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Our DMK

Integrated Annual Report 2019

Our way 2030
Market & Trends

Towards the future together.

The dairy market is becoming increasingly complex and the effects of the social megatrends are emerging more and more clearly. The new, fast pace of the food industry and the wish for environmentally friendly convenience solutions on the consumer side is also of decisive importance to the DMK Group. As Germany’s largest dairy cooperative, we decided in 2016 on a clear change of course in order to stand up to these challenges.

With the 2030 Mission Statement, we have set new focal points for our work which direct our attention to the key topics. Our sights are now set more firmly than ever on our consumers and their needs, so that we can be a trustworthy and reliable partner for them. This altered mindset naturally also led to changes in the company. Processes had to be optimised and teams reorganised. This was essential for us to pool our strength and tackle the exact areas where it was important to do so.

Final adjustments were made within the business units in 2019 so as to position our company to optimum effect on the international plane as well and to make us even more active, agile and innovative in this area as well. In addition, significant investments were made, such as the purchase of the Alete brand, the acquisition of DVN, the completion of a new spray tower in Beesten and the redevelopment and new construction of factories in Strückhausen and Russia. We have now put the cornerstones in place to stabilise our business and smoothed the path to the future.

This transformation has its price, and we are aware of the fact that the past years have been a major challenge for everyone at DMK. The good thing is, however: By reaching these important milestones, we have more freedom of action and can make a real new start together.

All of these enormous and in some cases sweeping changes would not have been possible in this form without the courage, patience and indefatigable commitment of our farmers and employees. Thanks to them, we have successfully cleared all hurdles and brought DMK onto the right course.

Yet again, we have proof: People make the difference – not only in our communication with our customers. Even in the time of coronavirus, our farmers and employees embody the new we feeling of the DMK Group and are pulling together in this challenging situation. They are the real guarantee of the company’s success. Not least for this reason, we drove internal restructuring forward last year.

“We have a high level of commitment in the team. For many people, DMK is not “just” an employer – we want to prove that that we will succeed together in taking DMK forward. Particularly in these challenging times, I cannot put a high enough value on that.”

Ingo Müller, CEO of the DMK Group

Successful progress thanks to new corporate structure

One significant element of the change is restructuring within the DMK Group. Tasks were reassigned and processes optimised so that we could serve our focus markets better and respond faster to change.

On the basis of thorough leadership tests, executives with a high level of professional and management competence were selected to support the business units to optimum effect in the future and drive the process further forward. This redefined leadership competence will be demonstrated by a new indicator: the Human Capital Index. This will reveal how well a department works together – in other words: whether everything is going smoothly.

2019 was therefore primarily about getting the work of the individual business units up to speed and about our reaching the important milestones together. In addition, we continue to promote transparent communication on all levels. An open feedback culture will strengthen interaction and innovativeness within DMK and give all employees the opportunity to contribute actively to the company.

“It’s about respect, employee development and transparent management. It’s no longer enough to have a good plan. You have to get people on board with the implementation.”

Ines Krummacker, CHRO of the DMK Group

More opportunities for employees and apprentices

Employees’ personal development is something that DMK takes particularly seriously. In 2019, a new development programme with individual training and coaching opportunities was offered in order to develop the existing potential within the company. Human behaviour is the primary focus here. Instead of pure technical work, this is about respect, employee development and transparent management. DMK wants to address the shortage of skilled staff with this approach and give employees the opportunity to use and build their own skills and talents.

Employees by type of employment contract Number (%)
Total number 6.035 89,15
Permanent 5.380 89,15
of whom, full time 4.669 90,72
of whom, part-time 382 9,28
Temporary 655 10,85
Employees under collective bargaining agreements1 5.939 98,41
Employee turnover 472 8,82
New hires2 720 10,75
DMK GmbH + min. 75% owned subsidiaries (Germany and Netherlands), as of 31.12.2019
1 Excluding senior executives
2 Excluding seasonal workers

The realignment of the corporate culture also includes the 18 apprenticeship professions. Regardless of whether these are commercial professions or training in nutrition, technology, commerce or logistics, apprentices will receive a comprehensive insight into the practical side and take on important tasks in their field from the start. For this reason, the training in 2019 was once more launched with a kickoff event at which all the new apprentices from all sites were able to network and exchange knowledge and experience. In addition, the “GROW – Training as Equals” project was launched in 2019. In this project, all apprentices receive the opportunity to formulate what they want the training to be like, and therefore help to design their start in professional life.

