Danish Crown sharpens the efficiency of its Danish production
Danish Crown is now taking the consequences of two years of challenges for the Danish production of slaughter pigs, where fewer pigs for slaughter in Denmark have challenged the efficiency of the group's Danish slaughterhouses. Therefore, Danish Crown is now concentrating production on fewer facilities and concentrating the group's future investments with a view to refining the owners' pigs into products such as bacon and pepperoni, rather than primarily being a supplier of raw materials to customers all over the world.
The decision to close the abattoir in Ringsted will result in almost 1,200 jobs being cut, while approximately a quarter of a billion kroner will be freed up for other investments over the next three years, and expected to create up to 300 new positions in Horsens, Herning, Vejen and Blans near Sønderborg.
The changes are to expand Danish Crown's position as the leading food company with a focus on meat in Europe.
"It is a difficult decision to close the slaughterhouse in Ringsted and in particular to say goodbye to skilled and well-liked colleagues, but it is a necessary step in our efforts to develop Danish Crown's position as a modern food company. With the changes, we are putting everything into increasing efficiency at the slaughterhouses and selling many more refined products to our key customers across Europe", says Jais Valeur, CEO of Danish Crown.
The strategy to increase the share of processed products was introduced in the group strategy Feeding the Future in 2021. Here, Danish Crown abandoned the idea of growing by slaughtering more pigs, and instead will create growth by raising the value of Danish pork through the production of refined foods and more focus on sustainability.
As the first significant step, Danish Crown has since invested up to one billion kroner in a new state-of-the-art bacon factory near Manchester in England, and the annual production of over 200 million packs of bacon have already been sold to three major UK customers.
Since 2021, however, the number of pigs sent to slaughter in Denmark has fallen significantly, and there is therefore a need to speed up the conversion even more and make production more efficient in order to be able to pay the owners - the Danish farmers - a competitive price for their pigs. The ambition is that the cooperative owners' meat is either to be sold as processed goods or, alternatively, to be exported as semi-finished products to high-price markets.
"The global trade in pork has changed significantly in recent years, so that the market for exporting pork for further processing around the world is now dominated by Spain, the USA and Brazil. On the other hand, we can see a potential for refined products, where the European market has shown great interest in, for example, bacon and pepperoni produced by Danish Crown", says Jais Valeur.
When Danish Crown gathers its Danish slaughtering activities at fewer facilities, it will mean that the company has a capacity that is adapted very precisely to the number of pigs that the share owners have indicated they will deliver in the coming year. It is colloquially called the "A quantity".
When deliveries and slaughter capacity are in balance, slaughter costs are minimized and the value of the pigs is maximized. Therefore, with effect from today, Danish Crown activates its so-called stability mask in an upward direction. This means that unit owners can no longer freely increase their A quantity on an ongoing basis. Instead, the agreed quantities are locked, so that changes must be made with 12 months' notice in the coming period. At the same time, a stability deduction will be settled if there are greater fluctuations in deliveries than Danish Crown's rules allow.
"Something simply has to happen now, and we are ready to turn all the levers we can. Over the past 20 years, we have repeatedly turned up and down our capacity. So either hired or dismissed hundreds of employees. Both overtime, training of new employees and idle capacity are hugely expensive and cost millions. Therefore, we must do everything to stabilize the unit owners' deliveries of pigs, because it is one of the ways to be able to settle for their pigs at a price that matches the rest of Europe", says Danish Crown's chairman Asger Krogsgaard and refers to the fact that Danish Crown last week presented a model which makes it possible for piglet producers to become part-owners.
A significant part of the production that currently takes place in Ringsted will in future take place at Danish Crown's other facilities in Denmark. The group will invest in Horsens, Herning, Vejen and Blans near Sønderborg, so Danish Crown expects that there will be work for the employees from Ringsted who are ready to take a job in one of the four locations.
"In the event of a closure, our social plan for dismissed employees comes into force. This means, among other things, that each individual will be invited to an interview to clarify his or her possibilities for employment at one of Danish Crown's other companies. Funds have also been set aside for courses and training, which can help employees move on to another company, because it is important for us to help as many as possible move on in their working lives", says Jesper Sørensen, who is production director at Danish Crown.
The abattoir in Ringsted is set to close in mid-September 2024.
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