Annual report 2019/20
2 Annual report
Contents
Contents
10 FRILAND ORGANIC cattle
New FRILAND ORGANIC products
12 FRILANDSGRIS®
— Read more on page 18
3 Preface 4
Chairman’s report
6
Results for the year
8 FRILAND ORGANIC pigs
14 FRILAND KØDKVÆG® and FRILAND LIMOUSINE®
3% increase in revenue — Read more about FRILAND ORGANIC pigs on page 9
16 More focus on nature and environment in the coming years 18 New FRILAND ORGANIC products 20 New large-scale forest farming project 22 Organic farmer launches hugely successful ‘pod camping in pig field’ project
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Preface
We are heading in the right direction When I took over as CEO four months into the financial year, I had a clear expectation that the next few months would be challenging and filled with new and interesting tasks. I was quite right, although this past year did, of course, come to be peppered with many more new types of challenges than anybody could have anticipated. The corona crisis, the ASF outbreak in Germany and Brexit have all impacted our business, and also – which you know, of course – our various additional payments. The corona pandemic in the second half of the year was particularly impactful as the food-service area and restaurants were closed down overnight. Some sales shifted to the retail sector, so despite the effects on our additional payments, we have come out the other side. And despite the unexpected challenges, we have also succeeded in driving our business in the right direction. Awareness of Friland continues to grow in
Denmark, and many initiatives have been launched to increase awareness further in the coming year. One of my clear ambitions for Friland was – and is – that we must grow less dependent on individual and specific markets in order to be able to pay acceptable supplements. It is difficult to predict the future, which is why it is important to have as many legs as possible to stand on. Of course, it is natural that we should sell most of our products on the Danish and German markets, but we are working to further diversify our other export activities, constantly moving in the direction of more new customers and more new markets. During past financial year, our office in Kiel also started contributing quite positively to our business. This is testament to the fantastic efforts of our colleagues in Germany and Denmark, and actually of the whole Danish Crown group. As a relatively small, but significant player in our field within the Danish Crown group, Friland can really
benefit from our colleagues’ expertise and relations. I am very positively surprised at how the ‘Act as One’ mindset permeates all the business units we work with across the group. An example is the way we are now selling organic pork from Sweden via our sales office in Kiel. This is an excellent setup for both Friland and KLS Ugglarps. That is the way to go. Best regards,
Claus Hein, CEO
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Chairman’s report
A few words from the Chairman Another year is drawing to a close where I have had the pleasure of being part of the Board of Directors of Friland. The 2019/20 financial year was a challenging one for Friland. Looking back on the past year and all the events beyond our control we have faced during the year, COVID-19 and African swine fever, of course, stand out a mile. Even though Friland has not been hit nearly as hard as one could have feared, COVID-19 in particular has caused quite a few disruptions, although I believe that we have succeeded in navigating through the turbulence. Of the things we have been able to control ourselves, I would, of course, like to mention the Board of Directors’ efforts to find a replacement for Henrik Biilmann, who sought new challenges with VikingGenetics almost a year ago. As you know, we decided to appoint Claus Hein, who knows the group well, as he has previously worked for both Danish Crown Beef and Danish Crown Pork. Moreover, Claus Hein comes with considerable and specific knowledge
about Friland, having previously represented Danish Crown Beef on the Friland Board of Directors. The Board of Directors was in no doubt that Claus Hein was the right choice, and the past year has only confirmed this belief. After several years of preparations, the 2019/20 financial year also saw Friland successfully entering the North American market with a special production of organic pigs. The Board of Directors has been closely involved in this initiative, and we have been keen to ensure diversification in terms of both markets and customers. We are currently in a good place, and customers greatly appreciate the quality Friland can supply. Our expectations for the new year are therefore positive. Best regards,
Peter Fallesen Ravn Chairman of Friland A/S’s Board of Directors, elected by Danish Crown Pork.
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Chairman’s report
Friland has managed to navigate through COVID-19
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Results for the year
Results for the year
84%
859 million DKK 823 million DKK 2019/20
FRILAND ORGANIC
FRILAND ORGANIC 84% FRILANDSGRIS® 12% FRILAND KØDKVÆG®/FRILAND LIMOUSINE® 4%
2018/19
Revenue Friland A/S generated revenue of 859 million DKK, representing a 4.4% increase compared to last year’s revenue of 823 million DKK. As has often been the case in the past, developments are driven by our two organic concepts, this year even based on an increase in revenue.
