Valio commences co-operation negotiations to adapt its operations

Valio’s share of Finnish food exports subject to Russian embargo over 85%

Valio will be hit by far the hardest of all companies in Finland by Russia’s import restrictions. Valio’s biggest exports to Russia are Valio Oltermanni® cheese, Valio Viola® cheeses, Valio butter, and fresh dairy products. The manufacture of all Valio products destined for Russian export was halted on Thursday, 7th August 2014, while that of products for the Finnish and other markets continues as normal. Negotiations in accordance with the Finnish Act on Co-operation within Undertakings are to commence on the adaptation of the number of employees to the decreasing production volumes.

Co-operation negotiations on the adaptation measures will commence at Valio’s plants in Haapavesi, Seinäjoki and Vantaa, as well as at the Lappeenranta unit. The negotiations concern all staff at those sites, a total of some 800 people.

Valio’s Russian subsidiary has begun preparations for the gradual run-down of operations as the current inventory becomes exhausted and sales end. Valio has around 500 employees in Russia. The production of the Russian processed cheese plant will though continue.

The fall in production may lead to unpaid lay-offs and the non-renewal of fixed-term employment contracts once the co-operation negotiations have been completed. There is at this time no estimate on the number or duration of possible lay-offs.

Valio to suffer most

Valio will be the hardest hit of all companies in Finland by Russia’s food import embargo.

According to the Bank of Finland, the value of food exports from Finland to Russia subject to the embargo totalled 283.4 million euros in 2013. Valio’s share was 85.4%, 242 million euros. Russia has been Valio’s biggest and a continuously growing export market, which generated almost 20% of the company’s net sales last year.

In comparison, for example poultry exports from the US to Russia subject to the embargo totalled 227 million euros in 2013, which is less than the value of Valio’s exports to Russia. And Russia is the second biggest poultry export market for the United States (source: NCC).

The total value of dairy product exports from Germany to Russia was 165 million euros in 2013 (source: ZDF), that will say less than the loss suffered by Valio alone. Germany’s milk production volume is 15 times that of Finland.

Valio is obliged to process all the raw milk produced by its owners, the Valio milk producers. Alternative markets for the milk are being sought.