Milcobel announces reorganization to make company more efficient and flexible

At a Special Works Council, dairy cooperative Milcobel announced its intention to reform its organization in the coming months to make the company more efficient and resilient for the future. The various dairy units within the company would be integrated and the powder activities partially scaled back. This is necessary, among other things, following the 2023 losses. Unfortunately, this means that up to 130 positions could disappear. The consultation phase will be started as soon as possible.

Challenges in the dairy market

2023 was a particularly difficult dairy year. A highly turbulent global dairy market, both on the supply and demand side, calls for greater flexibility. On the demand side, an increasingly global dairy market brings more geopolitical and economic uncertainties. On the supply side, the greatly increased regulations surrounding agriculture and livestock farming in Europe and Belgium are leading to a shrinking milk pool, as a result of which a declining milk supply must be taken into account.

In addition, the cost of energy, raw materials and services rose sharply, and labor costs also increased sharply given the mandatory indexation of 11%. Costs that could not be passed on immediately. A major financial impact came from the laborious implementation of an ERP software package (SAP) in the Consumer Products division, which led to a high one-time cost. This incident also exposed the need to implement a different organizational structure in order to achieve greater synergies.

Milcobel closed the year with a net loss of €11.6 Mio on a turnover of €1.315 Bn (3.7% less vs. previous year).

On the other hand, there are certainly positive trends to be noted. Milcobel invested in a successful partnership with ARLA for higher valorisation of the whey from the mozzarella factory in Langemark. Its subsidiary Ysco put in a strong performance and Kaasbrik's cheese grating activities performed strongly.

Towards a more efficient organization

To restore the company's profitability and prepare the organization for the future, Milcobel intends to integrate its dairy units (Premium Ingredients and Consumer Products) to work together more efficiently thanks to a flatter structure.

Furthermore, Milcobel intends to partially scale back powder activities in Kallo, particularly in the two smaller powder towers, starting in September 2024. This is a direct consequence of the shrinking milk pool and the low dairy quotations for powder. Milk powder would then still be produced mainly on the latest high-tech plant. Milcobel is of course open to a possible reallocation of these powder installations, for example for processing vegetable alternatives or producing for third parties.

Up to 130 positions would be lost during this reorganization, mainly white-collar workers and executives, as well as workers from the powder production department in Kallo. Milcobel understands that this entails uncertainty and hopes to be able to provide more clarity to its employees as soon as possible. The consultation and information round with the social partners will therefore be started as soon as possible and Milcobel is committed to constructive social consultation. Milcobel attaches great importance to this reorganization proceeding as respectfully as possible.

Milcobel is also betting on other cost-cutting measures, such as not paying out management bonuses over 2023, limiting new job openings and reducing the number of external consultants.

Looking to the future

Milcobel is committed to the future and is convinced that the proposed reorganization will lead to greater efficiency and flexibility that will enable it to respond better to the market. Milcobel will therefore continue to invest in the Belgian cooperative dairy story. This means, among other things, continuing to focus on better processing of milk into products that yield maximum returns. To this end, Milcobel is looking at possible expansion plans for the cheese grating activities of Kaasbrik. The cooperation with Arla Foods Ingredients to valorize the whey stream in high-quality products for pharmaceutical applications, baby and sports nutrition is also a good example of added value creation for the member dairy farmers. Milcobel is also constantly keeping its finger on the pulse to be able to respond to new opportunities in the market, including for the variety activities, mozzarella production, and the focus on consumer products (own brands and wholesale distribution).

Chairman Betty Eeckhaut: "As a cooperative, our ambition is to strengthen the long-term relationship with our members through, among other things, paying a competitive milk price. We definitely have the quality to do this, witness the top products we produce today. In addition, it is important to stand strong as a cooperative in order to permanently anchor dairy farming and dairy processing locally in Belgium and continue to offer it a future."