By concepts Organic pork accounted for 52% and thus still the largest share of revenue based on the animals supplied by our cooperative members in Denmark, although total supplies declined, while organic beef accounted for 32%. As a result, our organic concepts accounted for 84% of Friland’s total revenue in 2019/20.
Our other organic concepts accounted for the following revenue shares: FRILANDSGRIS®: 12%, FRILAND KØDKVÆG®: 3%, and FRILAND LIMOUSINE® calves, which was only active during the first few months of the financial year, accounted for 0.2% of revenue. This means that each concept accounts for close to the same share as last year.
Friland’s total revenue in Denmark represents 51% of total revenue based on the animals supplied by our cooperative members in Denmark, while exports account for 49%. The Danish share of revenue has fallen by 5 percentage points compared to last year. These shares are based on revenue generated by Danish raw materials. To sales outside Denmark must be added
the revenue generated through sales of non-Danish raw materials – primarily German organic pigs – via Friland in Germany. Friland in Germany posted revenue of 357 million DKK against 278 mil lion DKK last year. We have suc ceeded in increasing both volumes and sales prices of organic pork in Germany, while the growth in organic beef is mainly volume-driven.
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274,967
Results for the year
Development
Supplementary payments
Developments in animal numbers differed again this year, depending on the concept. All in all, the number of animals for slaughter supplied to Friland by Danish suppliers was 274,967, down 0.4% compared to last year. Please refer to the concept-specific sections for a more detailed description of developments for the individual concepts.
As always, it should be stressed that collecting supplementary payments is no criterion of success in itself. However, the Friland business model means that a certain buffer is needed in order to be able to absorb any unforeseen market movements. Suppliers of FRILAND ORGANIC pigs receive a supplementary payment of 0.80 DKK per kg of slaughter weight.
Suppliers of FRILAND ORGANIC cattle receive a supplementary payment of 1.40 DKK per kg of slaughter weight. Suppliers of FRILANDSGRIS® receive a supple mentary payment of 0.80 DKK per quality-approved kg. Suppliers of FRILAND KØDKVÆG® receive a supplementary payment of 0.70 DKK per approved kg. Unfortunately, there is no supplementary payment for
FRILAND LIMOUSINE®. Additional payments by Friland for the 2019/20 financial year, including these supplementary payments, total 214 million DKK.
0.80 DKK/KG
1.40 DKK/KG
0.80 DKK/KG
0.70 DKK/KG
FRILAND ORGANIC pigs
FRILAND ORGANIC cattle
FRILANDSGRIS®
FRILAND KØDKVÆG®
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Market report
FRILAND ORGANIC PIGS
Europe remains our largest export market, but new markets are emerging
27% 73% Distribution of revenue Exports still make up a large share of our business, which accentuates the importance of entering new markets.
Denmark
Exports
370 million DKK Development in revenue Following a marked fall in revenue last year, the curve is now sloping upwards.
2019/20 2018/19 2017/18
370 million DKK 361 million DKK 407 million DKK
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Market report
FRILAND ORGANIC PIGS
3% increase in revenue Revenue increased by approximately 9.8 million DKK to 370 million DKK, equating to a slight 3% increase. Despite the decline in numbers of animals supplied for slaughter, we have succeeded in raising sales prices and maintaining revenue levels. Generally speaking, the market has been characterised by an improved balance between supply and demand, compared to previous years. Thus, the oversupply situation seen earlier seems to be over for now. Prices are stabilising, and by spreading risks across more markets, we aim to avoid major price fluctuations in the future. Exports account for approximately 73% of total revenue from the concept, which is a slightly higher share than last year. To revenue outside Denmark should be added sales based on German organic pigs. Europe remains our largest export market for organic pork, but following our entry in the North American market and other markets, we expect to see a diversification of our sales across more markets and a broadening of our customer base. Other export markets for organic pork still represent a relatively small share of our revenue, and as mentioned above, we see a potential for increasing sales, which we expect to start realising in the coming year.
The development in Danish sales is largely unchanged, and based on relatively limited distribution. However, following the launch of our new Danish ‘Velskåret’ concept, we expect to appeal to even more Danes wanting to eat less, but better-quality meat. The number of slaughterings fell by 1.8% this year. In the current situation, we will continue to optimise the healthy balance we have struck. Signs are that the demand for NOP pigs supplied to North America under the US National Organic Program will continue to increase, and it may therefore be necessary to increase the number of pigs. We still expect the demand for other organic pork products to increase. A total of 143 million DKK has been paid out to the group – including supplementary payments, equivalent to 9.88 DKK per kg compared to 11.18 DKK per kg last year. Including the price paid by Danish Crown, an average of DKK 22.35 DKK per kg was paid compared to 21.00 DKK per kg last year. Any supplementary payments from Danish Crown are in addition to these figures.
