Danish Crown to Close Boning Plant in New Structural Plan

DENMARK - Meat processing giant Danish Crown is to close its deboning plant at Faaborg.
calendar icon 20 January 2014
clock icon 5 minute read

The Faaborg plant also produces ready meals for Danish Crown’s further processing business, Tulip.

The move is part of a comprehensive structural plan for the Danish part of the group.

The company said that a range of initiatives will be implemented to ensure that production in Denmark is competitive – and that slaughtering capacity is tailored to the number of pigs for slaughter produced.

“We have spent the past few months turning every stone to find out how we can responsibly solve the current challenge of surplus capacity while simultaneously keeping a close eye on costs in our Danish production,” said Danish Crown’s Group CEO Kjeld Johannesen.

The Boards of Directors of Danish Crown and its subsidiary Tulip Food Company have recommended that Danish Crown’s deboning department and Tulip’s production of ready meals in Faaborg, be closed because the current production set-up is not competitive.

The two closures affect a total of approx. 470 employees, of whom more than 60 are employed in Tulip Food Company.

At the same time, the Board of Directors is recommending that negotiations be started with the employees and other stakeholders at the slaughterhouses in Skærbæk and on Bornholm on a more sustainable cost structure.

“It is no secret that the slaughterhouse on Bornholm has been in our sights for some time because, at the end of the day, each kilogramme of meat we produce on the island costs considerably more than elsewhere,” said CEO for DC Pork Jesper Friis.

“However, we are also very aware of the importance of the local workplaces and of ensuring the shortest possible transport times to the slaughterhouse for the animals.

“Therefore, together with our employees and the politicians, we will look at whether it is possible to find alternative solutions to making production on Bornholm financially sustainable. In so doing, we hope to be able to preserve the slaughterhouse and the workplaces.”

The slaughtering of sows in Denmark faces exactly the same challenges.

Today, Danish Crown slaughters sows at its slaughterhouse in Sæby in northern Jutland, where the sows account for a small part of production, and in Skærbæk in southern Jutland, which is a pure sow slaughterhouse.

“We obviously need to be able to receive the members’ sows when they need to be slaughtered. However, especially in Skærbæk, sow slaughterings are costly and not competitive, and this needs to be looked at from a strategic point of view. Either we have to minimise the activities, or production has to be smarter and more streamlined,” said Jesper Friis.

As part of the structural plan, capacity at the group’s Danish pig slaughterhouses must also be adjusted.

“Today, we have the capacity to slaughter more pigs than the numbers being delivered to the slaughterhouses, and this is not tenable,” Mr Friis added.

The capacity adjustments will affect approximately 350 employees at several production facilities.

“We have not decided in advance how we will adapt capacity, but we know that about 350 employees will be affected,” said Mr Friis.

“Therefore, we are keen to enter into a constructive dialogue on how we can structure production to keep job losses to a minimum. There is a range of options open to us at the factories, which will be discussed with employees in the coming weeks,” he added, while stressing that there will be a need for less slaughter capacity from February this year.

Over the past five years and more, the production of pigs for slaughter in Denmark has fallen by over 20 per cent. In December, the industry received a helping hand from the politicians in the form of a growth package.

This proposes changes to, among other things, the tax rules if you invest in your own workplace.

“Unless we implement new initiatives, the trend will continue, and we will be facing further surplus capacity next year. Therefore, it is a good idea to resume discussions with our employees and look at whether, in the light of the new rules, we can boost the production of pigs for slaughter and thereby safeguard the remaining workplaces,” said Mr Friis.

“Danish Crown is a strong group, but its general financial strength cannot compensate for the fact that production in Denmark is economically weak. As we all know, a chain is no stronger than its weakest link, and in an industry characterised by fierce competition, we must think ahead,” said Mr Johannesen.

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