“We want to show them right at the start of their working life that we promote their commitment and encourage every individual to make an active contribution.”

Ines Krummacker, CHRO of the DMK Group

Open dialogue with farmers.

With around 6,000 dairy farmers and 7.1 billion kilos of processed raw milk, the DMK Group is one of the largest dairy companies in Europe organised on the cooperative system. The company looks back on a heritage of more than 200 years, which has been marked by a strong “we feeling” from the very start.

The cooperative spirit gives us an identity and is the foundation of our actions – particularly in times of change. That makes dialogue with our farmers all the more important. It is to become not only more intense, but above all opener. The Management Team therefore presented the current status of the DMK Group’s realignment at ten Regional Assemblies in the spring of 2019 and had a frank discussion of the results with the attendees. Topics such as the milk price and the trends in the milk volume were also addressed in this context.

This was followed in the autumn of 2019 by meetings with regional members of the Management Team, Supervisory Board members and Regional Managers at a total of 70 District Assemblies. Here, too, there was a lively exchange of opinions on current trends in the dairy industry. The farmers provided important ideas for DMK’s future by putting forward their concerns.

1 Excluding dairy farmers from member dairies and subsidiaries
2 In 1,000 kg

Overview of the work of the executive bodies

Last year, DMK’s various executive bodies deliberated and voted on a wide range of topics. Here is an overview of the most important points.

Annual Assembly of representatives

  • Five preparatory Regional Assemblies from 3 to 11 June 2019
  • Annual Assembly on 19 June 2019 with resolutions on the annual financial statements and profit, intense discussion of the direction taken by the limited company.
  • Four representatives’ letters after the Advisory Board meetings to inform the representatives of the main substance.

Board of Management

  • 18 meetings
  • 3 meetings together with the Supervisory Board of DMK eG (employer’s side) on the further development of the new Milkmaster Programme from 2020 onwards  Topics: Changes in membership due to resignations and the resulting impending loss of milk in the cooperative and the limited company, trend in the milk price, performance improvement at DMK GmbH, acquisition of new members, communication with members and representatives, redrafting of Milk Delivery Regulations as of 1 January 2020

Supervisory Board

  • 6 meetings
  • Meetings together with the Board of Management on the further development of the new Milkmaster Programme from 2020 onwards
  • The Supervisory Board appointed Franz-Josef Krechtmann and Thomas Stürtz as members of the Board of Management of Deutsches Milchkontor eG.
  • Audit assignments from the Supervisory Board committees were received
  • Topics: critical and intense discussion of the realignment of the DMK Group, particularly factory closures and toll manufacturing contracts, redrafting of the Milk Delivery Regulations and Milkmaster Programme as at 1 January 2020

Advisory Board

  • 4 meetings including a two-day closed meeting
  • The office of Management Board members Franz-Josef Krechtmann and Thomas Stürtz ended at the close of the 2019 Annual Assembly. Both stood for re-election. The members of the Advisory Board were in favour of Franz-Josef Krechtmann and Thomas Stürtz and approved their re-election.
  • Realignment of the DMK Group intensely discussed
  • Redrafting of Milk Delivery Regulations and Milkmaster Programme as at 1 January 2020, milk price trends, performance improvement at DMK Gmbh intensely discussed and resolutions passed

Part of a strong we feeling is consistent and transparent communication for everyone. For this reason, we simplified access to information and made changes to the “Milchwelt” magazine last year. Instead of the separate publications “Inside DMK” for employees and “Milchwelt” for farmers, there is now one shared “Milchwelt”, which has been published since March 2019 in printed and digital format. In addition, the monthly “Milchwelt kompakt” provides current market information. With the “DMK Milchpreisinfo”, our farmers also receive new dairy market forecasts for the month following every four weeks and can also contact the DMK Group directly and obtain information on current topics via the new online portal “myMilk”.

 

Young dairy farmers hugely committed.

