Jais Valeur: ‘’The new bacon factory is based exclusively on meat from the Danish cooperative’'
1. It is only three years since Danish Crown pulled out of the UK and sold Tulip Ltd due to poor finances. Why are you investing again over there and why do you think it's going well this time?
Tulip Ltd's business was primarily supported by the English value chain. The new bacon factory is based exclusively on meat from the Danish cooperative owners' welfare and quality pigs, which are an attractive product for many British customers. They are looking for specialized, high-quality products, and with the investment we can meet this need. At the same time, we are getting very close to our British customers and the British consumers who, after Brexit, want to secure their supply chains. It requires a local presence and full flexibility to be able to produce and deliver bacon that meets the customers' wishes and requirements.
Through sales to industrial and food service customers, we have maintained a strong position since the sale of Tulip Ltd. We are now expanding that position with sales to the retail trade. This is completely in line with our Feeding the Future strategy, which is about creating more value for the Danish pig. In the UK, Danish pork is the preferred alternative to British bacon, and bacon is the largest category with annual sales of 225,000 tonnes. Today, Danish Crown collects only a small part of the enormous earnings that are generated each year in the bacon category. We are changing that with the investment in the new factory.
2. It seems risky to invest in Great Britain, which is outside the EU and has been in political chaos since Brexit, to say the least. How big is the investment and when will you break even?
Of course, Brexit has made exports from Denmark to Great Britain more complex. The additional storage capacity that the new facility gives us is necessary to ensure reliable deliveries to our UK customers. We invest approx. £100m corresponding to approx. 850 million DKK in the new factory, and we expect that the factory will contribute positively to our earnings before 12 months have passed from the start of production.
3. Danish Crown's shareholders have been through a year where the production economy has not been coherent. Is it prudent to make such a large investment at this time?
The path to a good production economy for the cooperative owners requires that we manage to create an added value on the Danish pig that exceeds the extra costs associated with running a food business in Denmark. Therefore, we must identify and invest in growth pockets and niches that contribute to stable earnings that can be sent back to the unit owners through the listing. We have no doubt that we can make more money in the UK than we have in recent years, but that requires an investment like the one we are making now.
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