Milcobels force Annual report 2009 &RPPHUFLHHOB9(57,&$$/ LQGG

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1 Milcobels force Annual report 2009

2 Milcobel jaarverslag

3 Content Foreword by the president 3 The Milcobel Group in Cooperative news 8 Key figures Industrial products and export third countries 13 Cheese and butter for consumers 17 Consumption milk and functional drinks 19 Ice cream 21 Cheese packaging and distribution 23 Who is who in Milcobel 2009? 24 Financial report 25 Credits

4 Reinforce own equity Milcobel translates the result of the Group month after month into a monthly price and incorporates the final result in a post-payment, a payment of dividend on capital and a reservation for the consolidation to reinforce the own equity - 2 -

5 Foreword Guido Veys During 2009 the economic recession also weighed heavily on the dairy sector. The road to a freer and more open dairy market hits much harder than expected and announced. The brutal confrontation with extreme volatility in the short term is new and occurs at a moment that the rules of the farming game have not yet been changed. This causes friction and keeps the sector uncertain. And yet, we must have the courage to learn from this: for ourselves as dairy farmers and also as cooperative. It is an economic law that the demand for food is not really elastic. The demand for dairy products apparently is! That was abundantly clear in The former fall in demand which had already originated in 2008 as a result of the high prices was once again reinforced by the worldwide economic recession and financial crisis. Even the rich consumers and buyers adjusted their buying behaviour. And apparently it will also be a long time before the fall in demand recovers! The learning process in 2009 was interspersed with trade union tension and the relationships in the chain were put under pressure. Europe necessarily turned to the tools that it had at hand to prevent the market from falling into an even deeper recession. Despite the sombre climate in the sector and also when emotions were under pressure, Milcobel continued to follow consistently the delineated milk price process. Namely, translating the result of our enterprise month after month into a monthly price and incorporating the final result in a post-payment. The explained strategy in the various working communities was maintained just as consistently. This was done with the most visible results in the consumer cheeses where Brugge cheese became a concept and in Ysco where a good summer reinforced this approach. Furthermore, in all business units at the express demand of the Board of Directors the company s cost consciousness structure was enhanced. Intense communication with the shareholders on markets and products, on the state of affairs and our vision on the future contributes to the fact that despite the difficult situation our milk farming members continue to be confident about the future. Whatever the future brings, co-operators in any event, hold their sale in their own hands. This distinguishes them from their colleagues. In this continuous deliberation with the members our member team managements and the input of our management members play a crucial role. Milcobel also had its part to play in the busy chain deliberation. Our contribution is characterised by great involvement, being passionate about events in the entire sector and business entrepreneurship in the long term. Here there is no room for panic but only for considered action, both as regards the farm and the co-operative. This consistent and well-considered entrepreneurship together with a light recovery of the market offered the possibility of raising the milk price and for a post-payment towards the end of This experience confirms our overall strategy of diversification where the result of the ice cream business, consumer cheese, cheese service, milk drinks and powder specialities can act as a buffer against the extreme volatility of industrial cheese and milkpowder market. With this, Milcobel can make an important contribution to a future for dairy farming in which risk management is an important fact. In this difficult year members also voluntarily contributed capital to reinforce the co-operative s equity. This is an important stimulus for all employees, board of directors and management who take Milcobel s further development to heart. Guido Veys, President - 3 -

6 The variety in dairy products and market spread helps Milcobel to achieve the objective in the new dairy situation. A new situation that is characterised by large dairy market volatility and therefore market risks Achieve objective Milcobel jaarverslag

