and IT Systems areas within
Administration, Finance and Control. Furthermore, an overall business function (procurement and sales) was established
for products procured by the door-to-door sales network and Egg segment.
Activities with trade unions were significant in 2014
In July, the Group’s supplementary agreement was signed for the 2014-2016 three-year period, after six months of
discussions with the trade unions. In the section about the Group’s business policy, the parent and the trade unions
confirmed Granarolo’s mission as a chain business and agreed that this necessitates a development strategy that
confirms the traditional strengths of its Italian background and the distinctive status of the Granarolo brand, while also
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Granarolo Group
leveraging on its technical and product innovation capabilities and potential growth opportunities through acquisitions and
partnerships with other businesses.
The regulatory structure of the agreement confirms the trade union protocol previously in place with respect to
discussions - at Group/individual site level – on development guidelines for the group companies and to resolve any
organisational and work condition issues. Similarly, regulatory agreements relating to individual rights, equal
opportunities, training, safety in the workplace and company welfare were also confirmed and/or improved upon those
provided for by the national labour agreement and the previous Granarolo agreement. The part of the agreement
specifically relating to labour organisation was also renewed, and the parties agreed on the need for ongoing attention
and mutual willingness to communicate in order to meet quality, efficiency and production flexibility targets which are
crucial in the Group’s competitive context.
The Usmate Velate site also signed the 2014-2016 supplementary agreement, joining the Group’s system in an
alignment process that will be completed in 2019. Furthermore, significant important agreements were reached for
Zeroquattro S.r.l.’s specific supplementary protocol, defining financially sustainable terms given the specific nature of the
subsidiary’s business and the alignment of the supplementary agreements that the Group committed to when the
company was set up.
Another important development was the series of agreements reached with trade unions in relation to the subsidiary
Zeroquattro S.r.l.’s restructuring. The reorganisation commenced in 2013 was completed, entailing redundancy plans for
the central and sales coordination structures. Agreements were signed for the transfer of personnel in view of the
upcoming demerger of the logistics activities from the company’s distribution and commercial area (these agreements
are part of the project to share logistics and development services with outside partners, such as an independent
business area and distribution/door-to-door sales services). Lastly, an agreement was signed for the two-year
management of redundancies in the distribution area following the centralisation of fresh milk deliveries to the distribution
centres of supermarket chains.
In addition, discussions with trade unions were positively concluded with respect to the Bologna site’s new production
mission and the management of crisis triggered by Ferrero’s decision to discontinue the production of tea at the Soliera
site, defining non-traumatic redundancies and a production flexibility agreement for the site that would enable the
recovery of the production volumes lost due to Ferraro’s termination of the contract.
The French subsidiaries were also involved in talks with trade unions. In October 2014, the business committee was set
up to negotiate with trade unions on the French group’s behalf regarding a variety of issues affecting staff in accordance
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Granarolo Group
with French legislation. The establishment of the business committee also entails workers’ financial participation in a
share of any positive business results.
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Granarolo Group
RESEARCH AND DEVELOPMENT
Product and process innovation led research and development activities in 2014, without overlooking the continuous
improvement of the main features of product lines. This was achieved through improvement projects targeting the
performance of various products and by creating innovative products.
In particular, research and development activities were included in the Group’s growth plan, in accordance with the
following areas of development:
-
Granarolo 100% vegan: in some ways, this is a revolutionary step for Granarolo, which has always focused on
developing the dairy chain. The vegan segment shows continuous growth and, to meet consumers’ demands,
Granarolo has developed a new line of vegan rice and soy milk, along with a line of fermented products (yogurt)
and soy-based condiments. This line also includes a high-temperature pasteurised soy milk, the only product of its
kind to be found on the refrigerated shelf at supermarket chains.
-
Foreign markets: international growth is a strategic element for the Group and, consequently, R&D resources are
intensely involved in support activities through the development products specifically designed for foreign markets:
o
UHT liquid baby formula and toddler milk, in 500 ml tetrapaks;
o
UHT milk with strawberry and banana flavouring, in packages of three 200 ml containers for children;
o
technological and production solutions to lengthen the shelf life of soft cheese (e.g., mascarpone);
o
activities to support new aged cheese products (DOP, pre-portioned and grated) which constitute a key
foreign market entrance vehicle;
-
lactose-free products: lactose-free products continue to show sharp growth. To expand the Accadì (lactose-free)
line, yogurt, ricotta, mascarpone and light butter have been developed;
-
Specific targets: activities have been carried out on:
o
“light” versions of products (mozzarella, stracchino and mild ricotta)
o
children’s products: the Yomino line has been expanded to include soft cheese, with a new recipe and
rectangular shapes, and Yomino DJ dessert.
Additional development has enabled the diversification of yogurt and cheese, particularly Yomo sweet plain yogurt, Yomo
Più&Più, Yomo Delta - authentic Greek yogurt, new recipes for high quality products, sliced scamorza cheese and DOP
squacquerone.
Design and development also focused on packaging:
-
optimising packaging materials, especially to extend the useful life of products;
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Granarolo Group
-
eco-sustainability activities, with the development of a special ecological package;
-
support in the installation of new packaging lines at sites;
-
logistics optimisation activities, studying new secondary packaging and optimised palletisation.
The R&D department also offered key support activities for commercial projects through the development of products for
the private label market and industrial customers.
Product and ingredient quality maintenance activities were also carried out, along with the definition and optimisation of
technological process parameters for existing production lines, studying and analysing products’ shelf lives.
In 2014, a scientific research area was created to consider aspects concerning nutrition and health, microbiology and
biotechnology and to identify potential production development initiatives on the basis of new scientific discoveries,
including with participation in funded research projects. In this respect, national and European projects are underway,
with clinical studies planned for products under development.
