http://www.businessweek.com/stories/2008-06-04/next-shortage-ice-cream-businessweek-business-news-stock-market-and-financial-advice

Global Economics

Next Shortage: Ice Cream?


Supplies in Germany could melt away if dairy farmers continue their protest against low milk prices. Milk and cream are getting scarce

It's 27 degrees Celsius (81 degrees Fahrenheit) in Berlin Wednesday and the hot and sunny weather is forecast to last at least until the weekend. Perfect for an ice cream, you might think. But the summer snack could very soon be in short supply as protests by dairy farmers cause milk supplies in Germany to dry up.

In a coordinated campaign that has been going on for over a week, furious farmers have halted supplies to many dairies across Germany in protest against low milk prices. Farmers have been blockading dairies with tractors and pouring milk down the drain or feeding it to animals rather than sell it. With no end to the farmers' protests in sight, milk is getting scarce. Now ice cream producers are warning that they may have to halt production if they can't get enough milk.

"It's really serious," Peter Flügge from ice cream producer Bruno Gelato told SPIEGEL ONLINE Wednesday. "Since Monday we've been having problems getting deliveries of milk which are timely and reasonably priced like normal. We've never had a problem like this in the 10 years we've been in business."

Bruno Gelato, which is based in Rhauderfehn in the northwestern German state of Lower Saxony, specializes in high quality Italian-style ice cream and uses only fresh milk in its production. It manufactures 2.5 million liters (5.3 million pints) of ice cream per year and supplies ice cream parlors across Europe, with a focus on Germany.

Flügge explained that the dairies which normally supply Bruno Gelato—and which are being targeted by farmers—cannot guarantee deliveries of fresh milk for the next couple of weeks. "We managed to get a delivery for this week but it's not clear if we will get any milk next week," Flügge said. "We are having to telephone around and improvise to see where we can get milk."

He explained they have enough milk in stock to keep production going for another 10 to 15 days. After that, if they cannot get supplies, then they will have to halt the production of ice cream. "It's simple logic," said a clearly exasperated Flügge. "If they throw all the milk away then we can't make ice cream."

Flügge explained that the dairies are desperately searching around for other suppliers so they can fulfill their contracts with their customers. The dairies might have to import milk from abroad, he said, which would be 30 to 40 percent more expensive than German milk. "We will try to avoid having to pass the price increase on to our customers," Flügge said. "But in the long term it would be inevitable. We hope the situation doesn't continue too long."

Other producers are also feeling the squeeze. "There is enough milk in stock to guarantee production for this week, but not for next week," Michael Müller, managing director of ice cream manufacturer Rosen Eiskrem, told the Wednesday edition of the newspaper Tagesspiegel. "We are feeling the pressure from the dairy's suppliers."

The company, which produces 230 million liters of ice cream per year, is the German market leader in store-brand ice cream and supplies large German supermarket chains such as Aldi. It is precisely those large chains which are being targeted by farmers, who claim that the large chains are unfairly using their market dominance to force prices down.

Müller told the newspaper that his company could face difficulties in supplying enough ice cream to supermarkets within two or three weeks, should the strikes continue. His firm's suppliers had already raised prices by up to 15 percent as a result of the milk shortage, he said.

Mass-Produced Alternative

But German consumers desperate for ice cream can take solace in the fact that, even if their local ice-cream parlor runs out of the tasty treat, mass-produced ice cream from multinationals is likely to still be available. Nestle spokesman Alexander Antonoff told SPIEGEL ONLINE that its ice cream production was guaranteed for the foreseeable future. He explained that Nestle, which makes the popular ice cream brand Mövenpick in Germany, uses mainly milk powder to manufacture its ice cream, which can be stored for weeks or even months.

The company has enough milk powder in stock for the foreseeable future, he said, although he admitted that if the milk strikes were to continue for several weeks, "we would have to look around to see what our options are."

Customers need also not worry about a shortage of ice cream products from Langnese, the German equivalent of American ice-cream brand Good Humor, both of which are owned by the multinational Unilever. Unilever press spokeswoman Katja Praefke said that Langnese, which also uses milk powder in its products, was not feeling any effects from the farmers' protests.

The company has a central European purchasing department which sources milk powder from all across the European Union, she explained. "The situation is still good," she said.

Provided by Spiegel Online—Read the latest from Europe's largest newsmagazine

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