Internationalisation of the food industry in the Baltic Region

Tapani YrjöläPellervo Economic Research Institute PTT

YEMCo Meeting, GothenburgNov 24, 2007

Outline

• PTT• Internationalisation• M&A’s• Forecasts

Pellervo Economic Research Institute PTT

• Non-profit economic research institute• Est. 1979• Owners:

– Central Union of Agricultural Producers and Forest Owners

– Finn COOP Pellervo– Commercial cooperatives

• Budget: 1,8 M€ (2007)• 20-22 employees

Pellervo Economic Research Institute PTT

• Research focus:– General economics

• Public sector• Regional development• Entrepreneurship and cooperative enterprises

– Agricultural and food economics• Viability of Finnish agriculture• Competitiveness of Finnish food industry

– Forestry economics

PTT ongoing agrifood research projects

• Changes in management on Finnish farms

• Agricultural trade agreements (TRADEAG)

• Financial risks on Finnish farms• Anticipation of future political

operational environment of agriculture (MAPTEN)

PTT ongoing agrifood research projects

• Effects of choices of technology on costs on cattle farms (TEKNOTILA)

• Effects of the removal of milk quotas on EU and Finnish Dairy market

• Regional bioenergy potential (BIOREG)• Ex post evaluation of the rural

development scheme 2000-2006• The effects of the market changes on

food industry

Distribution of food expenditure in Finland

-2 000

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000Imports

Domestic products

Exports

Source: Statistics Finland

Distribution of food expenditure

0 % 20 % 40 % 60 % 80 % 100 %

NOR

FIN

GER

RUS

SWE

DEN

LAT

EST

Domestic products Imports

Source: Statistics offices

Value of food exports

Source: Statistics offices

0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000

GER

DEN

NOR

SWE

FIN

Million €

Food exports vs. food expenditure

Source: Statistics offices

0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 %

GER

DEN

NOR

SWE

FIN

Distribution of turnover

0 % 20 % 40 % 60 % 80 % 100 %

Atria

HKScan

Danish Crown

Vion

Domestic International

Source: Annual reports

Source: Annual reports

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100 %

2001 2002 2003 2004 2005 2006

Atria HKScan Danish Crown

International operation's share of turnover

Distribution of turnover

0 % 20 % 40 % 60 % 80 % 100 %

Valio

ArlaFoods

Danone

Campina

Frieslandfoods

Domestic Europe ROW

Source: Annual reports

0 %

10 %

20 %

30 %

40 %

50 %

60 %

2001 2002 2003 2004 2005 2006

Valio Ingman Arla Foods

International operation's share of turnover

Source: Annual reports

Companies involved in M&A’s

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

1 10 100 1 000 10 000 100 000

Turnover, Million € (log)

Pro

fit/

turn

ove

r

BuyerTargetFinnish

Source: Annual reports, D&B

Pig meat exports, Finland

Pig meat exports, Sweden

Pig meat exports, Denmark

Pig meat exports, Netherlands

IMPORTS OF MEAT

0

2

4

6

8

10

12

14

99 00 01 02 03 04 05 06 07e 08e

Mill. kg

Pigmeat

Beef

Source: National Board of Customs, forecast PTT

Poultry

EXPORT OF MEAT

0

5

10

15

20

25

30

35

40

45

50

99 00 01 02 03 04 05 06 07e 08e

Mill. kg

Poultry

Pork

Beef

Source: National Board of Customs, forecast PTT

MEAT PRICES IN EU

99 00 01 02 03 04 05 06 07e 08e50

100

150

200

250

300

350

Pigmeat

Source: European Commission, forecast PTT

€/100 kg

Beef

Milk

MEAT PRODUCTION IN EU

6

8

10

12

14

16

18

20

99 00 01 02 03 04 05 06 07e 08e

Mill. tonnes

Pigmeat

Beef

Source: European Commission, ZMP, forecast PTT

PRODUCTION AND CONSUMPTION OF BEEF

82

84

86

88

90

92

94

96

98

100

99 00 01 02 03 04 05 06 07e 08e

Mill. kg

Consumption

Production

Source: MMM, Gallup Elintarviketieto, forecast PTT

PRODUCER PRICE OF BEEF

185

195

205

215

225

235

245

99 00 01 02 03 04 05 06 07e 08e

Source: MMM, forecast PTT

€/100 kg

PRODUCTION AND CONSUMPTION OF PIG MEAT

165

170

175

180

185

190

195

200

205

210

215

99 00 01 02 03 04 05 06 07e 08e

Mill. kg

Consumption

Production

Source: MMM, forecast PTT

PRODUCER PRICE OF PIGMEAT

110

115

120

125

130

135

140

145

150

155

99 00 01 02 03 04 05 06 07e 08e

€/100 kg

Source: MMM, forecast PTT

PRODUCTION AND CONSUMPTION OF POULTRY

60

65

70

75

80

85

90

95

100

99 00 01 02 03 04 05 06 07e 08e

Mill. kg

Consumption

Production

Source: MMM, forecast PTT

PRODUCER PRICE OF POULTRY

110

115

120

125

130

99 00 01 02 03 04 05 06 07e 08e

€/100 kg

Source: MMM, forecast PTT