Ingo Müller has been CEO of the DMK Group since 2016. He started his career in this company, and has passed through a lot of departments since then.*
Mr Müller, 2020 made heavy demands on all of us. How has the DMK Group weathered the coronavirus year?
When we decided on DMK’s reorganisation a few years ago, we knew we were setting out to revolutionise our company. That was an enormous feat of strength. But what we then experienced, and are still experiencing, during the Covid crisis is a gear shift that I could never have imagined. The dizzyingly fast changes are a stress test for all of us.
Because of the actions taken to stem the pandemic, our sales in the hospitality trade vanished abruptly. From one day to the next, a lot of things on the customer side of the food service sector came to a standstill. At the same time, however, we also perceived an enormous rise in sales of retail products. Our deliveries to the retail grocery sector have soared by 30% now. So we had to take extremely fast action to meet this demand.
However, at the end of the day we’ve coped very well in the crisis so far. That’s primarily because of the strong “we” feeling in the cooperative, which has actually increased further despite all adversities in this period. Looking back, the committed way in which everybody pulled together and worked hard for our DMK makes me very happy.
We didn't just surrender reactively to the pandemic, but took proactive action and massively increased our speed of reaction. That’s also reflected in our figures.
How were last year’s results?
In a year dominated by the pandemic, the DMK Group continued to make sales and delivered stable results: we managed to avoid the negative market trend with DMK’s final milk price for its members. While the industry-wide milk price fell on average by around 0.8 cents/kilo compared to 2019, DMK succeeded in slightly increasing its final milk price year on year. Sales at Germany’s largest dairy company are on the same level as last year at 5.6 billion euros, the equity ratio remains stable at around 30%. At 24.9 million euros, the bottom line achieved the previous year’s level of 24.5 million euros.
This shows that we’re on the right track, after placing our results under the burden of a large number of heavy investments in 2019. My thanks therefore go to all DMK employees, who never failed to give their best efforts under these difficult conditions, and to the farmers, who could be depended on for deliveries of our raw material in these challenging times. Their achievement cannot be valued highly enough.
There must have been problems in the supply chains as well because of the Covid crisis. How did they affect DMK?
That’s true. Closed borders faced us with entirely new challenges. We had to react fast to maintain the delivery chains and our operating processes. Because even in challenging times we see ourselves as committed to our mission of supplying people reliably with high-quality foods. Our coronavirus task force responded very early and launched an adapted delivery strategy. As a result, our customers were still able to count on us as a reliable partner at all times even in times of lockdowns and closed borders.
The Covid crisis is an event that nobody saw coming. What goals had you set yourselves for 2020 aside from the pandemic?
Building the factory in Strückhausen factory, the tower in Beesten, streamlining the ice cream unit and acquiring the Alete heritage brand are measures that cost us money in the last few years. However, they were essential to make our company future-proof and earn sustainable value added for our farmers. We were able to complete many of these structural measures in 2020 and concentrate on the next steps.
These steps mainly relate to the challenges in the market, which remains highly agile even aside from the coronavirus. Consumers and retailers are making higher and higher demands: If possible, products should be GMO-free, organic, low-fat, low-sugar, high-protein, sustainably packed but still “convenient”. Added to that are other things that younger people want, such as the constantly increasing demand for vegan alternatives. All this is putting agriculture under immense pressure.
We did our homework for 2020 and at the same time were still guided by our “Vision 2030”. To make us more independent of the sharp price fluctuations in standard merchandise, we are switching our portfolio to products with higher value added. In addition to further strengthening our MILRAM brand, we integrated our Dutch brand Uniekaas into the BU Brand. After acquiring Alete and integrating it into the BU Baby, we gave it a new twist with the modern brand concept “Alete bewusst” (“Alete conscious”). We were also able to expand our partnerships in the ice cream sector and are now making new varieties for brands like Ahoj-Brause, Bahlsen, Ehrmann and Baileys.
However, we didn't just look at the market, but also launched a wide range of optimisation processes internally. These include not only the restructuring of our financial division with the OneFinance programme, but also, for example, projects like Pacesetter, which will optimise our procurement, and Tiger, which encourages continuous improvements and efficiency increases in our factories.
But we can't just stop there. We are and will remain a company owned by farmers. Our farmers will only be able to create value by their work if high-quality foods are appreciated again across the entire value chain. We clearly support that that and thanks to our restructuring are better positioned now than we used to be. Because we’re no longer purely a raw materials processor, we're a provider of modern foods. And they have their value and their price.