Research and development
Research and development activities are carried out at three production sites:
-
Bologna: milk and cream product development
-
Usmate Velate: cheese product development
-
Pasturago: yogurt and dessert development. The pilot centre operates at the Pasturago site and can support
the development of various product types.
15 researchers involved in the research and development department handle all product innovation stages from
conception to implementation, new product development and launch. In addition, they also attend to post-launch
activities.
Experiments on products and packaging play a key role in the development of new products. These tests are carried out
with subsequent scaling up until production begins.
The performance of the project requires the creation of a work group, with the involvement of all business departments
concerned (Marketing, Technical Management, Procurement, Manufacturing and Quality Assurance in particular), to
check and define production, financial, commercial and distribution feasibility.
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Granarolo Group
The team’s activities
The chart shows the time that researchers have devoted to the various projects, broken down by type of innovation. Most
projects relate to product innovation (45% of time), with product and process optimisation coming in second (23.1%).
R&D projects - 2014
7%
3%
22%
45%
Innovation
Optimisation
Absolute innovation
Industrial/quality optimisation
Pilot plant management
23%
The amount of time devoted to overall innovation is significant (22.2%), and includes the development of particularly
innovative products in terms of formulation, technology or product category. As shown in the chart below, the
development of the new line of vegan beverages and derivative products falls into this type of innovation.
Absolute innovation by category - 2014
3%
5%
14%
45%
Cheese
Milk
Yogurt and Desserts
Packages
33%
Other (plant-based)
The Group’s deep focus on innovation has enabled it to launch many new products on the market in the different product
categories.
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Granarolo Group
QUALITY ASSURANCE AND FOOD SAFETY
Certification
In 2014, the Group successfully continued the adoption of the FSSC 22000:2010, an international standard for food
safety management system certification, resulting from the integration of ISO 22000:2005 and PAS 220:2008 standards.
These activities began in 2010 with the certification of the Anzio site and in 2011 progressively extended to the
Pasturago, Bologna, Gioia del Colle and Soliera sites. In 2013, the Usmate Velate site, which already held BRC and IFS
certification and, from 2004, UNI ISO UNI EN 9001:2008 certification, received ISO 22000 certification. In 2013, these
Granarolo sites operated in accordance with an integrated management system for quality and food safety. In November
2014, the Castrovillari (CS) completed the integration process, obtaining 22000 certification and receiving confirmation of
BRC certification, improving from level B in 2013 to the current level A.
In 2014, not only did Casearia Podda complete new fresh milk and yogurt lines in accordance with Group standards and
definitively update refrigerated stocking cells for products and built loading bays for door-to-door lorries, but it also began
work to update the cheese areas and received BRC certification in September.
In January 2014, the integrated quality, safety and the environment policy was confirmed. Detailed charters for each area
will be prepared in 2015.
In February, the multi-site certification was confirmed for the registered office (supply chain, commercial, marketing,
research and development and human resources). The certification process consisted of an analysis of food safety
dangers for all production site departments and the central quality group.
The integration of systems for quality management (ISO 9001:2008), food safety (FSSC 22000:2010), health and safety
in the workplace (OHSAS 18001:2007) and the environment (ISO 14001:2004) continues.
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Granarolo Group
Summary of the Group’s quality and food safety certification
Site
ISO 9001
FSSC22000
BRC
IFS
DTP 035 high quality chain
Egg Chain
Organic
100% natural yogurt
100% Italian milk mozzarella
Bologna
Pasturago
X
X
X
X
X
X
X
X
X
X
X
X
X
X
FSSC22000
BRC
IFS
DTP 035 high quality chain
Egg Chain
Organic
100% natural yogurt
100% Italian milk mozzarella
X
X
X
X
X
Soliera
Gioia del Colle
X
X
X
X
X
X
X
X
Castrovillari
ISO 9001
Usmate
Velate
Sestu
X
X
Villagrande
Anzio
X
X
X
X
X
Campagnelès
Wardrecques
Saint Genix
sur Guiers
X
X
X
X
X
X
X
Since 2011, the FSSC 22000:2010 format is the equivalent of proprietary BRC and IFC standards, which European
retailers have been required to meet for some time in order to access the distribution chain, as a mandatory prerequisite
to ensure the safety of products supplied and that suppliers have taken all the necessary precautions.
Unlike previous standards, the FSSC 22000:2010 format takes a pragmatic approach to assessing and implementing the
necessary action to reduce or eliminate food safety risks. These standards contribute to the achievement of both
operational and structural results, at times with a substantial economic impact.
The optimisation and simplification of flows, personnel’s routes, ingredients and packaging in the production
departments, which already began with the Quality Assurance in previous years, continued in 2014 as well, and the
experience gained and the models tested in Granarolo’s sites were also extended to the Usmate Velate, Sestu and
Castrovillari sites and the Zeroquattro depots. The high quality standards and adequate food safety management
systems have been recognised by major UK retailers that have therefore also ordered 2014 supplies from the Usmate
site.
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Granarolo Group
Ongoing training activities and, as a result, the greater familiarity with specific operational methods to increase the safety
and hygiene of products and processes are practical examples of the steps taken to contain the dangers that put food
safety at risk every day.
The CORE project continued in 2014 as well, aimed at reducing foreign bodies in products. All sites continued the
detailed analysis of the dangers posed by foreign bodies due to the construction characteristics of production and
packaging plant, along with the analysis of the technical features and the adequate of metal detectors and X-ray
machines in place, evaluating the improvements to be made to this equipment, training personnel on how to manage
MD/XR equipment and, finally, implementing specific check lists. Explanatory signage was installed to support all these
activities.
In conclusion, following the considerable investments made in recent years, all bagged mozzarella packaging lines are
equipped with modern, highly sensitive metal detectors or x-ray machines.
