Berlin Germans are currently paying 50 percent more for semi-hard cheese than a year ago. According to the Federal Statistical Office, cheese is one of the foods that has become particularly expensive due to high inflation. Accordingly, the private cheese dairy Hochland (Grünländer, Almette and Patros) “had to push through massive price increases,” says Peter Stahl, CEO of the Allgäu family company.
In 2022, for example, the cheese dairy made a huge leap in sales with just 0.6 percent more sales: Revenues rose by 500 million to 2.2 billion euros. Nevertheless, the head of Hochland SE, one of the largest dairy companies in Germany, speaks of a “pitched year with weak liquidity”.
Food manufacturers see themselves being accused by retailers and politicians: Are cream producers currently refusing excessive price increases? Stahl vehemently rejects this: “There can be no question of enrichment or ‘greed inflation’ in our industry – on the contrary.” As proof, he presents the Handelsblatt with exceptional figures that the family company with almost 6,000 employees otherwise never publishes. The return on sales in Germany was therefore only 1.2 percent in 2022. In good years, between three and five percent are common.
Germany is by far the most important market for the company from Heimenkirch. Group-wide, the return on sales was slightly better at 3.7 percent. However, this is the worst result since 2013. “The cost increases were so brutal and rapid that many in the dairy industry had a bad year,” emphasizes Stahl, who is also President of the Dairy Industry Association. The price increases would not have covered the sharp rise in costs. Nevertheless, discussions are currently taking place with retailers, so that cheese prices could fall in the coming months.
Milk prices are on a roller coaster
Discounters such as Lidl, Kaufland and Norma permanently reduced the prices for some cheese products from Gouda to Emmentaler a week ago – Aldi followed suit immediately. The reason for this is the lower raw material prices, it said. The prices on the milk exchange are currently falling significantly, having risen from around 40 to over 60 cents per kilo within a few months. Raw milk accounts for about two-thirds of the cost of cheese factories like Hochland.
The reason for the price jumps: conventional dairy farmers had to contend with higher energy and feed costs as a result of the Russian war of aggression against Ukraine. In addition, the market was undersupplied with milk. Because for dairy farmers, their business was becoming less and less profitable for a long time.
>> Read here: Myth “Greed inflation” – What can be learned from the margins of large corporations
Now the market situation is changing to the opposite: “Due to the exorbitant rise in milk producer prices in 2022, many farmers had expanded their milk production and left more animals in production,” writes the agricultural market information service AMI. “Every year, four percent of dairy farmers give up. Some have postponed this for a few months. After all, milk prices were higher than ever before,” explains Stahl. As a result, the market is now oversupplied – and the milk price on the spot markets has collapsed to 32 cents.
The private cheese dairy from the Allgäu employs almost 6000 people worldwide.
The trade is now demanding rapid price reductions from cheese manufacturers. The discounters have already gone ahead with their own brands. These had previously become disproportionately expensive. Hochland boss Stahl considers immediate price reductions to be unjustified: “Dairies need this phase. After all, we were only able to pass on higher costs due to ongoing contracts to retailers much later and only in part.”
Cheese consumption down in 2022
On the other hand, Hochland has also had a painful feeling since the end of the year: Consumers are buying less cheese because of the high prices. Per capita consumption in Germany fell in 2022 for the first time in years: by 760 grams to 25.6 kilos. Stahl suspects that prices are likely to fall in the coming months, especially for private labels, with which Hochland does a quarter of its business.
Then consumers will increasingly turn to dairy products again. “As a result, there will be a shortage of milk again by autumn at the latest,” expects the head of the private cheese dairy. Overall, he expects milk prices to be higher than in the past: around 45 cents instead of between 32 and 35 cents per kilo as has been the case recently. Because it is politically intended that the number of animals and thus the amount of milk should decrease significantly.
At Hochland and other cheese dairies, the rapidly rising milk prices are having a negative impact on business.
(Photo: Highland)
The second most important market for Hochland is Russia, where the Allgäu company makes about a quarter of its sales. The family business is the market leader for cheese in Russia and, following the Russian attack on the Ukraine, is sticking to the business there – like the German dairies DMK and Ehrmann. Advertising and investments have been suspended.
With 1,600 employees, Hochland produces there with local raw materials for the local market. Hitting food production is neither the political will nor the aim of the EU sanctions. “We feel a great responsibility for our employees, their families and our long-standing partners in Russia. That’s why we’re sticking with our Russian subsidiary,” explains Stahl. “What would be better if we sold our works to a Russian oligarch?”
Market leader for vegan cheese faces competition
Hochland not only produces cheese from the cow, but is a pioneer for plant-based cheese in Germany. With their brand Simply V, the Allgäu are number one. But according to data from Nielsen IQ, the market share has shrunk from around 40 to around 30 percent in 2022. More and more products are coming onto the market, there are now 135: cheap private labels as well as products from established brands such as Bresso from the manufacturer Savencia. The French (Géramont, Fol Epi, Saint Albray) are the overall market leaders for cheese in Germany.
With its Simply V brand, Hochland is a pioneer for plant-based cheese in Germany. But the number of competitors is growing.
(Photo: Highland)
“There are currently more vegan cheeses on the shelves than consumers need,” states Stahl. The wheat will soon be separated from the chaff. According to Stahl, Simply V makes a “sideways movement” when heeling. The times of rapid growth are over – a normal development for a market pioneer. Now the brand wants to score with new products such as vegan mozzarella.
>> Read here: Oat milk and pea burgers: Every German buys plant-based alternatives for 23 euros a year
According to Nielsen IQ, plant-based alternatives account for just one percent of the entire German cheese market with a turnover of 79 million euros. The market share for vegan milk is already 13 percent.
Like the entire food industry, Hochland is concerned about the planned advertising ban for children. “Such an advertising ban would affect all our brands such as Almette, Grünländer or Patros,” says Stahl. Because the WHO rates the natural fat content of dairy products negatively. Even a natural yoghurt with 3.5 percent fat should not be advertised. “It’s crazy,” says the Hochland boss.
“Established brands like ours can sail on for a while without advertising.” Introducing new products without advertising is almost impossible. That hurts the innovative power in Germany enormously.
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