7 The Milcobel Group in a crisis year Milcobel s aim is to guarantee its member dairy farmers a sustainable sales volume of milk at a fair price. Milcobel wants to do this with clear concern for its members. This objective remained management s guideline during the difficult year of The market was negative in The worldwide financial crisis prevented demand and market equilibrium from recovering. Demand from both the private and industrial dairy product consumers remains poor. This was most noticeable on the export markets, where the food expenditure share is considerably larger than in Europe and where, therefore, a decrease in purchasing power has a great effect on the demand for dairy products. But the crisis was also felt in the rich west, in particular during the first half of During the second half of the year, the market improved somewhat after a two-year period of worsening. It was a very difficult year for the dairy farmers, farmers and horticulturalists in general. The milk price that could be fetched on the market was inadequate for long-term sustainable dairy farming. Because dairy farming sustainability for the members is also dependent on their sales, the weakening of the Milcobel group is no option for their access to the market. That is why Milcobel s board courageously determined the milk price from one month to the next at the level at which it was possible in keeping with the market and group result. The Milcobel group continued to actively work in the various market segments and product groups of the subsidiaries business. This variety in dairy products and market spread helps to achieve the objective in the new dairy situation. A new situation that is characterised by large dairy market volatility and therefore market risks. A stroke of luck after all The industrial products division and thirdcountry exports (Belgomilk, Kempico and Kemfoods) experienced a second consecutive difficult year. The milk powder and butter prices remained at intervention level for months on end. In contradiction to the year 2008, during which the cheese prices long held their own, they were positioned at almost equivalent levels the entire year. Therefore, there was not much milk price potential to be achieved with the so-called large products. Yet there were redeeming features. More refined products produced improved profits in 2009 as during 2008 and in contradiction to Investments in this diversification were therefore once again rewarded. Incolac s position was therefore reinforced in an increasing number of countries. Baby food production experienced exceptionally large growth. The full occupation of the factories increased efficiency and kept costs per unit under control. The consumer cheese and butter department (Belgomilk and Kempico) further continued the scheduled development. The identifiability of the brand cheeses, with the Brugge cheese as the flagship was strongly improved and led to the enhancement of the position. The first steps to take the rich Belgian cheese tradition, of which Belgomilk is the great driving force, to the neighbouring countries were rewarded with increased sales. The site in Moorslede is a large building site. Despite the adverse weather conditions during the past autumn and winter, the expansion will be finished in time. At the same time, the cheese factory is working at full capacity. Arrangements are being made in the factory in Gierle with the cheese assortment produced there to be able to meet the demand in combination with Moorslede. Part of the mozzarella production is already being transferred to the factory in Langemark. Belgomilk s consumer butter was also able to consolidate its position for brand butter on the local market with the brands Nazareth and Dixmuda, under conditions that were all but favourable. As specialist in long-life consumer milk and milk drinks (Inza brand), Inza had a fairly good year in Inza was able to generate the milk price over the entire year and make a contribution to the group result. Inza took over the Yogho!Yogho! and Choco!Choco! brands from Campina. Inza will support these brands with renewed panache and makes the necessary investments for this. As a producer of ice cream and consumer ice cream, Ysco was able to take advantage of the good summer of Despite the disappearance of the Frigécrème range after this brand was sold, Ysco achieved the same turnover. The results were not only the result of the ideal summer, but also the merit of many years of efforts to arrive at the position that Ysco now has in the private label ice cream and consumer-icecream sectors. Cheese packaging and distribution by Kaasimport Jan Dupont and Camal continue to be Milcobel s road to the consumer as regards cheese, and much more. Kaasimport Jan Dupont continues to distribute the best types of cheese from all over Europe, whether or not they package them first according to the most varied and modern techniques. With Camal, the sale of cheese increased in the south of the country. After the cheese distribution and cheese division of AKC (the Antwerp cheese centre), which was taken over in 2007, were integrated in the work of Kaasimport Jan Dupont in Bruges, the Paschka brand and accompanying trade register were sold. More milk processed The Milcobel sold approximately 7% more milk in 2009 than in the previous year. Besides the members milk, which Milcobel fetches and delivers to Belgomilk and Inza, Belgomilk bought less milk from other industrialists than the >>> - 5 -