Young farmers have been engaged in the “Young Dairy Farmers’ Working Group (AJKM) since 2001. The executive body of 67 farmers aged from 18 to 30 also deliberated intensely last year on current developments in the market and passed their ideas and suggestions on to DMK. On a study trip in January 2019, the voluntary members exchanged experiences with colleagues from France and held discussions with the Deutscher Raiffeisenverband e.v. (DRV) and the member of the European Parliament responsible for agriculture. At the same time, the DMK Group supported the work of the working group by providing its members with even more information about the company, the cooperative and important trends.

"As important regional multipliers, the members of the AKJM form a key interface between young farmers, the elected officers and the company."

Heinz Korte, Chairman of the Supervisory Board of the DMK Group

Indefatigable engagement for the region.

With more than 20 sites worldwide and around 6,000 dairy farms, the DMK Group plays an important role in mainly rural areas. Above all, outside of their day-to-day business the farmers help to shape their communities actively and strengthen farming in their regions with their engagement.

Thanks to voluntary self-assessment in the Milkmaster Programme, we have a very good picture of the farmers’ extraordinary achievements. For example, around 30% of all DMK farms supervise apprentices or agriculture students. In addition, around 40% carry out important voluntary work in professional associations or other industry organisations. Furthermore, around 40% of the farms allowed visitors an insight into their daily work. Around 240,000 interested visitors were able to obtain a picture of the dairy farmers’ work as part of the open days organised by the Federal states’ farmers’ groups and associations.

Hedging volatile milk prices.

To ensure differentiated pricing and thereby take every single farm’s individual situation into account, DMK launched a pilot project for a futures exchange-based fixed price model in 2019. The dairy farmers were offered voluntary fixed prices for the coming months in order to reduce possible liquidity risks. Once the test phase is concluded in 2020, DMK will offer a twice-monthly fixed price which will be put together from the butter and powder quotations of the EEX Leipzig. The dairy farmer can secure this as a basic price for the next twelve months for a milk volume to be determined by himself or herself.

Changes in the Milkmaster Programme.

The Milkmaster Programme is an important tool to support sustainability in agriculture. Modifications intended to simplify it have been made on the basis of robust data from the previous years.

The biggest change in the Milkmaster Programme in the reporting period relates to the new calculation of the Milkmaster Bonus. DMK rewards the farmers’ commitment to animal welfare and sustainability on their own farms with this bonus payment. It is to be calculated on a more individual and therefore fairer basis from January 2020 onwards. To do so, both the bonus criteria and the amount of the payment per kilo of raw milk are to be adjusted. You can consult more information on this subject here.

 

Launch of the new “myMilk” platform.

As part of the overhaul of the Milkmaster Programme, the new online app “myMilk” was developed in 2019. It is aimed at make dealing with the Milkmaster Programme simpler and at the same time it is an important interface between the DMK Group and the farmers.

The platform is easy to use and can be individually tailored. By this means, users always have the facts relevant to them in their sights. In addition, it has been optimised for mobile use, so that farmers have access to their data at all times. Important functions of its predecessor, the “Webmelker” platform, have been integrated into “myMilk” and are to be extended gradually by additional features.

We are convinced that we have positioned ourselves well for the future with the platform and are working here with a modern programme. The advantages can be seen now in particular in the time of the coronavirus: Our farmers can get the latest information about developments every day. Driving forward digitalisation was an important step in order to remain competitive.

 

Number of dairy farmers in the cooperative.

Because of resignations by members in previous years, DMK eG lost around 1 billion kilos of raw milk at the beginning of 2019. Nevertheless, we are seeing a positive trend again now because of the clear path the company is taking: More farmers are interested in membership of the cooperative and want to join us on our way to the future.

Business Unit Baby

In 2019, the Business Unit Baby repositioned itself and honed its core business. DMK extended its portfolio with the acquisition of the Alete brand. This brand is soon to receive a modern brand image and a fully revised product range and will develop into an important addition within the product portfolio.

In addition to the reinforcement of Humana and the private label cooperations, the focus was on more efficient logistics and the expansion of strategic partnerships. Furthermore, important investments were made to be able to profit from the enormous growth potential in this market segment, such as the building of the new factory in Strückhausen.

The state-of-the art facility was opened last year. Since March 2019, high-quality powdered baby food that fulfils the Humana brand’s innovative aspirations has been manufactured there, in the heart of Lower Saxony’s Wesermarsch district. Leading-edge plant and increased hygiene measures ensure top-class standards in the production process. In addition, an innovative page is produced in Strückhausen which makes the preparation of baby food even simpler and more hygienic for parents.