In addition to operating aspects, significant structural projects with a major financial impact were carried out, including
changes to the road system and site access, protecting plant and machinery from physical harm, updating software and
increasing the degree of automation of thermal treatment systems to maximise food safety levels.
Also in order to increase food safety levels, specific monitoring plans were adopted in 2014 for supplies of milk and other
ingredients. During the year, Supplier Quality Insurance bodies conducted 138 audits, including 33 on milk and cream
suppliers, 37 on ingredient suppliers, 29 on finished product suppliers, 18 on egg suppliers and 21 on packaging material
suppliers. In addition, a dramatic boost was given to controls on packaging and, in collaboration with packaging material
suppliers, particularly those supplying wrapping film, a risk analysis was conducted based on the evaluation of data
gathered in recent years in relation to solvents and heavy metals, total and specific migration and the migration of
aromatic amines, defining a minimum control plan. A similar approach will be taken in 2015 for all containers in direct
contact with products. Greater quality guarantees of raw materials, ingredients and, accordingly, finished goods, will arise
from the central laboratory’s continuous search for new analytical methods to detect pharmacological residue, sites’
adoption of the rapid detection of total bacteria in incoming milk and cream, the constant use of rapid detection systems
for mycotoxins, an increase in the number of analyses conducted on contaminants and the ongoing application of
georeferencing for milk production, with the mapping of raw material production sites and potential risk sources near
dairy farms.
As part of the vegan project, Granarolo no-OGM soy/corn specifications have been defined in accordance with
DTP030, minimum control specifications have been drawn in line with food and chain safety principles, and it is followed
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Granarolo Group
by all chain operators, seed producers, soy extract suppliers, transporters of semi-finished products and production sites.
The minimum control plan not only provides for analyses to exclude any no-OGM products through out all processing
stages, but it also requires utmost attention to monitoring potential contaminants in the water and soy seeds and the
validation of CIP washes in tanks and plants to prevent any cross contamination. DTP030 certification was obtained for
no-OGM and 100% Italian certiication is slated for February 2015.
Specifically, in terms of AFM1 monitoring, all production sites continued to check all raw milk tanks upon their arrival
throughout 2014 and, in collaboration with Granlatte, an alert threshold of 30 ppt was set for self-analyses performed
every 15 days on bulk milk. This is more restrictive that the limit set by the supervisory authorities. In view of close
cooperation with milk suppliers, the central laboratory has offered to help Granlatte dairy farmers determine mycotoxin in
milk when the cow’s diet is changed and when new lots of corn, silage or feed arrive. Indeed, rather than focusing solely
on product analysis, Granarolo is increasingly convinced that it is important to go upstream in the production chain and
assess the factors that, at a product’s origin, could affect its quality, before looking at the product itself. Moreover, as it
oversees the entire production chain, raw material control systems are more stringent and efficient.
Product quality and food safety activities and checks
During 2014, activities to ensure the safety of supplies were ramped up further, especially with respect to raw materials
and branded finished goods. Technical specifications were defined for all milk-based raw materials (raw and pasteurised
milk, cream and whey) with restrictions on how long after milking in the cowshed before they could be delivered (“milk
age” restriction) and the acceptable chemical and microbiological limits were once again reviewed. To gain more control
over ingredients, in collaboration with suppliers, all information and data necessary to prepare technical specifications
was gathered. This work was completed in November.
Auditing on the supply of eggs continued: the selection and packaging centres, poultry farms and feed producers were
internally audited in accordance with an annual plan and received an inspection from the certifying body, which
confirmed their compliance with the standards established in the relevant specifications. Again in 2014, the use of the L.
Acidophilus D2 CSL probiotic was used in the feed given to hens: the Group is deeply convinced that this practice, as it
has a positive effect on intestinal flora, improves the nutritional content of eggs, the characteristics of the shell and,
consequently, has a positive impact on the product’s quality and food safety.
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In accordance with the annual audit plan, 29 suppliers of branded finished goods were audited for quality. In this case, as
for raw materials, technical specifications were defined with restrictions on chemical, microbiological and sensorial
parameters.
The supervisory plan was confirmed for raw materials and branded finished goods (including both those produced
internally and those produced by third parties). As in 2013, the plan entailed about 15,000 checks, approximately 1,000
of which to monitor pesticide, dioxin, PCB and heavy metal content.
Projects to improve quality and food safety management, along with the objectives for the related KPIs were formalised
and published in the “2014 Quality, Safety and Environment Plan”. The monthly progress reports were performed and
discussed at various Group levels.
Site and product safety are new issues that all large distribution chains in Europe and America require of their suppliers.
The strategies developed to meeting food safety standards must be integrated with specific actions to improve safety in
terms of food defence. In this respect, in 2014, the food defence project began to define a food defence polity, take
structural and management steps to make stalls safer and define a plan that can be followed, with corrective action to be
taken if an intentional attack or deliberate tampering occurs.
These data and the activities carried out reinforce the awareness that quality is a key asset for Granarolo, which must be
constantly monitored and continuously improved.
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Granarolo Group
ENVIRONMENTAL
SUSTAINABILITY
FROM
THE
COWSHED
TO
DISPOSAL
The environment
Environmental certification
In terms of environmental sustainability, Granarolo has set the following strategic targets:
-
prevent, control and reduce environmental impact by setting tangible, measurable objectives;
-
making its entire production chain sustainable;
-
increasing environmental awareness through training and communications programmes;
-
informing stakeholders, including consumers, of the results of environmental management through clear, accessible
communications.
In the pursuit of these targets, the Group:
-
readily complies with all environmental legislation;
-
adopts certified management systems to improve environmental performance;
-
conducts LCA (Life Cycle Assessment) studies as a decision-making tool for new products and projects;
-
reports strategies to stakeholders.
