Valio to rationalise costs

Valio Ltd is rationalising its costs to correspond to the current operating environment. As part of its cost savings program, due to impacts on production and finance, the company will commence co-operation negotiations on 22 April 2015 in its Operations division and in some parts of head office operations.

The major changes undergone during the past year in its classes and volumes of production have had a significant impact on the profitability of Valio’s production structure, and this also has to be taken into account in the company’s business operations. The co-operation negotiations concern around 2,900 employees and it is estimated that at most the equivalent of 320 man-years in redundancies need to be achieved. The negotiations are expected to last six weeks.

Valio employs in total some 4,400 people, around 3,600 of whom work in Finland.

The cessation of exports to Russia has slashed Valio’s net sales by around a fifth. Meanwhile, consumer purchasing power has weakened in Finland and that has amplified the importance of price in buying decisions. Valio cannot compete in basic milks in its domestic market due to an interpretation of the country’s Competition Law, as a consequence of which the company’s market share of basic milks has fallen to less than 30%. In the global market, the recovery of prices is slow and uncertain.

“Most of the milk that was previously exported to Russia is now processed into milk powder and industrial butter for the global market, and their profitability is of a completely different order to consumer products exported to Russia. Exports to Russia are still under embargo and uncertainty there is expected to continue for a long time. In the co-operation negotiations over the next six weeks we shall investigate the most efficient way to manufacture our current product range and that for future needs. Some head office operations will be re-organised, including customer marketing, consumer services and some technical services,” says Mika Koskinen, Executive Vice President, Operations.

Valio has to foster its competitiveness, which is based on the skill of developing its own inimitable premium products. Alongside cost savings, the company has to ensure that new value added consumer products can be launched. The most recent example of our capacity to innovate is the even more stomach-friendly and fresh-tasting Valio Eila® products which are manufactured using a patented process and will be available in the shops at the beginning of May.