 

“We want to become the leading baby food player in selected segments. To do this, we are incorporating Alete and Milasan into the shared brand architecture so that our product range can be presented in an even better integrated form.“

Ingo Müller, CEO of the DMK Group

However, DMK’s baby food is also on course for success outside Germany. The heritage Humana brand is now at home in 50 markets all over the world and enjoys the trust of many parents. The figures also bear witness to that: Humana succeeded in boosting its sales significantly in 2019.

In 2019, the Humana brand became available for the first time in a virtual reality film, enabling viewers to experience a detailed insight into the manufacturing process. With this film, Humana highlights the confidence that many parents have in the brand. The film was available to view on popular platforms such as Instagram, Facebook and YouTube.

In addition, the private label business in baby food was expanded for higher value added. From January 2020 onwards, Sunval and German Baby Food GmbH have traded under the shared title of “Sunval Baby Food GmbH”. A new administrative site was opened in Mannheim to bundle the two companies’ expertise. In future, sales, management and logistics will be steered here as one unit.

Business Unit Brand

The BU Brand will be expanded further into a significant revenue pillar within the DMK Group. In the long term, it aims to achieve success not only in Germany, but in selected markets throughout Europe.

To achieve this, two critically important levers were pulled last year. Brand communication was focused even more towards consumers, so that they were able to identify even more strongly with the content and experience the brand in all popular social media channels as well. The MILRAM brand in particular thereby strengthened its image as a “north German original”. The regional reference is evident in the market launch of the new Moin Drinks, in the new advertising campaign, but also in the popular and enormously varied cheese portfolio. The latter has successfully grown its turnover more than threefold in the last five years thanks to the new brand image. For this reason, the brand’s north German image is to be further amplified in future.

“We want to grow from being a small but profitable business unit into a significant revenue pillar for DMK. To do this, we will develop and market innovative products ourselves.”

Matthias Rensch, COO of the BU Brand

On the other hand, the BU has developed innovative products that are keenly tailored to consumers’ needs, serving a specific demand in the market. For example, MILRAM Kalder Kaffee came on the market as a true hero product that impresses consumers with natural ingredients and convenience. Thanks to lactose-free milk, the drink is sweet and at the same time needs no added sugar. It contains cold brew coffee, making the mixture a real wake-up beverage.

Visitors to the Hurricane Festival had the chance to discover that last year. For the first time ever, the brand was there with its own stand and sampling on site and enthused a young target group with the taste and effect of MILRAM Kalder Kaffee.

We will continue to optimise this portfolio in the future to keep it attractive and relevant to consumers. Other permanent elements in this path will be measures to optimise recipes and the reduction of sugar.

However, MILRAM is also very successful outside of food retailing. The BU Brand is also very successful in the eating-out business, and has further expanded its position as a full-liner and competent resource for retailers and users. In addition to own brands and private labels for wholesalers, BU Brand offers innovative product and service concepts under the MILRAM Food-Service brand. This brand succeeded in once more extending its lead over competitors in the past year and in consolidating its position as a market leader.

The secret of success is a holistic view of the market encompassing retailers, users and mobile consumers. On the one hand, the focus is therefore on cooks in classic large kitchens such as those in hospitals, canteens or university restaurants. On the other, Food-Service has responded to consumers in bakeries, fuel stations or to-go shops with contemporary convenience products. The Food-Service team works closely with DMK’s experts from Retail and Innovation Management. Current trends and new concepts for classic gastronomy are discussed with the teams of chefs and food experts and find their way into the kitchen in the form of conceptual solutions. 

Business Unit Industry

As a market-oriented solution provider, the BU Industry not only develops whey- and milk-based products for the international manufacturing market, but also supports its customers actively in processing these products in various applications. As a result of these collaborative partnerships, the business unit scored a number of hits with its cooperation partners in 2019. In particular, there was a high demand for protein products, cheese, sweetened condensed milk, and in general foods which were developed for the needs of Asian markets.

To respond in an even more targeted way to the customer’s wants and needs, innovative protein products were one area given a forward boost in 2019. In addition, the business unit focused on expanding its application expertise in the more profitable milk-based value added products. At the same time, the development of specialised milk-based products continued to progress. The company aims to become established as a leading player in this market segment by this approach.