In 2014, the safety and environmental management systems at six sites and the Group’s registered office continued to
be audited to maintain multi-site certification in accordance with UNI EN ISO 14001 and OHSAS 18001 standards. The
Usmate-Velate (MB) production site was also covered by the multi-site certification during the year.
In addition, the two sites in Emilia Romagna maintained their EMAS registration.
Granarolo S.p.A.’s EDP process
In 2013, Granarolo implemented the EDP process to publish verified information on its main product categories.
The EPD process was developed through the preparation, verification and publication of environmental production
declarations (“EPD”) that have been validated in accordance with International EPD ® System requirements
(www.environdec.com).
EPDs are Type III ISO (Environmental declarations - Principles and Procedures - ISO 14025) declarations based on a
product life cycle analysis (LCA) with the main aim of providing relevant, verified and comparable information on the
environmental impact of a given product or service.
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Granarolo Group
The limits of the system subject to analysis are shown below.
Upstream Process
1
Industrial Process
Downstream Process
Production of raw milk
www.studiolce.it
INPUT
OUTPUT
Livestock
raising
Cowshed
liquid waste
Feed
3
FARMS
Process/Treatment
Waste
Water
4
Transport
WATER
Cleaning
products
Enteric
fermentation
emissions
Energy
consumption
ENERGY
Transport to the
logistics platforms
ENERGY
2
Pasteurisation
Packaging
Production of packaging
Raw materials
ENERGY
Production of
Caps-PET preforms
USE
Plants: Bologna, Anzio, Gioia del Colle
(Sail), Pasturago, Catrovillari (Assolac)
END OF LIFE
FOR PRIMARY
PACKAGES
Transport of raw milk
Transport of packaging materials
Voluntary
optional phases
Trannsport of finished good
In the second half of 2014, three environmental product declarations (EPD®) were prepared and published for
Granarolo brand products: PNB apricot yogurt, ESL cream and Accadì mozzarella.
The products for which Granarolo has currently published environmental declarations are:
-
high quality fresh milk in PET bottles;
-
“Piacere leggero” (“light”) fresh milk in PET bottles;
-
ESL Prima Natura Bio milk in PET bottles;
-
low-fat ESL Prima Natura Bio milk in PET bottles;
-
high quality mozzarella;
-
Prima Natura Bio fresh eggs;
-
ESL cream;
-
Accadì mozzarella;
-
organic apricot yogurt.
The indicators reported in the EPDs also include carbon, ecological and water footprints, indicating, for example, the
impact of 1 kg of yogurt and 1 litre of high quality packaged in a PET bottle.
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Granarolo Group
Ecological footprint of 1 kg of yogurt
Ecological footprint of 1 litre of high quality milk
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Granarolo Group
Steps taken to reduce the environmental impact of the Granarolo Group’s products
The LCA analyses and the published EPDs are one of the ways in which the Group has identified key areas on which to
focus when seeking to reduce the environmental impact of its products, and the steps taken involve the main elements of
the chain.
Environmental projects
The activities planned for the development of the LCA of traditional and organic products are carried out in the following
stages:
-
development of LCAs (ISO 14040 and 14044 standards) to assess the environmental impact of products over their
entire life cycle (farming practices, livestock raising, production, transport and distribution, packaging, stocking and
end-of-life);
-
identification of potential measures to be taken to reduce emissions in the life cycle of the selected consumer
products. To this end, the results of Granarolo’s LCA project will be incorporated in the definition of its
environmental programmes, considering the criteria, specific targets and actions to reduce their carbon footprint,
with specific regard to Granarolo’s organic products. Certain technical steps to be taken have already been
outlined:
-
o
more efficient farming practices;
o
solar power panels on cowsheds;
o
biogas production via anaerobic digestion for cowsheds;
o
cogeneration plan at sites;
o
minimisation of product packaging;
implementation and development of a model capable of calculating each product’s total carbon footprint for each of
the various stages of livestock raising, production, packaging, transport and distribution;
-
evaluation of steps to be taken during the product’s life cycle. Particular attention will be paid to the environmental
performance of organic products, dairy and egg farms and the various production/processing sites;
-
introduction of ecodesign criteria in business processes to improve the environmental performance of products:
-
preparation of guidelines for the dairy farms that supply raw milk;
-
definition and development of a communications strategy for the environmental impact of products and the results
achieved on the basis of environmental product declarations (“EPDs”) (ISO 14025), product environmental profiles
(“PEP”) (ISO 14025) and environmental product labelling (BP X30-323). These communications will target end
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Granarolo Group
consumers.
Water conservation and waste management
Water conservation efforts have involved projects carried out to calculate water consumption in the various production
divisions by installing gauges to optimise consumption and define targeted strategies for steps to be taken in the washing
of production lines and plant, with the use of single-product sanitisers which do not require more than one rinse, saving
significant water volumes.
In 2012 and 2013, a production water recovery system was built at the Bologna production site so the water could be
used for the cooling towers (non-potable). In 2014, roughly 7% of the site’s water needs were met through the recovery
and reuse of water.
Water consumption in the past three years has been more or less steady and is slightly down at some production sites
thanks to the conservation measures taken. One exception is the Gioia del Colle site where a new packaging plant was
installed in 2013 and rolled out in 2014, for which water conservation measures have not yet been taken.
Energy conservation
In 2014, two complementary projects were launched at the cogeneration systems already in place (at the Usmate Velate
and Pasturago di Vernate sites), to recover low-temperature heat for process plant, such as automated and manual
washing systems (CIP) and production room heating systems (UTA). The two recovery systems will be rolled out in
spring 2015.
With respect to the cogeneration systems, in 2014, Granarolo rolled out the last cogeneration plan with the initial
objective of self-producing about half of the electrical energy needed to meet all production requirements by 2014. It also
plans to strengthen the Bologna plant in 2015, leading to installed power for the Group of roughly 15 MW, the
consumption equivalent of approximately 5,000 households.