8 previous year and sold more to them. Yet the increased milk supply by the members caused an increase in the group s dairy factories milk processing, in particular billion l as compared to 968 million l in results The Milcobel Group consolidated turnover fell by 8% in 2009 to 755 million euros. This fall is fully due to the decreased selling prices. Thanks to the improved market during the autumn and the results of the non-dairy activities that were better than expected, a good result was achieved in the end. This result makes a postpayment of 0.70 euros per 100 l possible. After this post-payment in the amount of 7.5 million euros, the group s final consolidated result is 3,231,246 euros. A dividend of 4% will be proposed at the general meeting. The remaining result shall reinforce the group s equity. Milk price The milk price paid fell by 23% compared to This decrease reflects the particularly unfavourable dairy situation in With a fat content of gram/litre and a protein content of gram/litre, an average milk price of euros per 100 litres was paid. If this is recalculated to the standard milk in Belgium with 38 g fat and 33.5 g protein per l, the average milk price for members amounted to euros per 100 l. Investments Milcobel keeps investing to maintain its factories in good condition and to keep up with the technological developments. There was no derogation from this, also in a difficult year. Sustainable enterprise is only possible if machines are continually renewed and improved. The group s investments in material fixed assets amounted to 27.8 million euros in The greatest share was invested in the Belgomilk and Inza dairy factories. The cheese factory expansion works in Moorslede were started. In Langemark the cogeneration plant was put into operation. The automation of the warehouse was finalised in Inza. Besides the investments in material fixed assets, Milcobel increased its participation in Heritage 1466 (Herve s cheese factory) to 20%. Personnel The group continued its policy of open communication and deliberation by way of appropriate official bodies, work groups and safety units. This is all with a view to a good working atmosphere, health and safety at work and continued improvement in the quality of the work delivered and of the final products. Milcobel wants to be a Group where every employee is convinced of the objectives of the group in general and his or her division in particular. In that way each and every person will apply his or her talent with pleasure to achieve these objectives and will also be shown appreciation for this. In application and within the scope of the inter-professional and sector agreements, industrial CLA s were concluded regarding purchasing power. The CLA s adjusted labour organisation was either renewed or adjusted to the new circumstances. The particular aim here was simplification. Great progress was made regarding safety at work. This resulted in a substantial decrease in the number of accidents at work. The preparations for the development of a policy of prevention concerning the presence of drugs and alcohol on the workfloor within the scope of CLA 100 were started and will result in a policy statement and concrete policy on the matter. Socially responsible entrepreneurship Milcobel places great emphasis on socially responsible entrepreneurship. This is characteristic of a cooperative enterprise such as Milcobel. The social character and solidarity are ingrained in the origin and nature of the cooperative company. It is therefore characteristic that Milcobel is concerned about social issues and human rights. The step towards other issues of socially responsible enterprise is small. Care for the environment is a question of sustainability of the enterprise, society and the environment in which it must prosper. The heavy cogeneration investments in Langemark are within the scope of this care for using natural resources economically. This plant was successfully put into operation in the middle of Because all these principles already formed part of Milcobel s corporate culture, it supported the ten principles of the UN Global Compact, an initiative of the former UN Secretary-General Kofi Annan in This participation in the UN Global Compact is a stimulus not to leave the principles as mere principles but to convert them into daily practice in the company. Milcobel is one of the founding members of the Belgian network. Prospects The prospects for 2010 are better than in The world is recovering from the deep financial and economic crisis. Some realism is required here because the aftermath of the economic crisis has not fully disappeared. Yet, it may be assumed that the demand for dairy products will recover worldwide. The stock situation on the market is completely different from one year ago. There are indeed public stocks, but if these are brought onto the market wisely, this will benefit market stability. A new drop in demand due to too high prices would be harmfull for a sustainable dairy sector. Due to weather and other conditions, production in the southern hemisphere is lower than expected. In Europe too, the overall milk quota is not fully achieved. The combination of demand, stock situation and supply results in much better prospects for the market situation than a year ago. It will be possible to have substantially better milk prices. This is also necessary so that our members can once again start living after having survived for a year. Milcobel s management and employees welcome this improvement and will do everything possible to make and keep them as strong and sustainable as possible

