Rabobank Report: Intensified competition creating winners and losers
From 2007 to 2014, pork consumption in the EU has declined. Now, in this dynamic European pork industry, competitive power and market position are pivotal to success. In its report ‘The EU Pork Industry; Competitive Power Is Key’, Rabobank finds there are five key success factors of EU pork processors: cost competitiveness, sourcing, efficiency, market approach and client access.
The recent decline in pork consumption was triggered by two developments: higher pork prices due to feed cost increases and trading down to cheaper proteins due to the economic crisis. These developments collided with three longer-term trends of the last decades: consumer preference for convenience and processed meat products containing less meat; the increase in meat-restricted diets for environmental, ethical, animal welfare and health reasons; as well as various meat scandals in the EU.
"The rapid growth of the discount channel across Europe has increased retail competition and resulted in strong price pressure and squeezed margins for EU pork processors,” says Rabobank Animal Protein Analyst Albert Vernooij. “However, not all processors have suffered; a clear difference between outperforming and underperforming companies has developed. Outperforming processors have been able to stabilise margins through highly efficient production processes and cost price leadership;”
Rabobank believes the EU pork industry will see few opportunities for margin improvement in the coming years.
“To remain profitable and in business beyond 2025, EU pork processors must make a strategic decision regarding their positioning,” comments Vernooij.
This decision should be based on the current company status and the five key success factors of EU pork processors: cost competitiveness, sourcing, efficiency, market approach and client access. The focus should be on reducing cost price via targeted, efficiency-improving investments, rationalising capacity to optimise utilisation and strengthening the value chain position due to strategic investments in connecting activities or a merger/sale to strengthen the competitive position.
The pressure to adapt and apply the five key success factors is greatest for the underperforming processors, who need to make a strategic choice in order to remain in business. The outperformers will continue to invest and develop to secure ongoing success.