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Market report
FRILAND ORGANIC CATTLE
More organic beef for German consumers
76% 24% By markets Most of our organic beef is sold in the Danish market, but Germans
Denmark
Germany
have also become aware of the quality of Danish organic beef.
231 million DKK Development in revenue Despite the closure of restaurants in the spring, we have succeeded in delivering a historically high revenue for this concept.
2019/20 2018/19 2017/18
231 million DKK 207 million DKK 216 million DKK
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Market report
FRILAND ORGANIC CATTLE
A more even supply of animals Looking back on the year as a whole, we have generally seen a more even supply of animals than has been the case in previous years. We assume that the significantly higher additional payments over the summer have contributed to this development. This enabled us to supply the desired volumes to our customers to an even higher degree – even over the summer, which is key to retaining customer interest in selling organic beef. Our plan is to continue the same seasonal distribution in 2021 as the summer season has historically been challenging when it comes to the number of animals for slaughter. The first wave of COVID-19 hit sales of organic beef hard, with sales of expensive cuts grinding to a complete halt overnight. Fortunately, retail sales to some extent made up for this development, but there is no doubt that the concept was impacted by the lockdown. Following the gradual easing of the lockdown, we have bounced back and been able to raise the additional payments more than once. In the past year, we have had great success selling organic beef through our office in Kiel. Exports now account for 24% compared to 15% last year. Revenue totalled 231 million DKK against
207 million DKK last year – representing an increase of 12%. Minced beef still accounts for by far the largest share of sales (61%). Following the introduction of new industry recommendations, the start of the 2019 calendar year marked the end of the systematic killing of bull calves. The 2019/20 financial year was thus the first full financial year following the full implementation of this new rule. As expected, this has resulted in a slight increase in volumes of organic meat, and the increase is expected to continue as the young bulls are supplied for slaughter. All in all, 6% more animals were slaughtered than last year. The additional payments for organic cattle also developed positively compared to last year. A total of 46.3 million DKK has been paid out to the group – including supplementary payments and Danish Cattle supplements, which is equivalent to 7.40 DKK per kg compared to 7.07 DKK per kg last year. Including the price paid by Danish Crown, an average of 25.22 DKK per kg was paid compared to 24.55 DKK per kg last year. Any supplementary payments from Danish Crown are in addition to these figures.
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Market report
FRILANDSGRIS®
Continued good exposure in 7-eleven, MENY and Jagger
75% 25% By markets Most FRILANDSGRIS® pork is still sold in Denmark, but some is also still exported to a couple of handfuls of countries.
Denmark Exports
88 million DKK Development in revenue Revenue is close to index 100 compared to last year.
2019/20 2018/19 2017/18
88 million DKK 89 million DKK 96 million DKK
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Frilandsgris
Market report
FRILANDSGRIS®
Record total settlements
At index 100, FRILANDSGRIS® revenue is largely on a par with last year. As was the case last year, sales were down slightly in Denmark (index 93) and up slightly in our export markets. Consumer interest in the product remains strong, and increasing demand from the export markets has pushed prices up slightly. Moreover, the positive development in the number of processed products based on FRILANDSGRIS® pork is expected to continue in 2021. Our exposure in 7-eleven stores across Denmark remains good, and much work is going into strengthening visibility. Visibility is also good in the Copenhagen-based burger chain ‘Jagger’, while some of our Danish sales go to Meyer’s canteens, although obviously not during the nationwide lockdown.
The number of slaughterings of FRILANDSGRIS® pigs increased by 4%. A total of 22.8 million DKK has been paid out to the group – including supplementary payments, equivalent to 3.15 DKK per kg compared to 3.70 DKK per kg last year. Including the price paid by Danish Crown, an average of DKK 15.62 DKK per kg was paid compared to 13.52 DKK per kg last year. Any supplementary payments from Danish Crown are in addition to these figures.
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Market report
FRILAND KØDKVÆG®/FRILAND LIMOUSINE®
The concept is still sold to private butchers and foodservice, but REMA 1000 supermarkets also retail significant volumes of minced meat
86% 14% Bulk/retail distribution Much of production is sold to private butchers as bulk. But some is also retailed as minced meat in REMA 1000 supermarkets.
Bulk Retail
22 million DKK Development in revenue Revenue from the concept has remained quite stable for the past five years, and the 2019/20 financial year was no exception.
