The TINE Network

TINE is a producer owned dairy cooperative. In 2004, approximately 17 976 (the number is steadily declining) producers of cow-milk and 548 producers of goat-milk owned TINE. About 200 years ago, the first dairies were established moving milk production from the farm to a specialised production facility. In 1856 in Tolga, in the interior of Eastern Norway, 40 farmers established the first dairy cooperative. These were inspired by cooperative ideas within farming in England at that time. Gradually, more dairy cooperatives were established that owned and operated milk production facilities. In 1881, a nation-wide organisation of dairy cooperatives in Norway (Den Norske Meieriforening) was established. This organisation is the root of the nation-wide organisational form of TINE as we know it today.

The independent cooperatives expanded and smaller cooperatives were merged into larger ones. This period of expansion lasted until the 1960’s/70’s. Then, gradually, a period of rationalisation started and has continued until today. In 2002, 11 large, independent, regional dairy cooperatives were merged into one large corporation, TINE BA,and this is the organisational unit that is owned by the producers and is the corporative

“heart” of the TINE network.

Altogether, TINE employed 5549 persons in 2004, and had an annual turnover of 1.41 billion NOK. The TINE network consists of 5 regional departments and several completely and partially owned companies within the food industry. TINE is, accordingly, a large and complex organisation that produces and distributes a large range of food products. It distributes supplies of raw materials and goods produced by other companies to consumers in Norway and exports mainly cheese products to consumers in other countries. This production is organised by independent companies

owned by TINE. TINE links the supplies of different agricultural raw materials with the needs of consumers. The interconnecting function of TINE is illustrated in figure 5.1 below:

Fig. 5.1 The interconnecting function of TINE

Mainly raw-milk based dairy products; juices and deserts are produced at the 5 regional departments. The other companies in the TINE logistics network market and /or produce a range of other food products such as ice-cream, margarine, and pre-prepared dinner meals. Companies partially owned by TINE, may also aim to use raw materials supplied by TINE’s dairy farmers.

TINE’s logistics facilities are used to distribute many of these products from other producers; they always distribute the goods produced by the TINE departments themselves. Other companies in the TINE network are free to choose whether to distribute their products within TINE’s network. In practice, a large part of these products are distributed alongside the goods produced at the TINE dairies. TINE also distributes unpackaged, processed milk to the food industry. The sales and distribution of these products are carried out apart from the main distribution of its packaged and branded goods. The TINE network is shown in the figure 5.2 below:

TINE

Milk Farmers (owners)

Other suppliers

5 regional TINE departments

Companies completely owned by

TINE

Companies partially owned by

TINE

Norwegian and foreign consumers

Fig. 5.2 The suppliers and customers of TINE (Double-headed dotted arrows indicate business relationships)

The two products described in this chapter are currently distributed only on the Norwegian market and are packed and distributed to Norwegian food-retailers; the integrated nature of the food-retailer network in Norway was shown in the description of the BAMA network and also applies to this network. TINE maintains business relationships with all the Norwegian retailers. This is because TINE, as a former monopolist, still has a dominant market position regarding production and distribution of dairy products.

They compete mainly with smaller, more specialised producers. Low-fat milk is also marketed by the recently started Q-Meieriet, a small producer with a market share of less than 10%. On the supply side, raw-milk production and fisheries are major Norwegian industries regulated through government supervised quota systems.

Within TINE, there are about 53 production facilities (2004 figures) organised into 5 regions. TINE is gradually reducing this number of facilities in an effort to rationalise production and distribution of its products. In 2003,

TINE

Production and distribution centres

Retailers of household

products Hotels,

restaurants, catering

Convenience store outlets

Industrial customers Branded and

C-packed products

Products for industrial use Raw materials

suppliers

three production facilities were closed down. Many of the facilities are specialised towards the production of only one or a limited number of TINE products. TINE themselves group their products into either “solid” or

“liquid”. Examples of liquid products are juices, milk, pudding desserts, and yoghurt; solid products are mainly cheeses. In 2004, 23 dairies produced various milk products, including TINE Lettmelk. These dairies are commonly termed by TINE internally as “liquid-dairies”. They also function as distribution centres within TINE. Products from the other dairies must be transported to these distribution centres for delivery to customers.

