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Terrena Turns Its Attention Downstream

by 5m Editor
3 September 2008, at 10:37am

FRANCE - The merger of French pig co-ops Cooperl and Terrena's pig-producing arm Arca is being agreed this week and take effect on December 31. However, the final effective membership on January 1 is unlikely to be as high as the combined current producer numbers would suggest, writes Peter Crosskey.

Arca (Atlantic Arc) was formed in 1997 as part of the converging series of mergers that finally spawned Terrena itself in 2000. Between now and the end of the year, Arca members will be canvassed as to whether they want to transfer to the new Cooperl Arcatlantique co-op or stay in Terrena. The chances of Cooperl Arcatlantique finding itself short of clean pigs next year as a result are significant.

West coast Terrena has been collaborating increasingly closely with Breton co-op Unicopa, which transferred its fresh poultry business to Terrena earlier this year and the two have been pooling their buying muscle for farm supplies. It would seem that the two co-ops have got a taste for working together and Terrena has announced its intention to join Unicopa in the framework of Union Pigalys, with its existing partners Unicopa and Porcs Sud Bretagne.

Union Pigalys ensures the smooth operation of a vertically integrated livestock and food manufacturing business, in which Unicopa runs the prestigious Brocéliande charcuterie business. In a carefully worded announcement, Terrena said: "With the entry of Terrena, the new operation will take in 2.2 million pigs from nearly 1,000 producers from the regions of Brittany, Pays de la Loire [Nantes to Angers] and Poitou Charente."

In addition to an upstream commitment to supply finished pigs, Terrena signing a deal to hold some of the capital in Unicopa's substantial Broceliande charcuterie manufacturing operation. This 250 million euros/year concern, one of the largest in France, marketed 53,000 tonnes of charcuterie last year, including 5 million hams (average weight 7 kg).

Terrena's potential boost to this downstream business has generated suggestions that Broceliande could lift its output to around 70,000 tonnes/year over the next three years. By working with Pigalys, Terrena will be helping to reinforce Initia, a "commercial platform" for four of west France's strongest pig co-operatives.

The timing of this has a strategic value in that retail ham producers have steadily gained ground from Madrange in Limoges in recent years. The family firm is known to have been looking for a new buyer in recent months.

Whoever takes on the Madrange business will put up a war chest to fight long and hard to regain ground lost by years of supplying private label at the expense of branded sales. International names such as Smithfield's Aoste business unit or Nestlé's Herta subsidiary have been suggested as possible buyers.

Terrena knows the Madrange business very well from the inside at a senior level. The locations are sufficiently distant from the west coast and Breton heartlands to be of marginal commercial interest in times of rising transport costs, but knowing how the business is structured is a useful bonus.

5m Editor