2019/20 2018/19 2017/18
22 million DKK 23 million DKK 22 million DKK
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Market report
FRILAND KØDKVÆG®/FRILAND LIMOUSINE®
Continued value of concept Both our beef concepts – FRILAND KØDKVÆG® and FRILAND LIMOUSINE® calves – registered a decline in revenue. FRILAND LIMOUSINE® for obvious reasons, as the concept was discontinued at the end of the 2019 calendar year. At the same time, we have seen that large fluctuations in the number of animals supplied for slaughter tend to result in price pressures. However, I have no doubts about the value of the concept, which will only increase with a more even supply of animals. FRILAND KØDKVÆG® saw a 5% decline to 21.6 million DKK. All in all, the number of animals supplied under the FRILAND KØDKVÆG® concept has decreased slightly. A total of 0.9 million DKK has been paid out in additional payments by Friland – including supplementary payments and Danish Cattle supplements, corresponding to 1.70 DKK per kg against 1.60 DKK per kg last year. Including the price paid by Danish Crown, an average of DKK 24.49 DKK per kg was paid compared to 25.47 DKK per kg last year.
Any supplementary payments from Danish Crown are in addition to these figures. Including supplementary payments, a total of 1.99 DKK per kg was paid compared to 3.12 DKK per kg last year. Including the price paid by Danish Crown, an average of DKK 25.64 DKK per kg was paid compared to 27.09 DKK per kg last year. Any supplementary payments from Danish Crown are in addition to these figures. Unfortunately, there is no supplementary payment for FRILAND LIMOUSINE® calves.
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Report from Marketing
More focus on nature and the environment in the coming years LARS JØRGENSEN Krogsagergaard
For a start, Friland has increased its communication about biodiversity, having farmers present the messages in a more personal way. Wherever you look, the climate is high on the agenda, and Friland can really stand out positively when it comes to the environment and nature. In the past year, Friland has therefore been extremely targeted in its efforts to establish a communication strategy for FRILAND ORGANIC for the coming years. “We’ve landed in a very good place, and we intend to continuously increase our communication in these areas. For many years, we have been saying a great deal about the high animal welfare standards associated with our concepts, and this will remain one of the cornerstones in our communication. Going forward, we are going to also focus on other issues that are high on the public agenda,” explains Marketing Manager Maria Bast from Friland.
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Report from Marketing
The roll-out of the new strategy was initiated in our two most recent campaigns, which included portraits of six FRILAND ORGANIC farmers writing and talking about animal welfare and biodiversity in connection with organic production. The first campaign focused on beef, the second one on pork. The feedback has been very positive, and in addition to the farmers, the popular influencer Mattias Hundebøll and his son Carl Egon were also featured in the campaigns. “It added a really nice touch. In one campaign, Mattias and Carl Egon visited a supplier of organic beef. This was released just before the annual Organic Day to raise awareness about the event. However, due to the corona situation, the Organic Day unfortunately had to be cancelled this year. In the other campaign, father and son spent a night in a camping pod in a pig field. The campaign also included a draw for a night in the pod for the lucky winner,” explains Communications Manager Kasper Frank Christensen.
We’ve landed in a very good place, and we intend to further develop our communication activities in these areas
HELLE FRIIS BUHL Solhøjgård
— Maria Bast, Marketing Manager
JACOB GAMMELGÅRD Bording
Farmers contribute Six farmers have contributed time and content to Friland’s high-profile campaigns during the year. Moreover, a number of our suppliers regularly deliver content for Friland’s Instagram profile.
A range of new organic products has found its way to MENY. The beef range is called ‘FRILAND ORGANIC Unique’ A range of new organic products has found its way to MENY. The new Danish beef concept is called ‘FRILAND ORGANIC Unique’, while organic pork is sold under the ‘FRILAND ORGANIC Velskåret’ name. The products are retail-packed cuts in special vacuum skin packaging for extremely attractive product presentation.
We are launching this series in MENY for quality-conscious customers. We have a very good working relationship with the chain about our FRILANDSGRIS® products, and the Unique and Velskåret concepts fit in perfectly,” says Maria Bast, Marketing Manager Friland A/S.
