Pig processors must face the challenges of declining EU pork consumption if they are to survive, says a new report.
Pork consumption in the EU plummeted 1m tonnes between 2007 and 2014, as a result of retailer pressure, consumers switching to cheaper meat and a number of meat scandals, said analyst Rabobank in its latest pork industry report.
But consumption would only slightly recover in the coming years, exports would not bring higher prices because of the EU’s high cost base and competition remained fierce due to overcapacity and retail pressure.
“A clear difference between outperforming and underperforming companies has developed,” said the report’s author and protein analyst, Albert Vernooij.
“Outperforming processors have been able to stabilise margins through highly efficient production processes and cost price leadership;”
To survive, processors needed to examine their positioning in the market, said Mr Vernooji.
“To remain profitable and in business beyond 2025, EU pork processors must make a strategic decision regarding their positioning,” he said.
“Each company must have a clear strategy of what kind of products they produce, for which market and what they should do to become successful in it.”
This should be based on five critical success factors, said Mr Vernooij:
- Cost competitiveness
- Sourcing – arranging efficient sourcing and making sure the company was paying in line with competition
- Efficiency in the plant with logical structures and in-line working as much as possible
- Market approach – targeting specific markets and focusing everything towards those (commoditised export market, added value retail market, processed meat production)
- Client access – making sure the company has direct access to clients without too many middlemen to maximise returns
Why has EU pork consumption slumped?
The recent decline in pork consumption was triggered by two developments, said Rabobank – higher pork prices due to feed cost increases and consumers trading down to cheaper proteins (such as chicken) in reaction to the economic crisis.
These developments collided with three longer-term trends of the last decades: consumer preference for convenience and processed meat products containing less meat; the increase in meat-restricted diets for environmental, ethical, animal welfare and health reasons; and various meat scandals in the EU.
The rapid growth of the discount channel across Europe had also increased retail competition and resulted in strong price pressure and squeezed margins for EU pork processors, said Mr Vernooij.