The farmers also went on the streets for fair payment in 2020. What are your thoughts on that?
The jungle of laws in Berlin and Brussels is getting more and more dense and the new Fertilisers Regulation sets extremely strict rules which many farmers simply can't implement cost-efficiently any more. That was undoubtedly why that issue was the straw that broke the camel’s back. Agriculture has been under pressure for years and many farmers have the feeling that their voice is not being heard and that enough is now enough. At all events, the subject is now attracting more attention from the politicians because of the protests.
These issues concern us as an industry, and we too want them to get an airing. The dairy sector strategy should help to unite the dairy industry’s forces so that we speak with one voice and our products regain the status in people's perception that they deserve. To enable interested farmers to have more planning certainty, we also introduced a fixed price model in 2020 with which we can hedge certain volumes of milk on the milk futures exchange.
However, one thing remains of crucial importance: open dialogue. With the farmers. With the consumers. And of course, with retailers and politicians.
A propos dialogue: As a result of the coronavirus pandemic, the first ever digital Annual Assembly of representatives was held in 2020. How was that for you?
It was a good experience which showed me once again how valuable the cooperative concept is. Instead of an event with hundreds of participants, we met the speakers in a studio in Bremen in 2020 and answered the representatives’ questions there. They could dial in by PC, smartphone or tablet. This way, we can ensure that the internal dialogue doesn't stop and we continue to report to our members with the maximum of transparency.
The pandemic is still dictating events all over the world in 2021. What do you consider to be the key issues this year?
I’ve already said it in a number of places. We haven't finished our restructuring, and we never will – we’re living in a constantly changing world. The coronavirus shows us very clearly that you can't plan everything. So there are still issues and projects that we will address in the context of our Vision 2030. At the moment, the BU Baby should be mentioned in particular. The infant formula business area is and remains a market with huge growth potential and we have no doubt that we can even lift this potential thanks to our measures. However, there is still quite a bit to be done before then. We've therefore put the organisational structure of the business unit on the agenda. The goal is to form a unit that's less complex, that’s lean but efficiently focused on growth issues and core markets. In future, we will therefore concentrate - in the marketing and distribution of infant formula, for example - on selected countries so as to establish focal areas. We’ve got everything we need to be competitive and to enthuse our customers: with Humana and Alete we have strong brands that our customers trust; with our factories peak modern production sites where we can manufacture products safely and securely. We want to use these assets in an even more focused way so as to achieve sustainable success in this market. The past months’ results demonstrate clearly that we're on the right track here.
The transformation plan not only provides for optimised marketing, but also for some essential related changes in the organisation. We're pursuing a clear direction here. The unit’s profitability will be increased and resources deployed more efficiently. In addition, structures within the BU Baby will be simplified in future, to reduce administrative expenses and enable it to draw more on the resources, expertise and skills of the DMK Group in central functions.
And what more? With six business units, there’s probably plenty of variety...
That's right. DMK's internationalisation is a pillar in our future strategy, and we want to focus the expansion of our engagement in internationalisation on countries where it makes sense to expand. We see these countries as separate markets which we want to serve individually locally. We will do this by paying attention to the special wishes of consumers in the relevant market, and by developing targeted product ranges to address these wishes – just as we do in Germany.
That's why it is also of crucial importance on the international level for us to link the individual sites better so that we can make the company’s knowledge available to everyone and design processes more efficiently. At the same time, we want to continue to grow into one big “DMK family” together.
What do you think will happen in 2021 going forward?
In the current situation, forecasts are hard to make. Our market environment remains volatile and the Covid crisis is amplifying this. Our coronavirus task force is keeping current developments in its sights, as it did in 2020, and will prompt ideas for the management of the company. But if you ask me whether peace will be restored in the DMK Group after the crisis, I can only say that I don't think there's much chance of that! But that’s a good thing – we don't want to stand still! The Covid crisis has shown us once again all the things we can accomplish as a team. That will now also help us to pursue our clear vision and strategy and turn it into reality.
What was the most important insight you gained in 2020?
DMK lives on its “we” feeling. Last year, everyone proved that that’s more than just a truism. Even in times when we all communicate with each other almost entirely by virtual means, people have stood together and displayed true team spirit. Roughly in line with the motto: “What one person can't do, a lot of people can do together”. It's this solidarity that has ensured that we have got through the crisis so well so far. I am very grateful for that.
*The interview with Ingo Müller was conducted before the official company figures were announced