During the year, the compressed air systems at the Pasturago site were installed and updated with the installation of
inverters on the main machines. Tests are currently in progress to improve the yield of steam distribution lines using
special high-efficiency outlets to separate the condensation/steam mixture.
Furthermore, specific energy conservation studies were carried out using various innovative systems. Their application
will be fine-tuned as soon as this is possible (e.g., following line harmonics checks), while others are being implemented
(e.g., localised power factor correction, LED lighting, etc.).
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Granarolo Group
In 2015, in accordance with Legislative decree no. 102/2014, energy audits will be conducted at all Granarolo S.p.A.
production sites to diagnose energy use and plan the actions for the preparation of an energy conservation plan.
In 2014, the energy conservation projects that the Group has implemented led to significant results in addition to those
already reached in 2013, such as cutting electrical energy consumption by 3% and natural gas consumption by 5%.
Waste management
The Group continues in its commitment to separate waste produced at its sites, increasing the portion of waste (mostly
paper and plastic) that it recovers for reuse and recycling. In 2014, it began investigating supplies from companies that
offer 100% recycled plastic packaging to be used as secondary packaging for milk bottles. Specific audits were
conducted on the main treatment sludge disposal centres to monitor performance and vet qualified providers.
The waste management software used at all sites has made it possible to monitor the trend in waste produced and
evaluate potential action and improvement areas.
Granarolo continues to research how to reduce plastic, paper and aluminium content in its packaging and how to replace
traditional materials with other, new generation materials. Granarolo participates in a national research project to study
and develop biodegradable polymers for their use in the replacement of current traditional plastic packaging.
Packaging innovation projects are aimed at providing improved services to consumers, like new wrapping for high quality
stracchino and mozzarella, designed to make them easier to open, even when they are consumed outside the home.
2015 environmental targets
The following environmental targets have been set for 2015:
-
extending environmental certification to the Group’s sites where it has not yet been obtained;
-
completing the upgrading of water treatment plant at Saint-Genix-sur-Guiers and Usmate Velate;
-
continuing research and development to reuse packaging waste and reduce it by promoting ecological packaging.
-
Granarolo S.p.A. will adopt a calculation tool for the main CSR indicators in accordance with G4 guidelines
(Sustainability Reporting Guidelines) for their use in the preparation of the sustainability report:
-
as part of the European Life+ Climate Change E-R project, with the aim of reducing the greenhouse gas emissions
of farming systems in the Emilia-Romagna region, in collaboration with certain farming businesses that have been
previously selected and involved, Granarolo’s parent Granlatte will conduct innovative farming practice and forage
production practice experiments to reduce the greenhouse gases emitted in the raising of cows at the dairy farms
within its cooperative.
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Granarolo Group
HEALTH AND SAFETY IN THE WORKPLACE
Granarolo’s commitment to health and safety in the workplace focused on the following activities again in 2014:
-
training and awareness campaigns for personnel and targeted training on hygiene and safety in the workplace;
-
non-recurring work on machines, structures and plant to improve safety conditions and update to the best
technologies available;
-
improvement of roads in production sites with horizontal and vertical signs;
-
in-depth analysis and management of accidents to prevent injuries, with the preparation of the main ratios and
identification of the consequent costs;
-
access control using remote systems operating without the use of personnel;
-
updating of specific risk assessment documents where required to maintain adequate risk assessments as situations
and production processes change;
-
adoption of software to easily and simply organise and check the implementation of the risk assessment document
and related activities (e.g., management of individual safety devices, health surveillance, periodic training deadlines,
deadlines to meet requirements, etc.);
-
adoption of management software for continuous updates on changes in legislation and the related requirements:
-
specific audits at all sites to monitor that safety and environmental requirements pursuant to current legislation are
met in practice;
-
affixing specific notices warning of injuries that have occurred at nearly all sites.
Certification
In 2014, the safety and environmental management system audit continued to maintain multi-site certification in
accordance with UNI EN ISO 14001 and OHSAS 18001 standards.
Consolidation activities continued with respect to OHSAS 18001:2007 system management by planning operating
improvement activities on plant and safety organisation. The multi-site certification project was completed in February
2013 with the independent certifier’s release of a certification of compliance with voluntary OHSAS 18001:2007
standards for the Granarolo Group’s sites. It was confirmed in 2014.
After completing a planned process and receiving a positive audit report from the certifying body (SGS), the UsmateVelate (MB) production site was included in the multi-site certification scope.
Calabrialatte and Casearia Podda also continued adopting their specific safety procedures to create a shared basis that
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Granarolo Group
will enable them to rapidly adopt codes of conduct and procedures in accordance with the Granarolo Group’s safety
standards, leading to certification of compliance with OHSAS 18001 standards.
Safety indicators
Number of injuries and frequency ratio
The Granarolo Group recorded a total of 53 injuries, showing an improvement on the 60 injuries reported in 2013. They
are summarised below:
Number of injuries:
-
Usmate saw an increase from 12 injuries in 2013 to 17 in 2014;
-
The number of injuries at Anzio remained the same, three in both 2013 and 2014;
-
Bologna Production injuries increased from 16 in 2013 to 19 in 2014;
-
The actual number of injuries at the Bologna Offices was two in 2014, as in 2013;
-
On an actual basis, Gioia del Colle reported no injuries in 2014, compared to two in 2013;
-
Pasturago Production remained the same at six injuries, as in 2013;
-
Soliera improved significantly from 19 injuries in 2013 to six in 2014;
The Codipal Group’s French sites reported nine injuries, the same as in the previous year.
Frequency ratio:
-
the frequency ratio at Usmate, Anzio and Bologna Production is higher than the Group’s target and the rate
recommended by INAIL (national labour insurance institution) for the sector.
