Food Union Group, one of Europe’s leading ice cream and dairy producers, ramped up its capital expenditure to €18.8m last year – the highest investment level seen at the company for the past five years and double the average spend for the prior two years.
Targeted investment will form the foundation of the group’s ‘ambitious’, long-term plans, the company said.
“We actively invested in long-term growth for our leading market brands to meet growing demand,” CEO Normunds Staņēvičs explained.
“We focused on enhancing production capabilities and poured energy into modern technologies to improve production capacity and ensure the highest quality product. This will give us an ongoing competitive edge as we continue to push the boundaries of innovation and create new products that delight consumers.”
Quality, local insight and innovation
Food Union Group, a Latvian ‘national dairy champion’, ended 2019 €277m in net revenue and a gross profit of €104m. The company is the leading ice cream company in the Baltics, as well as a strong regional player in northern and southeastern Europe.
Food Union’s strategy focuses on building strong local brands throughout a wide range of product categories. It operates in frozen food and pastries, but dairy - and in particular ice cream - account for the lion's share of its sales.
Since 2011, Food Union has grown to be the leading ice cream maker in the Baltics and Denmark; it also holds a strong market position in Norway, Romania, Russia and Belarus. This geographic spread has been achieved by combining in-depth knowledge of what the local consumer wants and focusing on innovation to meet these needs.
“In 2019, we invested in technologies that allowed us to improve in two primary consumer-oriented directions – quality and innovation. We invested in dairy production facilities which allowed us to create unique dairy products for each local heritage and culture at the highest production standards. Similarly, our investments in ice cream production facilities across Europe allowed us to improve the quality of cold chain distribution (from production to the consumer) and launch SKUs (stock-keeping units) in new categories,” Staņēvičs told FoodNavigator.
Food Union Group leverages deep consumer insight from the local markets in which it operates to adapt to specific conditions and consumer trends.
“We are closely monitoring changes in consumer behaviours and preferences which will allow us to adjust our long-term plans accordingly. Our industry insights allow us to operate in the most suitable way for each country’s market. For example, the Scandinavian market has a bigger share of products for consumption at home. Eastern European markets are consolidating retail markets which gradually impacts how we offer our products to the market. Meanwhile, in the Baltic market we see a gradual shift from consumers shopping at large-format stores to around-the-corner grocery stores.”
COVID’s door-step-delivery boost
In Norway and Denmark, Food Union Group operates two nationwide door-step-delivery (DSD) businesses – Hjem Is in Denmark and Den Norske Isbilen in Norway - both of which benefited from ‘considerable investment’ in 2019.
This move, Staņēvičs said, enabled the group to stimulate sales by focusing on technological improvements that made the businesses more ‘consumer-centric’.
“Both companies’ sales were stagnant until we made the decision to invest in more advanced, consumer-centric delivery services. We focused on improving logistics, invested in a new car fleet, and a more convenient ice cream purchasing process using new online platforms.
“We are also focusing on sustainability and have created more efficient delivery routes to help decrease our carbon footprint. Not to mention we are constantly improving our ice cream quality.
“Since 2018, improving our door-step-delivery services has been a top priority and it will continue to be our focus in 2021 as well. Sales have considerably improved in 2019 and due to COVID, sales for the first half of 2020 are skyrocketing.”
Tech and trends shaping strategy
Investments in new technologies have served to ‘improve the entire supply chain’, enabling Food Union Group to meet the needs of customers and focus on emergent consumer demands, the dairy CEO told this publication.
The adoption of new food tech solutions will continue to be a focus for the ice-cream to dairy company moving forwards. “We are working on integrating our supply chain and data management tools in close cooperation with our retail partners to maximize consumer value. In order to be the food industry avant-garde, we gather market data and track our product portfolio performance. We closely observe consumer preferences when developing new and exciting products,” Staņēvičs noted.
What consumer trends does Staņēvičs believe will shape the future of the business?
“Consumers are increasingly more aware of their consumption behaviours and the benefit products provide. That does not necessarily mean that consumers are choosing ‘healthy’ products over ‘delight’, but more broadly speaking all products are increasingly evaluated for their function and benefit. Ice cream, for example, is becoming a ‘snack’ or a ‘dessert’ depending on the particular SKU. This requires more precise and targeted brand messaging and product listing.”
Research and development will be key to responding to the evolving needs of the markets that Food Union serves – and innovation will remain the bedrock of the company’s strategy moving forward.
“R&D is a focal point within Food Union. It is deeply integrated in our marketing and market data analytics. We have developed an Ice Cream Competence Centre, based in Riga, Latvia, which is responsible for new product development at our production facilities in eight countries.
“This Centre works closely with local R&D teams to launch new exciting products every summer and winter season. This summer we launched 100 new ice cream products, including non-dairy options across Latvia, Lithuania, Estonia, Norway, Denmark, Romania, Belarus and Russia.”