Vion looks back on a turbulent and lean year. For the first time since 2014, there was no profit. 2022 will also start with great uncertainties. But Vion CEO Ronald Lotgerink has confidence in the course that was started three years ago. He sees a growing interest in chains that bring added value worldwide.
‘Nobody expected this,’ says Lotgerink, looking back on 2021. Changing market conditions, disruptions in the supply chain and higher costs for energy, labor and plastics, among other things. ‘An unprecedented combination of challenging global developments and market dynamics that have strongly influenced our German activities in particular.’
Half of our turnover is already generated in demand-driven chains
Ronald Lotgerink, CEO of Vion
60% of the turnover is realized in Germany. How do you assess the situation there?
‘In Germany there are a number of issues, of which African swine fever is a very important one. It will take time for Germany to be free of that again. The weekly pig supply has already dropped to about 780,000 animals. I expect this to stabilize at 700,000.
‘With that number, Germany is self-sufficient. 100 percent German or ‘5D’: born, raised, slaughtered, cut and packaged in Germany. That is also what the German consumer is asking for. The supply is then in balance. Not yet the value.’
Will slaughter locations be divested?
‘As far as we’re concerned, that’s not the issue. In Germany, our slaughterhouses are located in the region and there is a huge demand for regional products. Our strategy is aimed at building demand-driven chains, which we will offer regionally in Germany. We are already doing this with Simmental PUR, which has the Geprüfte Qualität Bayern certificate.
‘In Emstek we made the export slaughterhouse flexible. The basic capacity has been reduced and can be scaled up again if necessary. I don’t rule out the possibility that we will take another look at the footprint of our company’s branches and activities.’
Vion is active in the Netherlands, Germany and Belgium. Three countries where the number of cattle and pigs is shrinking. What is the impact of that?
‘We see no sustainable future in the fight to offer meat at ever lower costs. If you add value, you can add with a smaller production. And adding value is what we do with our ‘Building Balanced Chains’ strategy. We started working on this three years ago and already half of our sales are produced in chains.
‘By better gearing the supply in the chain to specific demands from the market, higher margins can be achieved. The entire chain could be up to 20% better. We achieve this, among other things, by recording data in all links of the chain, the digital highway, and linking the blockchain technology Good Farming Star Vision to this. 175 pig farmers provide their data to Joindata for this.’
Where is the development of blockchain technology now?
‘We are only at the beginning of that. The DNA of pigs is now also included in the blockchain, which provides so many more options for sending and selecting. In the Netherlands we are the furthest with this, but we are also preparing for Germany and Belgium. Open and transparent. That’s the future.’
In the Netherlands, the focus is strongly on shrinking livestock. What does that mean for Vion?
‘As a company, we would prefer to see the focus shift to the question of how to achieve the climate and environmental goals while preserving a future for farmers. Working from specific chains is the answer. That approach is much more positive. There are opportunities there, but you have to want to see them.
‘The challenges surrounding food security in Europe are not that far behind us. Dutch politicians think too much from the postage stamp of the Netherlands. Let’s take a broader view. Give farmers the future and consumers the difference.’
85 percent of the production remains in Western Europe, 15 percent has to be sold in third countries. Is the added value paid there?
‘We expect the meat market worldwide to grow by 10 to 12 percent. There are promising markets for specialist products outside Europe. We already export spare ribs to America, for example, and there is also demand for more expensive concepts in China. There, prosperity is increasing and there are more and more consumers who have something to spend. For example, we are going to bring our Robusto ham to China.
‘In general, the well-being index in Asia is rising. We have also started pioneering in Africa. Vion relies on value added chains. For example, when it comes to taste, well-being, climate or health.’
What are your expectations for 2022?
‘I can’t say anything sensible about that. The price increases are dramatic and affect not only us, but also our suppliers and customers. The costs of our purchasing – animals, energy and plastic – have increased enormously.
‘Our market position and customer relationships are good, but we have imposed a surcharge on all our customers. The costs have to be paid somewhere. We can also keep up with you cost-effectively. In combination with our market position, you can withstand storms like this one.’
The cost increases will also affect the consumer, who may be more inclined to opt for cheaper meat under the current circumstances?
‘That is indeed a risk, but our focus is on added value. We have built our strategy on that and you don’t just let that go if things go a little less for a year. That’s the way it is. We stick to our course. The market will recover though.’
Vion turns a loss over 2021, no dividend paid
For the first time since 2014, Vion closed a financial year with a loss. While the profit in 2020 still amounted to 52.9 million euros, the loss for 2021 amounted to 29 million euros. Turnover fell by 6.2 percent to 4.6 billion euros last year. This is apparent from the annual figures that Vion presented on Thursday. Earnings before interest, taxes, depreciation and amortization amounted to EUR 40 million in 2021. In 2020 that was still 122.3 million euros. Net debt rose from 6.9 million to 114.8 euros and solvency decreased from 46 to 39.9 percent. No dividend will be paid to shareholder NCB Participaties, part of ZLTO, for 2021. Vion CEO Ronald Lotgerink cites five reasons for the delay in the results: production interruptions due to corona, African swine fever in Germany, which hinders exports to third countries, recovery of Chinese pork production, significant inflation and rising prices for the purchase of cattle.