Valio, now owned by 18 co-ops, has grown organically to become the second biggest company in Finland with a turnover of €1.6bn. 7,500 farmer members supply 1.9bn litres of milk. Milk volumes have fallen due to weak dairy markets as farmers curtailed production.

The domestic market accounts for 65% of sales, with exports and international operations accounting for around 35% of sales. Operating margins are a tight 1.2%. The company has a strong focus on research and development (R&D), innovation and value add. Today the company earns 30% of the gross margin from products that are less than five years old. It spends around 1.6% of sales or €26-30m per year on R&D. Overall it invested €127m or 8% of sales in 2016.

Valio’s success has been a two-pronged approach. Firstly, the focus on scale and efficiency gave Valio enough negotiation power to play a power game with the multiples on the home market. While the development of value-added products were critical to enter and drive growth in targeted specific foreign markets like Russia.

However recent years have proved difficult as the full effects of the Russian trade ban, increased competition in its home market, and the decline in global dairy markets hit performance.

In 2007, Valio invested €60m in a factory near Moscow for packaging of cheese and butter for the Russian market. Russia accounted for almost €400m in sales before the ban.

The Russian market remains inaccessible, demand in Asia has been poor, and the oversupply of milk in the EU is pushing competitors into its home market creating fierce competition from imported products. The company is on a major cost saving programme and reduced costs by 6% in 2016.

Last December it was fined €70m for abusing its dominant market position by selling milk at too low a price between 2010 and 2012.

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