3. Material topics

3.1 Economic performance

The Emmi Group understands “economic performance” to mean the creation of value in an economic and social context. In addition to the growth and profitability targets it has set, the Emmi Group considers the way in which the company’s targets are implemented along the value chain to be relevant (see section “Responsible business conduct”). The Emmi Group pursues its corporate goals as part of its corporate and sustainability strategy, which together form the overarching framework. In addition to direct economic impacts, economic performance also includes indirect economic impacts, such as those that arise through procurement, tax payments made by Emmi or its employees’ income.

3.1.1 Impact on the environment and society, and opportunities and risks for Emmi

The global dairy industry plays an important role in driving value creation within the agricultural economy. The overall economic performance of the global dairy industry is significant. Approximately 930 million tonnes (t) of milk are produced worldwide every year. Around one billion people make a living directly or indirectly from the dairy industry (The State of Food and Agriculture, 2023). An important socio-economic factor is the large number of jobs in agriculture and manufacturing primarily in rural areas, which are supported by hundreds of millions of farms. The world’s 20 largest milk processors alone generate sales of around CHF 200 billion. Global sales exceed CHF 720 billion (IFCN Annual Sector Database with Long Term Dairy Outlook, 2023). With sales of around CHF 4.3 billion (2024), Emmi’s impact is less significant at the global level. However, its socio-economic contribution is definitely relevant in terms of the Group’s direct business environment, especially for employees, milk suppliers, shareholders and the communities at the production sites.

Job losses and the removal of economic factors that support individual locations could have significant economic and social consequences, especially in rural areas. In these areas, many people are directly or indirectly dependent on successful milk marketing. The loss of these jobs would not only put a financial burden on the affected families but would also weaken the local economy by slowing the circulation of money in the region. Strengthening rural areas by creating jobs and ensuring security of supply is therefore of key importance. This not only contributes to economic stability, but also to improving the quality of life in rural areas.

A decline in the economic performance of the dairy industry could also affect food security on a global scale. The dairy industry makes a significant contribution to the supply of essential foodstuffs. A decline in production could lead to shortages and higher prices. Overall, this could jeopardise the stability of the global food supply. Continuity provided by the Emmi Group and its achievements in terms of innovation, which are geared towards consumer needs and current nutritional trends, are therefore important. By developing innovative products and services that promote a balanced diet, Emmi is able to meet market requirements and contribute to consumer health and satisfaction. This requires a deep understanding of consumer trends and needs as well as the ability to translate these findings into practical and attractive solutions.

3.1.2 Management approach and goals

The economic performance of the Emmi Group is under the strategic control of the Board of Directors and the operational management of Group Executive Management. Emmi’s management model is designed for the medium to long term, with the aim of sustainable and profitable growth and added value for its stakeholders.

Strategic goals and priorities

Long-term strategic goals and financial “north stars” (growth, profitability and return on capital) form the basis of Emmi’s management model. These long-term goals are translated into annual goals and cascaded across the entire organisation. The (strategic) progress is reviewed three times a year on the basis of rolling forecasts and a qualitative assessment. Important principles in the management model are foresight and adaptability.

While the company is further strengthening its leading position as a milk processor in the Swiss domestic market, it is also focusing on the Group’s international growth in the strategic markets of the USA, Chile and Brazil. Emmi aims to continuously optimise its brand, product and corporate portfolio and focuses on innovations in strategic niches such as ready-to-drink coffee, speciality cheeses, chilled premium desserts and plant-based milk alternatives. It also aims to develop strong brand concepts that meet current consumer needs and market trends. The company seeks to achieve cross-divisional excellence and to be a leader in sustainability. To enable investment in long-term profitable growth and innovation, the company also emphasises consistent cost management across the Group.

Emmi Group strategy

Short- and medium-term goals

Emmi sets itself short- and medium-term targets for economic success. These include target ranges for organic sales growth in the divisions and for the Group as a whole. Target ranges are also set for the operating result (EBIT) and the net profit margin from a Group perspective. Other medium-term goals in connection with economic success relate to return on invested capital (ROIC) and the payout ratio.

The short-term targets for the following or current financial year and the medium-term targets are part of the outlook in the financial commentary.

Emmi creates value for investors in several ways. For shareholders, this is achieved through a sustained increase in the share price and a continuous dividend policy with a payout ratio of between 35% and 45%. The foundation for this is built on consistently meeting the announced targets (guidance). Emmi is also a safe and reliable investment option for debt providers (e.g. via the bond market) by keeping debt within a narrowly defined limit.

Added value for other stakeholders

Emmi also aims to take responsibility for stakeholders in the upstream value chain and create added value as part of sustainable and profitable growth. In addition to respecting human rights, ensuring fair working conditions and a living wage for people working in raw material production and logistics is particularly relevant from a social perspective. For example, Emmi aims to pay a milk price above the industry average and to compensate suppliers for their sustainability performance via the market.

The Board of Directors formed a group of experts under the title of Agricultural Council to monitor current and future agricultural policy matters and general dairy industry developments in Switzerland. In the year under review, the Agricultural Council consisted of five members of the Board of Directors and the five following external experts: The Managing Director of regional milk producer organisation ZMP, which has a stake in Emmi; the Director of national milk producer organisation SMP; the President of national industry organisation Milch (BOM); the President of milk producer organisation Mittelland Milch; and the Managing Director of milk producer organisation mooh. The external members of the Agricultural Council receive annual compensation of CHF 5,000 each, plus compensation for meetings (of which there are generally two per year) and travel expenses. For all five members of the Board of Directors, their activities as part of the Agricultural Council are included in the compensation disclosed in the Compensation Report under Clause 6.

Information on the management approach in terms of promoting a sustainable dairy industry and responsible sourcing can be found in the relevant chapters on these material topics.

Sustainable dairy

Responsible sourcing

3.1.3 Developments in the year under review

Breakdown of economic performance

Emmi spends more than half a billion Swiss francs per year on its employees, procures goods and services worth more than CHF 3 billion from its suppliers, pays almost CHF 40 million in income taxes and distributes more than CHF 80 million in dividends to its shareholders, which is in line with the target payout ratio of 35% to 45% of net profit. A significant proportion of the dividend goes to the majority shareholder (Zentralschweizer Milchproduzenten [ZMP]) and ultimately to more than 2,800 milk suppliers.

3.1.4 Outlook

Information on the outlook for the 2025 financial year can be found in the financial commentary.