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Underperforming EU Pork Processors Urged to Make ‘Strategic Decisions’

16 October 2015, at 12:00am

EU - In a recent press release, Rabobank warned underperforming EU pork producers that they could find themselves out of business by 2025 if they don’t start making good “strategic decisions.“ The report, The EU Pork Industry: Competitive Power is Key, says that the EU pork industry is unlikely to see opportunities for margin improvement in the coming years, writes Melanie Epp for ThePigSite.

Since 2007, EU pork consumption has been on the decline. Rabobank believes that this decline can be attributed to by two factors: higher pork prices due to increased feed costs, and an economic crisis that has led consumers to seek out cheaper protein options. The decline has been further complicated by three longer-term trends, experts say, including:

  • Consumer preference for convenience and processed meat products that contain less meat
  • An increase in meat-restricted diets, and
  • Various meat scandals in the EU

“The rapid growth of the discount channel across Europe has increased retail competition and resulted in strong price pressure and squeezed margins for EU pork processors,” says Albert Vernooij, Animal Protein Analyst at Rabobank.

“However, not all processors have suffered; a clear difference between outperforming and underperforming companies has developed. Outperforming processors have been able to stabilize margins through highly efficient production processes and cost price leadership.”

EU pork processors, if they wish to remain in business beyond 2025, must make a strategic decision regarding their positioning, said Mr Vernooij.

Decisions should be based not only on company position, but also on five key success factors, as outlined in Rabobank’s report. Those factors include: cost competitiveness, sourcing, efficiency, market approach, and client access.

The focus, says the report, should be on reducing the cost of production through efficiency-improving investments, and by strengthening their position in the value chain by either making strategic investments or through a merger or sale to strengthen their competitive position.

While the outperformers continue to invest in their future, pressure to adapt and make changes is greatest for those who are underperforming, concludes the report.

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