-
it is higher than the target, but lower than INAIL rate for the sector for Bologna Offices;
-
it is lower than both the target and the INAIL rate for Soliera, Pasturago Offices, Pasturago Production and Gioia
del Colle.
Overall, the Group’s consolidated frequency ratio is higher than the target, but remains lower than the INAIL rate for the
sector.
Rate of injury seriousness and the number of days lost
The number of days lost improved slightly from 1,225 in 2013 to 1,175 in 2014.
The seriousness rate in 2014 is:
-
lower than both the target and the INAIL rate for the sector at Usmate, Bologna Offices, Soliera, Gioia del Colle and
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Granarolo Group
Pasturago Offices;
-
higher than the target, but lower than the INAIL rate for the sector at Anzio, Bologna Production and Pasturago
Production;
The Codipal Group’s French sites show a slight increase in the number of days lost from 408 in 2013 to 550 in 2014.
Overall, the Group’s consolidated seriousness rate is above the target but below the INAIL rate for the sector, showing a
slight improvement on 2013, from 0.57 to 0.56.
The subsidiaries’ sites and branches
-
Sestu: the situation is the same as in 2013 and the number of injuries is zero, as in 2013.
-
Castrovillari: the situation has worsened compared to 2014, from no injuries in 2013 to two in 2014.
-
Logistics hubs and depots: the number of injuries improved in 2014 from 23 to 18. The frequency rate dropped from
28.66 to 19. The number of days lost worsened slightly on 2013, from 572 days in 2013 to 576 in 2014. Considered
overall, the seriousness rate is below the average for the sector and went from 0.61 to 0.64.
Despite intense efforts, the targets set for injury rates were not achieved, although five of the eight sites subject to
monitoring achieved the individual target.
The Group complied with the frequency and seriousness rates recommended by INAIL.
The Group plans to strive for “no injuries”, continuing to analyse both injuries and near misses and to implement a fullscale awareness plan to achieve this goal.
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Granarolo Group
AS EXPO 2015 APPROACHES
2014 was a year of rapid expansion to international markets, a year of significant change at all levels and a year of
preparation for a major event for Italian businesses and for Granarolo, Expo 2015.
The Granarolo Group - which is Italy’s largest milk chain directly owned by 1,000 associated producers as a
cooperative - will be one of the big names in the Italian Pavilion at Expo 2015. It will represent Italy’s milk chain. It
won a tender.
A highly symbolic food in nearly every culture around the world, milk is the liquid of life, a symbol of fertility and plenty. It
is the food of the gods, a human child’s first source of nourishment and, accordingly, it is closely associated with the
source of life itself. The Ancient Greeks’ called the galaxy the Milky Way and it has quintessentially remained in our
collective imagination an element of creation, the keeper of fertility, birth and growth. Of universal distinction, milk is the
ideal protagonist for an installation that appeals to everyone. Accordingly, visitors will enter a man-made galaxy created
within the exhibitioners’ area of the expo. Displays and installations along this path into the history, artisanal production,
territory and art of milk and its derivatives will give visitors an exciting, hands-on, interactive experience. The Lercaro
Foundation in Bologna has generously loaned one of the most stunning depictions of the Nursing Madonna from the
late fifteenth century to be displayed in this space. It is a lesser known haut-relief because it was only recently
discovered.
Visitors will also be able to taste the most important Made-in-Italy foods in a special corner where a selection of
traditional Italian and DOP cheeses will showcased, as these products are an important vehicle for reaching foreign
markets.
Granarolo will also offer a series of projects building upon the theme of vegetable gardens and the sprouting of young
talent capable of best highlighting Italian excellence. Visitors up to the age of 30 will be able to participate in the
Archimede Expo talent search. Innovative solutions, product ideas for the national and international market and new
ideas for processing and packaging will be judged, presented and awarded. After a series of steps, a €40,000
scholarship will be awarded to young Italians who want to study at Università del Gusto in Pollenzo.
All the Group’s stakeholders have been affected by the Expo 2015 project; employees have been involved in
organising the exhibition of the Group and its products; institutions, opinion leaders and press have been more
attentive and involved in the Group’s events (such as Prime Minister Matteo Renzi’s visit for the opening of the new
production site in Bologna); and consumers who, despite the weak economy, have begun see Granarolo as the
company that holds the Italian torch in the dairy industry.
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Granarolo Group
FOCUS ON KEY STAKEHOLDERS: EMPLOYEES, COOPERATIVE
MEMBERS, CONSUMERS, THE COMMUNITY AND NEW GENERATIONS
Employees
In 2014, management organised meetings with the various departments to explain to employees the market scenario in
which the Group is operating and the strategies it intends to adopt to face current and future challenges, including the
commitment it expects from each department.
“A Gran Voce”, the quarterly newsletter created in 2011 as a platform for employees and dairy farmers, grew to include
an insert with contributions from outside the Group as well about current issues (like the reasons behind non-recurring
transactions farm-gate raw milk prices and Expo 2015) and contributions from operating department personnel.
The Group renewed its commitment to company welfare by promoting a series of initiatives to tangibly support
employees’ families from a socio-economic standpoint. The many initiatives carried out included the awarding of meritbased scholarships to help protect the right to education.
Taking part in an initiative launched by the newspaper Il Corriere della Sera, for the second year in a row, Granarolo
decided to open its offices and sites to employees’ children (aged 3-13). Parents and colleagues helped children explore
the world of milk and its derivatives. This initiative saw a high rate of participation (roughly 72% of those eligible) and is
planned again for 2015.
Specific focus has always been devoted to mothers. Again in 2014, on Mother’s Day, Granarolo gave working mothers
half the day off. A total of 75 mothers took advantage of this benefit, for over 250 hours of paid leave.