Raw-milk is supplied to all dairies for production. These “liquid-type”

dairies are organised as a single actor unit consisting of different departments. It is possible to group these departments into two: one primarily related to supply and production, while the other is mainly concerned with distribution to customers. The dairies are actors managing and operating supply, production, and distribution facilities located adjacent to each other. The supply and production side of the dairies exchange information with suppliers, inbound logistics, production, and product quality control at the laboratory. The dairy’s role as a distribution centre includes handling customer relations, materials handling activities at the terminal, and the outbound transport of products to customers. The dairies own, manage, and operate a fleet of tank trucks that are used to supply raw-milk to the dairy and the fleet of delivery trucks. Other transport firms carry products from the other companies to the TINE dairies. To distribute its products from the distribution centres to its retailers, TINE cooperates with GILDE, a meat producer, and PRIOR, a poultry product producer, through an agreement termed LFD (Landbrukets Ferskvaredistribusjon). The TINE network actors used to supply goods, including the flows of goods, are shown in figure 5.3 below:

Fig. 5.3 Overview of the actors and the flow of goods in the domestic network of TINE (Arrows indicate the direction of the flow of goods)

Each distribution centre consists of the following main departments that manage the flow of goods in different manners:

• Production: the production process

• Logistics: terminal and inbound and outbound transport operations

• Sales: customer relations and order handling

• Laboratory: raw-material and product quality control

• Organisation: supplier (farmer) relations

Within the LFD agreement, either a PRIOR, TINE, or GILDE distribution vehicle is used to transport their combined products to their shared customers. Currently, LFD is not an organisation, rather a way to coordinate deliveries of each other’s products and they have their own separate order routines and documents. PRIOR, GILDE, and TINE, therefore, need to exchange information to create transport documents and the appropriate package labelling necessary to carry out LFD operated delivery to their customers. The cooperation is mainly technical in nature, organising how TINE, GILDE, and PRIOR products share terminal and transport facilities.

Where and how the trucks are loaded is organised regionally.

TINE dairy: supply-production-distribution (milk-producing dairies, producing “liquid” products)

23 locations 29 dairies

producing

“solid” products

Milk-farmers (direct supplies of

raw-milk)

Other TINE companies (supplies of

other products)

Customers End-user

LFD (distributor)

While product development and marketing of TINE Lettmelk are managed by TINE, Marian fish filet products are developed and marketed by Fjordland. This company within the TINE network is completely owned by TINE (49,7% share), GILDE (29,7% share), HOFF (11,4% share), and PRIOR (9,2% share). HOFF is a producer of potato-based products such as potato chips. Fjordland’s turnover in 2003 was 607 million NOK, up from 500 million NOK in 2002. Fjordland was established by TINE in 1994 mainly to develop and market margarine-type products. Fjordland does not manage or operate production facilities and uses mainly raw materials supplied by the owners in its products. Fjordland develops and markets 8 different brands, with some important products being Yoplait yoghurts (produced under license from the French brand-owner), Fjordland ready-made dinners, and Bremyk margarine. Marian Seafood merged with Fjordland in 2004 and retained Marian as a brand name of its fresh seafood products. Fjordland generated 405 million NOK (2003) worth of product sales through TINE/LFD and 200 million NOK worth through other networks. Marian products constitute a small percentage of Fjordland’s total revenues.

The main business relationship and the contents of the information exchange within these relationships in the logistics network of the distribution centres are shown in the figure 5.4 below:

Fig. 5.4 The TINE network (Shows actors in circles and business relationships with dotted double-headed arrows)