9 Group structure Members Milcobel cvba Belgomilk cvba 50% Fassbel nv Kaasimport J. Dupont nv Inza cvba Ysco nv Milcobel NL bv 50% Les From. des Flandres GEIE (2) Cheeseline nv Ysco FR Holding SASU BMF-Lait SARL 50% Prodinco Cheeselink nv Ysco France SASU Bedrijvenpark Wingene nv (1) 50% Kempico cvba Zuivelindustrie Zandhoven cvba (2) Milcobel 3F cvba Kemfoods cvba Heritage 1466 nv (1) 20 % Melkerij van Loenhout cvba St. Marie cvba AKC nv (1) Camal sa (1) as to asset mutation (2) not included - 7 -

10 Cooperative news 2009 became a year of survival strategy for many dairy farmers. The extremely unfavourable economic situation weighed very heavily on them. Members of the milk sector were involved in demonstrations in an attempt to sensitise public opinion and European politics, and these remain in the collective memory of many. Despite the sector s bleak climate, Milcobel remained particularly active on all fronts. Convincing strategic choices were made for the future and this is why the Board of Directors together with the Group Management - held a special internal study day at which information was obtained from co-operatives in other sectors which are further on the road to free market conditions. At the first meeting of the Board of Directors in 2009 it was decided that stricter accession criteria should be put in place. Accession to the co-operative must be based on a well-considered and sustainable commitment. That is why there is an accession premium which will only be fully integrated in the member capital after 10 years. As regards accession premiums, it was also decided that these cannot be recuperated upon resignation or dismissal. Exceptions are provided in cases of de jure dismissal for F shareholders, W shareholders and situations whereby the company that is brought to a standstill is continued by a Milcobel shareholder. Besides the stricter accession criteria, the difficult dairy situation encouraged the Board of Directors to keep the cooperative closed. This intervention signifies two things: on the one hand, the situation is avoided whereby in unfavourable market conditions additional milk volumes would put too much pressure on the price of the current members milk; on the other hand, this means that space is reserved for the members industrial development. This last point is perceptibly gaining in interest and importance. Milcobel is committed to respecting and following the industrial development of the member companies. No longer allowing new members is a kind of supply management while respecting the possibility of individual growth. It has been decided that there will be no individual supply management on the part of the cooperative. In consequence of this and within the context of quota-free milk production, the in-house regulations have always been adjusted: the contribution of member capital is still based on milk quota but can immediately be linked to delivery size where quota has been greatly exceeded or withdrawn. You may be surprised to hear that in 2009 the milk supply rose to 1,067,098,628 litres. This is no less than 7.4% more members milk than the previous year. Over 91% of this milk comes from the Belgian members, almost 6% from the Netherlands and 3% from France. An analysis of this major increase shows that it has to do with the accession, as per 1 January 2009, of 85 former Ste. suppliers. Marie Zuivel from Wuustwezel, the very limited number (7) of new members at the beginning of 2009 and an average annual net growth of all current members of + 4%. During 2009 the average number of suppliers fell by only 1.74% to 3,380. This decrease is considerably smaller than the previous years and also lower than the Belgian average of 4.4%. With the increased milk supply and the number of members only decreasing slightly, the individual supply volume within Milcobel evolves to an average of 315,700 litres. With regard to the difficult dairy situation, a political trade union agreement was made by which a Fedis solidarity contribution was to be paid out on behalf of the Belgian supermarkets. Milcobel made the respective payments immediately. In so doing, a total amount of 8.5 million euros was made available to the Belgian members. Based on a principle of uniformity for all members, an own solidarity contribution was also provided for the French and Dutch members. As an additional concession to the dairy farmers and so as not to put an extra burden on their liquidity situation, all pending obligations regarding capital and income premium for 2009 were suspended for one year. A stricter cost consciousness was implemented within the co-operative business and supply administration division and the extent to which the costs of the quality follow-up remained justifiable within the co-operative solidarity was checked. As a result after deliberation with member management teams it was decided to implement a partial cost account for antibiotic tests. Within one and the same cost management policy the conditions regarding sponsoring and promotional interventions on the part of Milcobel have been somewhat adjusted in favour of exclusive initiatives which are proportional to dairy farming itself. In 2009, the logistic milk supply organisation continued to aim for efficiency and profit. This was done by means of a continual development towards large tanktrailers, pumps with a greater capacity and the automatic optimisation of the collection rounds along with continuous communication with the suppliers. Finally, the former plans to restructure the member structures were re-activated during the meetings of the member teams. This means that as of autumn 2010 there will be 9 rather than 12 member teams. Things will continue in the same vein in 2010 and 2011 and in addition there will be a newly composed administration. The total number of management members in the new member team structure will not alter. Initially, the new management teams will be composed of the current management members. Management commitment does, after all, lead to true cooperation! - 8 -

