INTERVIEW WITH CEO & CFO
The year 2021 was marked by many challenges. People's consumer behaviour and eating habits continue to change, and the corona pandemic additionally accelerated changes in food production and the world of work. Ingo Müller, CEO of DMK Group, and Dr Frank Claassen, CFO of DMK Group, talk about the company's work in 2021 and further plans for the future.
2021 was also shaped by the Corona crisis. How did the DMK Group get through the past financial year?
Ingo Müller: Basically, global demand for milk-based products is rising. This is good for us as DMK, because our products enjoy a high reputation not only here, but also abroad, even though we as an industry are always subject to criticism and must and want to provide answers accordingly. Agriculture is under heavy scrutiny as a CO2 emitter, dairies also produce in an energy-intensive way, and water is becoming scarcer. These are some of the issues we are working on intensively. We set out a strategy for DMK in 2019 with our "Vision 2030" and have since been working along this route, solidly executing our plans step by step - despite massive crises worldwide. Today, in the fourth year of our extensive reform process, we can state: DMK Group is a bit of a "safe haven". On the one hand for our supplying farmers in the cooperative - on the other hand also for the consumers whom we supply with food millions of times over.
Frank Claasen: The past business year also shows this. It is true that transformation takes time and costs money, for DMK and for our farmers. But our commitment will pay off in the long term. This is shown by the fact that we have achieved our targets for 2021: We ended last year with an average payout price of 35.88 cents above the 11 average. If we take the official BLE comparison, we were 0.14 cents above this average. Compared to 2020, this means an improvement in the annual average of around four cents. We have thus clearly achieved our most important goal for 2021. In addition, we have increased the Group result to 27.0 million euros in 2021 - after 24.9 million euros in 2020. We have also once again complied with the so-called "financial covenants", i.e. the key figures promised to our banks with regard to equity and debt.
Many companies speak out about plans for the future, but rarely look further than two years ahead. DMK, on the other hand, developed a long-term vision early on. How did it come about?
Ingo Müller: Before we presented a vision "DMK 2030" in 2019, we first looked back and analysed what has happened in the past 11 years. This gives a good picture of how quickly things and issues change, even over such a period of time. When applied to short periods of time, this picture tends to get lost in the "here and now". Accordingly, we quickly agreed that short-term planning would not help us deal with these long-term changes.
Do you feel that some trends have been accelerated by the pandemic and the war in Ukraine?
Ingo Müller: The world is changing at breakneck speed. The last few years have clearly shown this and it will remain so. However, crises do not change or stop developments - they usually only change the speed. That is why we as the DMK Group, but also as an entire industry, must continue to find answers to the most pressing questions of our time, beyond the current crisis issues. Nutrition transformation continues to play the dominant role here, but security of supply is also increasingly coming into focus. And, of course, we continue to look at how we can implement more sustainability. With this multitude of topics and requirements, it is clear that our industry is currently undergoing one of the greatest transformation processes alongside the automotive and energy sectors.
In the end, all of this is also about credibility for us as a company, but also for an entire industry. To do this, we have to clearly show that we are developing solutions and are not the problem. Transformation is not a foregone conclusion; for this we need innovations, clever minds and means for implementation. All these changes have a clear impact on agriculture: climate protection, biodiversity, improved husbandry conditions, regionally produced feed, farm to fork or green deal - we have to deal with these and other issues in order to remain fit for the future. This requires flexibility, courage, willingness to change and a certain degree of pragmatism from all those involved, even if the wind does not always come from behind. At the same time, the current crises have also shown that we as an industry ensure that people are fed. This awareness was almost non-existent before - basic foodstuffs were taken for granted. This new appreciation must also be expressed in sustainable value creation.
Frank Claassen: That is true. One can say: the crisis has led to a comprehensive change in mentality - at DMK, among consumers and also in food retailing. Suddenly it was no longer about low prices, but about more fundamental things like security of supply. And that does something to our own awareness. We have learned that thanks to our vision "DMK 2030" we can also react flexibly to crises without leaving the path. That gives us courage and mobilises our willingness to tackle the big issues of the future.