The Archimede project was also completed. Launched midway through the year with the aim of gathering ideas from
anyone in the company who had a way to achieving any kind of savings in terms of processes or to launch a new product
on the market. 25 proposals were received. The panel of judges will meet in upcoming weeks to award the prizes. At the
same time, Granarolo would like to celebrate the award winners. Given the high level of participation, management
would like to hold the Archimede project again in 2015.
Allattami, the donated human milk bank, saw the successful involvement of Granarolo and Auser pensioners and young
unemployed people, who helped collect milk from donating mothers in Bologna and, after it had been pasteurised,
distribute it to the Sant’Orsola, Maggiore and Ferrara hospitals. They received a small sum in exchange for their help.
The code of ethics was carefully reviewed, leading to a the preparation of a new document that will be approved in
upcoming weeks. Management deemed it useful to take a careful look at the Group’s supply arrangements after activities
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Granarolo Group
were blocked by 20 porters from the SGB cooperative (in 2013 and 2014).
Cooperative members
Like every year, in 2014, the Chairman and General Manager of Granarolo and General Manager of Granlatte met with
all members of the Granlatte cooperative twice: once in the spring and once in the autumn to update them on
developments in the business plan, especially in the light of the price of the raw material, as we approach the end of the
milk production limits. These periodic meetings are held in Milan, Bologna, Anzio, Benevento-Campobasso and Gioia del
Colle.
Consumers
Again in 2014, the Granarolo Group continued to reinforce the communications systems whereby consumers and
customers (mainly supermarket chains) can contact the group companies, to make it easier and faster for them to do so.
In particular:
-
a free call centre;
-
a website that enables users to send general requests or product defect reports via email;
-
social networks like Facebook, Twitter and Youtube.
In early 2013, the Granarolo Group decided to find a way for consumers to participate actively, creating value and
promoting interaction, listening and dialogue. This plan took tangible shape in 2014.
“Digital Granarolo” initiatives: listening, participation and inspiration
The specific aim of the Group’s digital activities in 2014 was to communicate both offline and online, optimising costs and
dividing consumers into groups based on their interest in the various brands or initiatives. On social networks, and on
Facebook in particular, it created editorial content that could generate measureable results, identifying and constantly
monitoring demand requirements, facilitating exchanges in an innovative way and forging an interactive relationship with
consumers capable of creating value over time.
In 2014, the Group continued to offer online coupons for certain products, distribute gadgets that can be downloaded
online and it also designed cooking classes for light cuisine and the traditional, unparalleled tiramisù. A recipe section
was created for lactose-intolerant consumers, featuring the new Accadì lactose-free products. With the support of
specific advertising projects, the Facebook page now has more than 150,000 fans.
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Granarolo Group
The Granarolobimbi Facebook page continued to publish “fresh” news and advice for parents, along with details and
nutritional recommendations for babies, with the help of paediatric experts.
On the company’s website, the Group sought to identify and make the most of content on its CSR activities. This is why
the sections about sustainable development, particularly the Environment, and Diet and Nutrition were expanded with
additional information on nutritional content and how to prevent waste: suggestions for using food when it is close to its
expiration date, how to make “safe-food” dishes and how to reuse some food after it has expired for non-food uses. The
partnership with the Italian Pavilion at Expo 2015 is yet another reason to take an enthusiastic and knowledgeable look
at nutrition and the environment. In addition to these consumer-related activities, the Group contributed storytelling
content, with photographs of the Granarolo company from the 1960s to the present day, drawing on the invaluable
photographic archive of the cooperative’s document centre.
Several years have passed since the Granarolo website was launched, and the numbers are still promising (an average
of 100,000 views per month) considering the investments in advertising. However, the company has changed, and
consumers have changed too. This is why Granarolo has decided to redesign its digital platform as a crucial hub for all
its activities and online initiatives. This project, which began in first few months of the year and is nearing completion,
highlighted the scenario in which the company operates, reviewing the Group’s digital impact in a new light and looking
at the site’s touch point from a new perspective to create its own digital ecosystem. This is why it has decided to
separate Granarolo’s two fundamental areas: corporate and consumer, each with its own identity and value, although the
two are inextricably linked: the Granarolo Group and all the brands and products that make up this large group.
This project has been based on the awareness that the digital world, with its significant potential and many possibilities,
is a key tool that will accompany Granarolo in the achievement of its objectives.
The community and new generations
The Allattami project (a donated human milk bank for the city of Bologna) was launched in 2012 and has now expanded
outside the province. In 2013, this project, which was created to meet Bologna’s maternal milk requirements, has now
been extended to the Ferrara Hospital and in 2014, the Ferrara project was fully rolled out. It has become a model and
frame of reference for efficient cooperation between the public and private sectors, and is often cited in newspaper
articles.
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Granarolo Group
Allattami:
Each year in the city of Bologna, 100 premature babies are born and face a daily struggle against countless difficulties,
from infections to serious complications that put their lives at risk. Scientific research clearly shows that human milk
increases the survival rate of premature babies and encourages their growth and development. However, mothers whose
babies are born prematurely are often under significant physical and psychological stress and do not produce enough or
any milk at all. To meet this need, Granarolo and the Policlinico di S. Orsola hospital established ALLATTAMI in
September, a donated human milk bank for Bologna.
ALLATTAMI selects donor mothers, picks up their milk directly at home, stores it in total security and supplies it to the
city hospitals.
