HOK-Elanto retail chain chooses Swedish-Danish Arla Ingman dairy goods over domestic Valio

Finnish milk producers stunned by decision

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HOK-Elanto, the largest regional cooperative retail chain in Finland, delivered something of a bombshell this week, when announcing it will no longer sell any regular milk products produced by the dairy cooperative Valio, the most significant milk processor in Finland.
     
In the future, the only whole milk, skimmed milk, and low-fat milk products found on the shelves of S-Markets as well as at Alepa and Prisma stores around Finland will be those processed by the Swedish-Danish dairy Arla Ingman. However, HOK-Elanto will be offering a selection of Valio’s special milk products even in the future.
      HOK-Elanto is part of the S-Group and has 143 grocery stores in the Greater Helsinki area, owned by more than 500,000 customer-owners.
     
Arla Ingman is Finland’s second largest dairy firm, and the parent company Arla Foods is Europe’s largest dairy product enterprise, owned by Swedish and Danish milk producers.
      ”The reasons for replacing Valio by Arla were the cheaper price offered by Arla Ingman as well as logistic advantages”, says director Veli-Matti Liimatainen from HOK-Elanto.
      At stake is a significant redistribution of markets. Last year, HOK-Elanto sold some 50 million litres of milk products, of which half were processed by Valio.
     
For Finnish milk producers, the decision from HOK-Elanto was an outrage. Valio has around 10,000 milk producers who are owners of their own dairy cooperatives, and these cooperatives in turn own the shares of Valio Ltd.
      Finnish milk producers are accusing Arla Ingman of destabilising the Finnish milk production by means of cheap imports from Sweden.
      ”We hope that this trend will not spread to other Finnish cooperatives”, says farmer Eero Isomaa, a member of the Board of Directors at the Central Union of Agricultural Producers and Forest Owners (MTK), and the chairman of the MTK milk committee, who himself has a herd of 25 milking cows in Nivala near Oulu.
     
”We have received really bitter feedback from farmers. As an organisation we are not encouraging Finnish milk producers to start a boycott, but some farmers intend to take their business, including animal fodder and other agriculture-related purchases, away from the S-Group’s Agrimarket stores to the K-Group’s agricultural stores”, says Timo Lehtiniemi, the executive manager of MTK’s northern office.
      ”On my meeting trip to the capital yesterday, I went to check the situation at an S-Market in downtown Helsinki. One litre of Valio’s low-fat milk cost 85 cents per litre, while Ingman’s low-fat milk was 79 cents per litre, and the price for Arla’s Swedish milk was 69 cents per litre”, Isomaa lists, checking his notes.
      ”The Swedish origin of the milk was displayed in a notice posted on the milk shelf, and the country of origin was also printed on the carton”, Liimatainen points out.
     
”As I feared last summer, Arla Ingman has started dumping milk”, Isomaa frets.
      Last spring Arla Ingman began to import milk from Sweden. Thanks to the cheap price, the volume of imported Swedish milk is estimated to amount to 50 million litres in 2010. Already last year the volume of imported milk totalled 19 million litres.
     
”Arla Ingman has 26 per cent of the Finnish milk market, while Valio’s market share is around 60 per cent. By means of competition we plan to increase our market share to 30 per cent. We will be able to pay higher producer prices than Valio”, says Robert Ingman, the Managing Director of Ingman.
      ”There is no doubt about this, as Ingman has tempted to its camp a number of young producers whose large milk farms are located near Ingman’s dairies in Sipoo and Hämeenlinna”, MTK’s Isomaa says.
     
Isomaa fears that the imported milk and decisions like that made by HOK-Elanto will shake the foundations of Finnish milk supply.
      ”It has always been Valio’s principle that milk has to be picked up from all farms, even as far as Utsjoki in Lapland. This is not the case in many other European countries, where amounts of milk as large as 600,000 litres are known to have been bought and resold by scalpers”, Isomaa reports.
     
In Finland, the average producer price is 34 cents per litre. Over the past year the producer price has come down by some 20 per cent.
      ”How long will Valio be able to pay the current producer price? The consumer price of 69 cents per litre for Swedish milk is cheaper than the corresponding price in Sweden. Arla Ingman is trying to enter the Finnish market by force, as Denmark has the potential to produce milk”, Isomaa notes.
     
At the same time, even the Finnish Defence Forces have been offering conscripts only Arla Ingman’s milk products already for two years.


Previously in HS International Edition:
  Finnish dairy industry threatened by cheap imports from new EU countries (16.3.2005)
  Valio cutting producer prices of milk (23.6.2009)
  10 million litres of raw milk imported from Sweden per year (19.3.2009)
  Finland´s Ingman sells dairies to Swedish-Danish giant Arla (9.11.2006)

Links:
  Helsinki Cooperative Society Elanto (HOK-Elanto)
  Valio
  Central Union of Agricultural Producers and Forest Owners (MTK)
  Arla Ingman briefly in English

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