Vion accelerates strategy and aligns capacity with the market
In 2022, Vion was forced to cope with a number of global market dynamics such as the coronavirus pandemic, export restrictions due to African swine fever, a significant decrease in available livestock in Germany and a tight labour market. The energy crisis that followed the invasion of Ukraine fuelled inflation, which had already started to increase in 2021. Price increases in the supply chain were absorbed before being passed on to the consumer. Although this boosted turnover, it had a negative impact on margins and earnings.
In 2022, Vion faced a series of external factors that affected its operations. In February 2022, the outbreak of war in Ukraine drove up the prices of animals and livestock feedstuffs. This was further exacerbated by the subsequent energy crisis, which aggravated inflation at all levels. These conditions resulted in higher costs for Vion and the industry as a whole, which were eventually passed on to consumers in order to restore margins. This energy crisis together with inflation created consumer uncertainty, putting pressure on consumer spending. The overall uncertainty and higher prices also depressed sales volumes.
Added to that, the outbreak of African swine fever in Germany has once again caused a significant decline in the country’s pig population. Exports from Germany to Asia remain blocked. Since 2018, pig production in Germany has fallen by about 25%. This has created significant overcapacity in abattoirs, forcing them to pay high pig prices to meet their capacity needs. Vion is now bringing its German slaughter capacity in line with the current market situation, enabling regional branches in the country to serve the market optimally. Although the Netherlands was forced to deal with the same external factors, but not African swine fever, capacity for both beef and pork is in line with the market, thus saving the country from having to take drastic measures.
CEO Ronald Lotgerink said: "Market developments in Germany have been faster than we anticipated due to African swine fever, and we have therefore reduced and consolidated a significant portion of our slaughter capacity in that market. By contrast, the German Food Service operations again performed strongly due to the chain strategy pursued. Dutch capacity is in line with the market, although we continue to keep a sharp eye on this with the view to building a foundation for long-term sustainable growth and further consolidating our close partnerships with our farmers and customers in the supply chain".
The Change that Matters improvement programme is ahead of schedule
Current and future trends in both Germany and the Netherlands are expected to result in further declines in both pig and cattle populations. Vion anticipated these developments and has integrated them into its strategy. However, these market developments are moving faster than expected, particularly in Northern Europe, which is why Vion decided to accelerate its strategy in 2022 with the Change that Matters programme.
Change that Matters envisions improving performance by EUR 150 million every year by 2025. Vion aims to achieve this improvement by adjusting its production footprint and implementing operational improvements, cost savings and commercial initiatives. Having been fully implemented by early 2023, this programme is already ahead of schedule with adjustments at the Emstek, Holdorf and Landshut sites and the closure of the Bad Bramstedt (beef) site. Vion expects a significant improvement for this year.
The programme also includes a transition to country-based organisations, with operations of the Pork, Beef and Retail business units due to be merged in both the German and Benelux organisations. This will put Vion in a better position to serve its customers, with the establishment of a single point of contact and farmers having closer links to customers throughout the chain. The Change that Matters improvement programme is ahead of schedule.
Sustainability is a cornerstone of Vion’s strategy. In addition to the Scope 1 and Scope 2 targets (own consumption and suppliers), special attention is being devoted to Scope 3 (the supply chain). Vion believes that sustainability goals with regard to the climate, animal welfare, biodiversity and organic products can only be achieved by improving cooperation between farmer and customer in the supply chain. That is why the Change that Matters programme also provides for speeding up the implementation of sustainable chains, giving farmers a future and customers more choices, whatever their budgeting capacity.
According to Ronald Lotgerink, "Building sustainable chains continues to be a key aspect of our strategy. They reduce food waste, improve animal welfare and improve efficiency by, for example, guaranteeing product integrity using DNA traceability. We remain committed to the Science Based Target initiative (SBTi), thus actively reducing our CO2 emissions. We achieve this by supporting regional and circular food systems in our supply chains.".
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