The Africa Milk Project merits specific mention. It is an international cooperation project for self-development promoted
by Cefa Onlus in cooperation with the Granarolo Group. The aim of this initiative is to develop a micro milk chain around
the Njombe Milk Factory (a cooperative dairy factory in one of the most impoverished areas of Tanzania) a small but selfsufficient farming/livestock system that can produce milk and distribute it to homes and schools, offering food, work and
economic activity all at the same time. Since the project began, Granarolo has supported the development of the Njombe
Milk Factory with a financial contribution, the transfer of knowledge to Tanzanian dairy farmers (training courses were
offered at the Granarolo sites in Bologna) and with other types of support. Since 2009, through the Africa Milk Project,
the Group has attempted to more significantly ramp up this initiative, also involving its consumers, in line with the
principles of cooperation for self-development. To publicise the initiative and involve a growing number of residents,
Granarolo created a website and Facebook page: africamilkproject.org. Through these sites and messages on UHT milk
tetrabrik packages, in 2013, Granarolo has promoted a contest to increase consumers’ awareness of the project. The
awards are three holidays for six people to Njombe, along with splendid prizes made by Tanzanian women. Over 12,000
people participated in the contest. In 2014, the six lucky winners had the opportunity to see the project in action and
contributed to its development. Contact intensified between Granarolo experts and the dairy farm staff at the Njombe Milk
Factory via Skype to streamline certain processes. In 2014, work was carried out, during two missions, to launch the
newco, under the direct supervision of the local authorities and Tanzanian dairy formers, bringing the project closer to its
objective: self-development and independent management.
With the Africa Milk Project: love your land, combat poverty and drink your milk”, in late 2014, CEFA “il seme della
solidarietà”, Granarolo, the Ministry of Foreign Affairs and the Tanzanian Njombe Livestock Association, won first prize
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Granarolo Group
for their best practices in the “Sustainable development of small rural communities in marginal areas” category. 800
competing projects were judged by a panel consisting of renowned photographer Sebastiao Salgado, Prince Albert of
Monaco, the Minister of Farming, Food and Forest Policies Maurizio Martina and Andrea Illy, Chairman of Illy Caffè.
Africa Milk Project placed first in its category: “Sustainable development of small rural communities in marginal areas”
(www.feedingknowledge.net). Accordingly, it will be one of five projects recognised for their global best practices in food
safety at Pavilion Zero, the space developed in collaboration with the United Nations, which will introduce the 20 million
expected visitors to the theme of the Milan Expo. The project will consist of films, which the Expo will create and show for
six months in Pavilion Zero: telling the story behind the “heroes” of this small miracle.
In 2014, the fruitful relationship with schools where the Group’s main production sites are located continued, inviting
students of all ages (preschool, elementary school, middle school and high school, university and post-graduate) to its
sites for educational tours about the production process and classroom lessons about topics of interest. In 2014, 1,480
people visited the Pasturago site (1,280 students), 3,190 visited the Bologna site (2,143 students) and 690 visited the
Gioia del Colle site (610 students), for a total of 5,360 visitors (5,134 in 2013).
Granarolo has always made it its mission to supply safe food in terms of hygiene and nutrition and to offer suggestions
for a healthy diet, which constitutes a significant social commitment. In this respect, in the beginning of 2012, Granarolo
began an important initiative, which continued into 2014: publishing brochures to support the Earn your Health campaign.
40,000 brochures were distributed through events and initiatives. These are guides for a balanced diet for children and
teenagers, the elderly and athletes, specifically written in a way that is simple and easy to understand, but with a
scientific basis. The brochures were sponsored by the Ministry of Health. They aim to help all target groups. The
brochures, which can be downloaded for free at www.granarolo.it are distributed at schools, sports events that Granarolo
sponsors and centres for the elderly.
Granarolo expanded its activities with the medical/scientific world, a goal that Granarolo has always made a priority,
devoting a series of initiatives (conferences, the “Alta Qualità” newsletter and healthy food courses) to this field, with the
aim of spreading technical/scientific information on the nutritional characteristics of milk-based products.
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Granarolo Group
EVENTS AFTER THE REPORTING DATE
We report that:
-
on 1 January 2015, Gennari Italy S.r.l., which is wholly owned by Granarolo S.p.A., leased Gennari Vittorio
S.p.A.’s production and commercial business unit consisting of cutting Parmigiano Reggiano and Grana Padano
and dividing the cheese into portions and processing and ageing Prosciutto di Parma D.O.P.;
-
in January 2015, Granarolo Chile S.p.A., which is wholly owned by Granarolo S.p.A., signed a service
agreement with Bioleche Lacteos Ltd., a Chilean cooperative, whereby Bioleche Lacteos will produce its dairy
products on Granarolo Chile S.p.A.’s behalf for sale in Chile and South America;
-
in January 2015, an office was opened in Shanghai (People’s Republic of China) to better coordinate and
develop Granarolo S.p.A.’s commercial and distribution activities in China and the surrounding countries;
-
on 1 January 2015, the plan for the demerger of logistics activities from distribution and commercial activities to
Zeroquattro Logistica S.r.l. was implemented, with the latter receiving all primary and secondary transport
activities and management of product handling and warehousing at both platforms and transit points. It is very
likely that a qualified logistics partner will acquire an interest in the company in 2015.
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Granarolo Group
CHAIRMAN’S CONCLUSIONS
Dear Shareholders,
The financial statements as at and for the year ended 31 December 2014 show a net profit of €5,133,610.57.
These financial statements give a true and fair view of the financial position and results of operations and are consistent
with the accounting entries.
The board of directors proposes:
1.
approving the 2014 directors’ report;
2.
approving Granarolo S.p.A.’s separate financial statements as at and for the year ended 31 December 2014, in
their entirety, and allocating the net profit for the year of €5,133,610.57 as follows:
-
€256,680.53 to the legal reserve,
-
€1,576,930.04 to the extraordinary reserve,
-
€3,300,000.00 as dividends to shareholders.
Bologna, 10 March 2015
Gianpiero Calzolari
(signed on the original)
Chairman of the board of directors
108

GRANAROLO GROUP DIRECTORS` REPORT 2014 1,6Mb

Transcription

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