11 Cooperative structure Milcobel members board of the member circle 12 regional member circles statutory general assembly council of the cooperative 4 delegates per member circle 14 members of the board of directors Group structure chart milk collection - holding & coordination & group services Milcobel cvba Consumption milk and functional drinks Inza cvba Cheese and butter for consumers Belgomilk cvba Kempico cvba Cheese packaging and distribution Kaasimport Jan Dupont nv Camal SA Industrial products and export third countries Belgomilk cvba Kemfoods cvba Ice cream Ysco nv Ysco France SAS - 9 -

12 7,4% more milk In 2009 the Milcobel s milk supply rose to no less than 7,4% more with an average number of suppliers of

13 Key figures Key figures milk flow 01/01/2009 till 31/12/ Members milk 1,067,098, ,591, ,037,323 Deliveries suppliers Milcobel Netherlands Deliveries suppliers BMF 20,265,179 Total supplied milk 1,008,302,502 Available total incl. third parties 1,083,480,552 1,015,709,787 1,019,202,731 Total sales 68,527,451 47,737,070 63,006,620 Available for transformation 1,014,953, ,972, ,196,111 Key figures collection of the members Average number of suppliers 3,380 3,440 3,620 Quantity of milk supplied 1,067,098, ,591, ,037,323 Average fat content Average protein content Price paid for milk in millions of euro Euro per litre Key figures Milcobel Group (in thousands of euro) Turnover 755, , ,757 Investments fixed assets 29,105 29,228 27,587 Result 3,231 1,168 2,271 Capital and reserves 95,539 94,587 94,243 Solvability % Average number of employees 1,962 1,911 1,

14 Despite the difficult market conditions for milk powder, the diversification of the destinations and the product range were further developed Diversification developed Milcobel jaarverslag

