This week, the Denmark-based meat processor Danish Crown announced plans to build a new UK pork facility in north-west England at a cost of GBP100m (US$118.5m). The bacon and gammon plant will be the co-op’s first in the country since the sale of its Tulip business three years ago. At the same time, the private-label and discount specialist – one of Europe’s largest meat firms – reported its annual results, with revenue up but profits down. In an interview with Just Food, Danish Crown CEO Jais Valeur and global sales director Lars Albertsen outlined the company’s current thinking.
Just Food: Your planned new facility is on a large scale. It’s a 30,500 square-metre site – with 300 new employees producing 900 tonnes of bacon and gammon a week when it becomes operational in the second half of next year – in a market in which Danish Crown hasn’t had a physical presence for three years. Why now and why in the UK?
Jais Valeur: We think this is a good time. Brexit has settled down. The market is robust here. [German discounter] Aldi has now become the number four retailer so consumers are voting with their feet and discount and private-label is gaining ground. That provides space for a facility like this. And, while we have been big exporters to Britain, we need to use British pigs to get a carcass balance. The parts of the animal not required [in the UK} can be sent elsewhere.
JF: Why is the UK so important to you?
Lars Albertsen: The UK is very important to us because it’s about 20% of what we do. The Danish market does not have the same scale.
JV: The UK is also one of the most important markets for consumer trends. Things will often start there and then spread elsewhere.
JF: But the UK meat industry has been beset with labour shortage problems since Brexit made it more difficult for companies to bring in workers from overseas. Is this not a concern?
LA: We saw throughout the pandemic the stability of our workforce. We’ve had a low turnover of staff. Some food factories have closed down and we are setting up. The response is Rochdale has been very positive. We are steadfast in our belief that we will create jobs that people will like to have. We need to create attractiveness. The quality of the facility will help and we will need highly skilled staff because of the amount of automation. It’s not just people putting bacon in a packet.
JF: You’ve talked about bacon sales increasing even though meat consumption is down generally in Europe. Why do you think this is?
LA: If you look at the bacon and gammon category it is one of the cheaper proteins on the shelf. People like it. It is a versatile product.
JF: But it’s not generally seen as a healthy food and there are concerns around the use of nitrites. Is this a concern?
JV: We work closely with the FSA [the Food Standards Authority] but it comes back to the reality of what you are trying to sell and making sure [if you take things out] it is still bacon. And there is a balance between cost-of-living and health.
JF: What of the trend towards plant-based meat products and even cell-based meat in the future? Are these areas part of Danish Crown’s strategy?
JV: We are looking at it continually. We have launched plant-based products in Poland, Sweden and Denmark. We are number one in Denmark. But the volumes are very small. The growth forecasts are not materialising. Consumers are preferring the products they know. The growth is relatively slow when you look at the likes of Beyond Meat and Oatly. With cell-based, I saw the recent announcement [the first US approval of a cell-based product]. We are looking into it but it’s a long shot. Don’t underestimate the consumer and what they want. Food is about quality of life and way of life.
JF: Danish Crown released its annual results this week, which showed group revenue rose 10% to DKK64.2bn (US$8.91bn) but net profit fell 3.5% to DKK2.2bn. You said the year was characterised by “the supply crisis brought on by the war in Ukraine, Covid-19 and very high inflation”. What are the most significant headwinds moving forward?
JV. There are two headwinds. Firstly, the energy crisis which is affecting everyone. We are an energy-intensive industry. It goes into everything. It is not really a food crisis, it is an energy crisis. The other one is that there is an oversupply of pork meat in the European market because of the decrease in exports out of Europe. This is a tremendous headwind when added to the slight decrease in meat consumption in Europe.
JF: You’ve said those headwinds have prompted rising prices across all products and that there is a need for further price increases. How have the negotiations with retailers gone?
JV: No negotiations with retailers are ever easy. That will be the day. But overall it has been reasonable. When we can show them the numbers, facts and figures, there is an appreciation of that.
JF: Pricing has also been an issue with plant-based products.
JV: We have price parity with our products. They are priced close to meat. But [more generally] some of the plant-based products have been priced too high.
JF: How would you say Danish Crown is set up to deal with the economic downturn and cost-of-living crisis?
JV: We are well placed. We are well-invested and used to private-label and we work with the right customers. Private-label and discount products account for a greater share of overall sales and we do not expect that situation to change.
JF: Some might think it strange that you have announced such large-scale capital expenditure in the current environment.
JV: I have learnt in 30 years in the food business that you need to make some big, bold moves once in a while to keep moving forward.
JF: The new facility will be powered by 100% renewable energy and you have said it will reduce food waste by using bacon offcuts to supply other products such as sausage. Last year, Danish Crown was criticised by some environmental groups for your ‘climate-controlled pig’ product labelling, which they claimed was misleading and you were accused of ‘greenwashing’. Eventually, the labels were dropped. How do you reflect on this episode now?
JV: It is not resolved yet. It will be heard in court in Denmark next year with Greenpeace and other NGOs. For us, it is a principle. We think we should be able to talk about our progress towards climate neutrality and be able to [publicise] these improvements. Greenpeace might say different.