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Report from Marketing
FRILAND ORGANIC Unique Organic ribeye steak
Organic striploin steaks
Organic filet mignon
FRILAND ORGANIC Velskåret Organic fillet steaks
Organic pork chops
Organic bone-in pork chops
Organic thick-cut streaky bacon
Organic pork neck chops
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Report from the Centre for Free-range Livestock
ROBUST: New large-scale forest farming project In the ROBUST project, the Centre for Free-range Livestock will look at how forest and cattle farming can be combined. Cattle are natural forest animals, and this project will work towards using forested areas as part of cattle farming practices as a way of improving animal welfare. This can contribute to a more varied feed composition and a better climate, environmental and biodiversity profile. The project started up in the second half of 2020 and will end in 2024. Two Friland suppliers, Mads Helms from Sommerbjerg I/S and Gert Lassen from Ellinglund Økologi, are involved in trialling forest farming of cattle.
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Report from the Centre for Free-range Livestock
The idea is to find out how much foliage can be fed to dairy cattle, and how. This includes both the feed provided in feeding stations and the foliage which the animals eat from the trees. “In this project, we’re going to look at the effect of forest farming on the welfare of grazing cattle. For example, we will be recording the extent to which the cattle spend time in the shade and seek shelter from the elements under the trees. All the exciting results and the experience we gain will be uploaded to our website,” says Camilla Kramer, an agronomist at the Danish Centre for Free-range Livestock. Using trees in agricultural production can help reduce the climate footprint while achieving other positive ecological effects such as reduced leaching of nitrogen, increased natural value, more fertile soil and improved animal welfare.
systems for a substantial number of Danish farmers to begin to see this form of production as a realistic possibility,” says Camilla Kramer. The project is supported by Fonden for Økologisk Landbrug as well as the Green Development and Demonstration Programme (GUDP), while Organic Denmark has been in charge of project management. An impressive ten partners are involved in the project: Organic Denmark, the Centre for Free-range Livestock, the University of Copenhagen, the network of Local Forest Owner Cooperative ‘Skovdyrkerne’, the cooperative dairy Them Andelsmejeri, Ellinglund, Sommerbjerg, Sinatur Hotel & Konference, Forum Østergaard and Nyborggaard. The results of the project can be studied at: www.frilandsdyr.dk/2020/08/25/skovlandbrug-robust/
“The purpose of the project is to build sufficient knowledge about the effects of forest farming
More fertile soil, improved animal welfare and a reduced climate footprint are some of the expected results of ROBUST.
The purpose of the project is to build sufficient knowledge about the effects of forest farming systems for a substantial number of Danish farmers to begin to see this form of production as a realistic possibility — Camilla Kramer, an agronomist at the Danish Centre for Free-range Livestock
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Report from Owner Service
Organic farmer launches hugely successful ‘pod camping in pig field’ project Over the summer, Jesper Adler from Odsherred on Zealand invited Danish tourists to stay in a specially designed pig shelter. In 2020, record numbers of Danes spent their summer holidays in Denmark, Danish campsites and shelters were booked out, and organic pig farmer Jesper Adler’s farrowing field also welcomed a few extra visitors over the summer. “We opened up the farrowing field for overnight stays at the beginning of the summer holidays and received a couple of bookings. Then the local TV and radio stations got wind of the camping pod, and we haven’t looked back,” says Jesper Adler who has welcomed more than 100 overnight guests.
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Report from Owner Service
The report by TV2 Øst was particularly effective and received more than 150,000 likes on Facebook. Information about animals Those coming to stay sleep in a specially designed and insulated version of a pig shelter with electricity, a veranda and, of course, decorated with FRILAND ORGANIC foil. “It’s a great experience for our visitors, but as our pigs are production animals, visitors are, of course, also briefed thoroughly prior to their stay. They must not feed the animals, and they must not eat their food outside the pod. However, I hope that being able to stay with us gives our visitors a sense that our farming methods are not so crazy after all and that they will decide to buy our meat when they next go shopping,” he says.
Positive press Having supplied the specially designed pod, Friland is very pleased with Jesper’s project.
The press coverage has been overwhelming. We are seriously thinking about rolling out the idea to other suppliers.
“The press coverage and social media attention have been overwhelming. We’re seriously thinking of rolling out the idea to suppliers in other parts of Denmark,” says Communications Manager Kasper Frank Christensen, although this will not happen until 2021.
— Kasper Frank Christensen, Communications Manager
The pod was wheeled into the barn during the autumn holidays, but on Gelstrupgaard’s Facebook page, you will be able to keep an eye on our pod adventures next year – and make bookings!
According to Jesper Adler, don’t count on many hours of solid sleep. “The pigs grunt and rumble all night. I reckon you’re lucky if you get about four or five hours of sleep,” he says.
150,000 views on Facebook
Friland A/S Tulipvej 1 8940 Randers SV Denmark
+45 89 19 27 60 frilandinfo@friland.dk www.friland.dk
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