15 Industrial products and export third countries This division processes the majority of the milk in the Milcobel Group. Most of it is processed into powdered milk, the remainder becomes industrial cheese (mozzarella and cheddar). In 2009 more cheese was made once again. This was not sufficient to compensate for the milk supply that had increased by 7%, meaning that milk powder production also increased. As it largely concerns commodity products, the focus is particularly on quality, flexibility and service to customers. In addition to this business, comprising the priority processing of milk, this division also develops non-dairy activities that make optimum use of the production facilities available. General market conditions The 2008 financial crisis resulted in a worldwide economic crisis. The dairy sector was also hit by this. After the 2007 boom the dairy markets experienced a heavy relapse due to the drop in demand and increase in supply. Despite the historically low prices for dairy products, the economic crisis prevented a recovery of the demand and market equilibrium. On the contrary, it went from bad to worse. The dollar exchange rate also had a negative effect on the prices for European products as expressed in euros. High prices in 2007 meant that a search for substitutes for a number of dairy product applications was began, and they didn t return too dairy, despite what would undoubtedly have been more attractive prices from the users point of view. A complete collapse of prices was only prevented when the European Commission once again applied the market tools of intervention and export refunds. Export refunds were even increased a number of times. It was not until August September that the market recovered, with the result that the refunds in October were put to zero. Milk powder In 2009 the powder market was also dominated by the Fonterra auctions. It has become a stopand-go market until the next auction results are known. The demand for full milk powder remained low. Substantial stocks weighed on the entire market. Because the intervention of skimmed milk powder and butter offered an alternative, the market could gradually be relieved. Belgomilk was also forced to call on intervention, with the result that in 2009 less full cream milk powder and more skimmed milk powder was produced and sold. Prices improved substantially during late summer: the auction prices fetched at Fonterra rose by a quarter twice consecutively. Expressed in euros, the rise was less spectacular, however. By the end of the year the market weakened again. The diversification of the destinations were further developed, despite the difficult market conditions. Without losing sight of our customers in third-world countries, in particular in Africa and the Middle East, and by further developing and increasing this database of customers, special attention was paid to the European market for milk powders. Both commercially and industrially, the organisation made a huge effort to reach this target. In the current, abovementioned stop-and-go market, sales continuity is becoming increasingly important. Small packaging Milk powder and consumer packaging for thirdworld countries was a successful development pool in Good growth was achieved as regards both volume and profit. It is encouraging that the Incolac brand was a front-runner in this growth. Incolac s development is being increasingly strengthened in a variety of countries. In deliberation with our customers Incolac s packaging was given a new appearance and the modernisation of Incolac s look seems to be a success. Besides milk powder, Belgomilk is having increasing success with the sale of flavoured milk produced for the Incolac range, by sister company Inza. Moreover, the range was extended with whole and grated mozzarella. Baby food Belgomilk has a collaboration agreement with Fasska nv for the manufacture and packaging of baby food powder. A mutual subsidiary, Fassbel nv, was established for certain markets. In 2009 the manufacture grew by 50% compared to This growth was thanks to both an increase in regular customer procurement of large tenders. Confectioners & ice-cream mixes The sale of these products under own brands is continuing to develop positively. Mozzarella The cheese market encountered the same negative consequences with the powder market, as the powder market itself. Here it was striking that both in the downward and upward sense, phasing between market movements in the powder and butter markets had become much shorter. It seems that producers switch much quicker to the best milk valorisation. More or less supply made the cheese market evolve quickly to prices which generate equivalent profits for the milk used. There were a few factors that caused cheese prices to quickly follow powder prices, in contrast to the previous years. This resulted in downright bad prices at the beginning of

16 Growing number of customers The Belgomilk and Kempico mozzarella is appreciated by a growing number of customers Milcobel jaarverslag

17 The prices for mozzarella reached rock-bottom as soon as the intervention purchases of powder and butter had their effect on the market. Only shortly after the powder and butter markets recovered, the prices started lifting from the bottom. In November there was an upsurge in prices. A growing number of customers appreciate the quality of the Belgomilk and Kempico mozzarella. So the sales of mozzarella increased in 2009, at the expense of cheddar. The sale of both whole mozzarella and grated mozzarella to third-world countries developed favourably. Cheddar Due to the choice of mozzarella, the cheddar market, cheddar production and sales remained limited to the production that fits in the context of optimum use of the cheese factory in Langemark. The prices for cheddar also dropped to historically low levels. Butter In the beginning of 2009 the butter prices dropped considerably below the intervention level. Opening up the intervention made the prices rise to that level, only to remain there for months on end. It was only in the autumn that the trend in butter prices experienced a noteworthy revival. The production of skimmed milk powder and butter before intervention resulted in a major increase in butter sales. Contract work and baby food Once again, Belgomilk has made maximum use of the free capacity to manufacture and package non-dairy products. Milcobel members increasing milk delivery pursuant to the quota extensions within the context of slowly but surely arriving at the post-quota period will limit the free capacity in future. That is why it has been decided not to extend an age-old agreement for contract drying in In the future there will most probably still be an opportunity to do contract work outside of the peak periods of milk delivery. Cream As with the butter sales, the sale of cream rose as a result of the increased production in skimmed milk powder and mozzarella. The trend in prices largely kept up with the butter prices. Whey and whey products Whey prices remained relatively stable during the first half of 2009 at the low levels of During the summer they gradually rose to 50% higher levels to stay there for months. All things considered, the market for whey and whey products was still relatively healthy in A large part of the whey can be valorised in the group, either in applications of Belgomilk or in the other divisions of Milcobel. The anticipated expansion of cheese production in the group and the accompanying whey flow will make additional valorisation possibilities, internally or externally, essential. The future Things are looking more positive in Although the economic crisis is not completely a thing of the past, major signs of recovery are visible. The demand is returning, in which developments in China are playing a major role. The demand for dairy products is also reviving in other parts of the world. The total milk supply has declined slightly as a result of the low prices. Finally, the stock situation - not taking into account the public stock - can be referred to as rather tight with both producers and purchasers. The situation at the beginning of 2009 was completely different when there were large stocks on the market. However, milk remains a harvest product and a good or bad season in the large production areas can have an important influence. With the input of the employees, planned investments and developments, Belgomilk continues to pursue optimum spread of the valorisation of members milk so that it can limit market risks. With even better products and service for our customers, Belgomilk will aim to limit the influence of the increased volatility on the dairy market without creating the illusion of eliminating it. Annual report tmilcobel l