In addition, the BU Industry became established in another role in 2019 by rolling out toll production models. Thanks to this measure, we were able to compensate successfully for the loss of around one billion kilos of milk. The principle behind it is simple: business partners deliver the milk or plant-based materials  to the relevant DMK factory, which then makes the appropriate products. The product is then returned to the toll production partner in a refined form and markets it under its own responsibility. This ensures better capacity utilisation and more cost-efficient production.

In addition to the product portfolio optimisation and the launch of the toll production model, the acquisition of DV Nutrition (DVN), a company based in Hoogeveen, the Netherlands, was implemented in 2019. The joint venture, which has manufactured whey proteins and lactose-based ingredients since 2004, passed into the sole ownership of the DMK Group on 1 January 2020. DVN’s activities are currently being transferred to the DMK subsidiary wheyco. This makes the DMK Group one of the largest global providers of whey derivatives at a single stroke.

The DVN acquisition represents an important investment for DMK, which was made in line with the 2030 Mission Statement. Whey derivatives therefore represent an important growth area for the coming years in relation to the factory infrastructure, research & development and marketing and sales. The production and marketing of functional ingredients for the food industry by DMK subsidiary DP Supply was also enhanced in 2019. The most important milestone here was the commissioning of a new spray tower in the Group’s own drying plant at the Beesten site. It will be used in the coming years to continuously increase DP Supply’s international exports. With Norlac, the DMK Group has further underpinned its position as the German market leader in the field of high-quality milk substitute products for rearing calves and wishes to expand this area further in the future.

Business Unit International

Outside the European home market, changes have also taken place – first and foremost, the Group build a new factory in Russia. A second dairy factory will help in future to serve the growing demand for cheese and fresh dairy products locally.

From the end of 2020 onwards, a number of cheese specialities will be produced in Bobrov, Russia, six hundred kilometres south of Moscow. These specialities will be tailored to the individual needs of the Russian market, including Tilsiter, Gouda, Goya and Maasdamer, but also block, cylindrical and spherical cheeses. Experimental varieties such as wasabi and pesto cheese will also be made.

With the launch of the Oldenburger Professional marketing image, the business unit was given new brand communication for the international food service market. The website presents recipes developed by chefs for chefs from a very wide range of cultures, publishes Q&As about products, trends and raw materials and ingredients as well as Oldenburger's broad portfolio.

The predominant focus for Uniekaas in 2019 was its relaunch. The Dutch heritage brand was modernised with a new image, and the product portfolio was extended by innovative cheese products. This rounded off all the preparations for the its successful transfer to the BU Brand in 2020.

Business Unit Ice Cream

In preparation for the challenges of the future, the Business Unit Ice Cream also had a revamp last year. In addition to the optimisation of its private labels and the development of new and innovative product solutions, the main central focus was the cooperation business. With partners such as Bahlsen and Baileys, the business unit developed innovative ice cream products which impress consumers by both their favour and their environmentally friendly packaging concept.

However, production is to be optimised beyond that. For example, the sale of the Waldfeucht-Haaren site was prepared in 2019. The factory, with around 200 employees, will be handed over to Schwarz Produktion on 31 December 2020. The decision was primarily a strategic one. The sale is intended to streamline the production network andn focus on the Everswinkel and Prenzlau sites.

“We will be looking increasingly to private labels and licensed brands in the future, but will also support our partners as a highly reliable innovation and quality leader. We are well positioned with this solution and can respond to changes in the market even more individually.”

Marcus-Dominic Hauck, COO of the BU Ice Cream

Business Unit Private Label

The Business Unit Private Label supports our retail partners in the development and production of new products, responding to their concrete individual requirements. On request, the department accompanies the process from the initial idea through the packaging concept to successful market launch.

The advantage to business partners is self-evident. They profit from DMK’s aggregated expertise and receive tailor-made and individual solutions for their private labels. We consider the production process holistically and take a 360-degree view  on behalf of our partners of product portfolios, trends and consumer behaviour for the markets of the future.