How does this development affect the DMK Group?
Ingo Müller: That was another thing that changed abruptly with the pandemic. There was simply no more time to doubt whether someone was doing their job at home. For the time being, we were happy that all employees rolled up their sleeves and continued to bring our products to the trade or to our industrial customers. To ensure that this continues to work so well in the future, we don't want to stop here. "New Work" is the keyword that has become a fixed term in the working world. Because this is the only way to attract the right employees to the DMK Group in the context of the shortage of skilled workers. That means new working models, optimised processes and, from 2023, a new office building designed for flexible working. But of course not all of us work in an office. That's why we are also looking for ways for our colleagues in the plants to make their work more effective and flexible.
Frank Claassen: We really only had one choice: adapt, tackle and move forward. And lo and behold: not everyone always has to be present to work well together. On the contrary, with "New Work" we can respond much better to the concrete wishes and needs of individuals and teams. However, this means that we have to manage another change: that of the corporate culture. Employees also need to meet each other on a personal level. It will be exciting to reconcile this issue with the new, more flexible working models.
But the world of work is not the only thing that is changing. Eating habits are also affected. Regionality and sustainability are two consumer wishes here. How does DMK deal with this?
Ingo Müller: Due to the high safety standards for food, our products are also of higher quality than ever before. Nevertheless, we have naturally asked ourselves what we can optimise in the company and in the supply chain. At the same time, we also use our expertise and technology to meet consumer demands with vegan products. Due to the high safety standards for food, our products are also of higher quality than ever before. Nevertheless, we have naturally asked ourselves what we can optimise in the company and in the supply chain. At the same time, we also use our expertise and technology to meet consumer demands with vegan products.
Frank Claassen: In addition, such trends always open up new opportunities. People have very different needs that require different concepts. This is how we as a company create real added value. And that pays off, in the truest sense of the word. By reaching consumers with customised products, our work and that of the farmers is also valued anew and rewarded accordingly.
If you look at the current debates around the topic of sustainability, you get the impression that consumers are longing for a past that never existed on farms. How do you deal with this development?
Frank Claassen: As DMK, we fortunately have a direct line to our owners. We literally know where our milk comes from and what expertise is available on the farms. You can also clearly sense this when you visit the farms. The farmers work with a lot of commitment to lead the way and deliver high-quality milk. And through the close exchange, we quickly learn what issues they are concerned about and where they need support.
Ingo Müller: And we do indeed see that the past is often glorified because people no longer know how agriculture works. In the 1940s and 1950s, out of 10 people, 8 to 9 were always in direct contact with someone who had a farm or worked for one. With urbanisation and technological advances in agriculture, fewer and fewer people have direct contact with it. This has led to consumers having a rather romanticised image of sustainable agriculture in their minds. That is why we have made it our task, through our own communication but also through projects such as the Milk Initiative, to explain why things have changed and that sustainability, animal welfare and nutrition are evolving in the process.
In the context of value-added products, vegan products were also delivered to food retailers for the first time this year. What is the importance of this product category for the DMK Group?
Ingo Müller: Here, too, we stick to our Vision 2030: We want to deliver the right food for our customers - for life. And we can do that. With our knowledge and experience as food technologists, we can also produce products from plant proteins. Because the right protein mix will be decisive for the quality of products in the future. In this sense, sustainability is almost the same as profitability. Milk and the products made from it, however, is and remains our core business.
Frank Claassen: The demand for milk has been at a stable level for years and continues to show a positive trend. It is impossible to imagine the dinner tables of this country without milk. As a staple food full of essential nutrients, it has always been an integral part of a balanced diet. More than 80 percent of households buy dairy products every week. But demand is changing in many product segments. Changing consumer preferences driven by increasing levels of health awareness and individual dietary habits, as well as climate and sustainability concerns, have created a new market with plant-based products that has been developing at significant growth rates for years. Plant-based products target similar consumer needs as dairy products, and it is natural for us to accompany this development. As a food manufacturer, we want to help shape nutrition in this business area as well.