18 Development factory capacity In the course of 2009, preparations were franctically being made for the introduction of the Group s cheese master plan and the development of the factory capacity for the production of consumer cheese is in full swing

19 Consumer cheese and butter This division represents all business of the Milcobel Group with regard to cheese and butter, whereby the end-products are consumed by the consumer. Four manufacturing sites are involved here: the Belgomilk Moorslede cheese factory, the Kempico cheese factory in Gierle, the Ste Marie Zuivel cheese factory in Wuustwezel and the Langemark butter division. The supply consists of a wide range of cheese specialities that not only have their origin in the Belgian cheese tradition, but also in a range of southern-inspired cheese, which is sold mainly in Italy and the Balkans. In the course of the 2009 working year, preparations were frantically being made for the introduction of the Group s cheese master plan. Commercially, the complete re-styling of the Brugge cheese range is the most eye-catching. It has spectacularly improved its visibility and recognisability in the shelf. Supported by a successful media campaign in the second half of the year, Brugge cheeses ended the year with good growth figures. In the stagnating Belgian cheese market, taking the specific context of the financial and economic crisis into consideration, this is an extraordinary achievement. Beer cheeses are also making good progress thanks to their promotion on a number of new sales channels. In relation to this, full use is being made of the packaging possibilities of our sister company, Kaasimport Jan Dupont. The cheese products destined for the Belgian retailers private label stood firm, despite pressure from neighbouring countries due to aggressive price fixing. Distribution of the Belgian cheese brand outside of Belgium is patiently developing. Partners are selected based on their market knowledge and capacity to jointly develop the Belgian market. Both traditional channels and retailers are being approached. Cheeses inspired by southern Europe and manufactured in Gierle and Wuustwezel also continue to play an important role in the selection on offer. Here too, quality was opted for enabling specialisation and thus achieving an above-average milk valorisation. In addition, in 2009, these cheeses were successfully sold pre-packed for the first time. This is the start of an important development that means the group can finally take advantage of its winning hand. In the meantime, the industrial part of the cheese master plan, i.e. the development of the Moorslede factory capacity, is in full swing. However, the severe winter weather conditions meant that the schedule was disrupted. The objective is still to have extra capacity available as quickly as possible in order to achieve commercial growth and complete the transfer of the Gierle manufacturing by the end of The consumer cheese and butter division has put a strong year behind it, thanks to the growth of cheeses brands and distribution innovations locally and abroad. Consequently, excellent contributions in support of the milk price were made and the first steps towards the long-term presence of Belgian cheeses on the international map were made

20 Varied product range Inza has a varied product range which creates a higher added value and must be able to neutralise the price pressure on consumer milk