In particular, consumers’ expectations have risen in past years, a fact which is clearly reflected in purchasing behaviour. As a result, innovative packagings and trend products are more and more in demand even for premium private labels. In addition, the European market is growing closer together, for which reason customer needs now often have to be considered from a transnational point of view. This perspective on the future is important, since white dairy products and cheese own a large share of the total market, as the third-largest segment in food retailing. Many of our customers have therefore positioned themselves accordingly and trust DMK’s expertise in order to be successful across the whole of Europe.

The Business Unit Private Label is currently working together with all Germany's major retailers. Around 1,500 employees in seven factories do all they can to ensure that more than 800 products are delivered complete and on time every day. At the same time, we have much more than just products to offer in the Private Label area: A deep understanding of retailing and our consumers enables us to deliver a 360-degree sales and service approach. The business unit therefore exemplifies the transformation in the entire DMK Group – moving away from being a product provider to being a competent partner that has understood how to develop business categories such as cheese and white dairy products further in a potential-oriented way that adds value. 

“We want to improve our business together with the retailers and enthuse our consumers, we impress our retail partners with reliability, quality and entrepreneurship. That is the foundation of sustainable success.”

Thorsten Rodehüser, COO of the BU Private Label

Value added in procurement and sales.

For us to deliver on our 2030 Mission Statement, the corporate structure has to be simplified on all levels. By doing so, we will not only achieve more flexibility in a fast-paced market. The closer integration of all departments also creates valuable synergies, which help to increase value added.

An important step here was the introduction of Corporate Procurement as a central and cross-departmental steering unit for purchasing, which was launched in 2018 and completed last year. In addition, our production processes were scrutinised and optimised. For example, one measure in 2019 was the implementation of the new Sales & Operation Planning function, S&OP for short. This covers all relevant process steps from sales planning to actual production.

The goal of the new planning process is to permanently improve customer satisfaction through even more accurate sales planning. The customers’ needs are being analyses in close collaboration with the business units concerned for this purpose. This assessment will be used to produce an action plan which will map the precise need for raw milk, stocks and capacity in the factories. Possible gaps in the production process will be smoothed out so that demand can be served optimally.

Progress in Research and Development

Due to the rapid changes in the dairy market, a need has arisen for innovative products which address consumers’ wishes for more sustainability and convenience. Fresh ideas are needed for products, manufacturing processes and packaging to meet the high present-day requirements.

The Center of Expertise (CoE) in the area of Research and Development forms an important interface. All the key tasks in the innovation process are aggregated here so as to be able to exchange knowledge easily and quickly within the departments. This creates important synergies that contribute to the company’s innovativeness.

In 2019, the team focused on important optimisation projects to improve efficiency and quality and drove forward the development of innovative products. Special importance was attributed to the Milk Innovation Centers in Zeven and Edewecht in this context. Developers and technicians carried out research on site into new products, production processes and packaging methods, drawing on the comprehensive know-how aggregated in the DMK Group’s business units. At the same time, the CoE examined whether the necessary infrastructure is in place and the daily operational business secured.

For example, 2019 saw the publication of a total of 13 patents on the manufacture of cheese, industrial butter, whey protein concentrates, basic curd, and sour whey with reduced lactose as well as on waste water treatment in the dairy industry.

*From technological fields

Research and Development in the area of sustainability was also driven forward in 2019. For example, the  OCEAN project was launched. This project deals with the avoidance and recycling of plastics, among other issues. In addition to our partners in food retailing, the Business Units Brand, International and Industry were also involved in the project. A combined effort was directed at exploring all opportunities to find more environmentally friendly alternatives to plastics. Plastic-free packaging concepts are also being examined. This is intended to permanently reduce the volume of plastics processed in the products manufactured by DMK.

In addition, the “Intellidate” project was progressed. An intelligent best before end (BBE) date for packaging is being developed in this project. In future, data about the actual storage is to be recorded and a more accurate BBE date for manufactured foods identified. The objective is To reduce the volume of food which is discarded unnecessarily because the printed BBE date has expired. A trial run under real market conditions is to take place in 2020.

 

Operational health and safety optimised.

Protecting the health and safety of all employees is naturally a top priority. For this reason, a plan to improve occupational health and safety by reducing accidents permanently was developed in 2017.

Once potential risks in the areas of stumbles, slips and falls and the handling of machines and tools at the DMK sites had been identified in previous years, the focus in 2019 was on possible accidents with steam and hazardous substances.