Vion: turning a corner

By Ed Bedington

- Last updated on GMT

Related tags Investment Quality control Netherlands Uk Vion Pork

Meat processing: Vion
The decision by Vion to exit its processing operations throughout the UK sent shockwaves throughout the industry. A year on from that announcement, and with the dust finally starting to settle from the company’s dramatic retreat, Ed Bedington took a trip to the Netherlands for an update

For many in the UK meat sector, Vion was the white knight, riding to the rescue of the troubled and crumbling Grampian Country Food Group back in 2008. The arrival of the Dutch farmer-owned Vion Food Group was greeted with enthusiasm and relief by those who feared the collapse of the once mighty Grampian.

At the time, Vion said it was a natural move for its business. It considered the UK to be a third home market, alongside the Netherlands and Germany, and it was a natural progression to take on a processing role within the market. And for the UK, the arrival of the deep-pocketed Dutch co-operative meant the survival of a key player in the meat trade.

Fast-forward four years and that dream lay in tatters. Vion, no longer the shining white knight, was retreating, battered, bloody and bruised, back to its homeland, having found that even deep pockets have limits, with the former Grampian business sold off piecemeal to various operators throughout the trade. Having already disposed of it pharmaceutical operations, the company has gone on to restructure even further, merging some of its Dutch operations, putting its frozen produce business, Oerlemans Foods, up for sale, and successfully completing the €1.6bn (£1.3bn) sale of the Vion Ingredients business this summer.

So considering all the troubles that have befallen this Dutch titan, does the company regret its UK adventure, and was it a case of biting off more than it could chew?
Hindsight is a wonderful thing, says Marc van der Lee, director of communications with Vion Food. “In 2008 we had a great opportunity. We had three core markets, and this opportunity was potentially very interesting, because it would strengthen our position in the UK market for Dutch and UK production.

“So we acquired the Grampian Country Food Group and I still believe – though it’s my personal view – that the acquisition was a good one. But maybe it was just a little bit too much, given the economic circumstances at that time. With hindsight, you can say should not have done it, but if it had been a success, people would have said we had a clear vision and a clear strategy.

“Essentially, the timing could not have been worse, but, if you’re in business, and you get an opportunity, you choose to either take it or not. And we did.”

He says the purchase was made at the start of a perfect storm which sowed the seeds of the business’ eventual withdrawal. In 2008 the economic downturn really started to bite and, as the economy nosedived, so did consumer confidence.

Coupled with this downturn was the realisation that significant investment was going to be needed to keep the UK operations going and, unfortunately, the UK was not the only area that required investment, says van der Lee. “The money to invest had to be around, and then it had to be divided among three different markets, and if you’re only doing a little bit here and there, then you’re not doing the right job.”

So with investment needed in both Vion’s German and Dutch operations, the cracks started to show. “Things really became clear in 2011, when our profit was down to €14m (£11.5m),” says van der Lee. “The executive board said this was a development that we needed to analyse closely because this was a result that was not sustainable.”

The decision was made to improve efficiency and operational excellence – and to cut costs. “The only way to improve was to restructure, so we started to divest any non-core activity.”

Vion’s pharmaceutical operations were sold “for a nice sum”, says van der Lee, but it “was not sufficient to get us back on track”.

“Grampian needed a lot of investment to get the organisation back on the right level, and we didn’t have enough money to invest in all the countries. So the decision was to concentrate future activity in the Netherlands and Germany. and divest UK activity, and that was quite a shock for a lot of people.

“There were a lot of questions being asked, because it was the biggest acquisition we had made and in line with our strategy. But it was no longer possible to maintain all three activities in all three countries.The outcome is what it is. If it had been a success, we’d have had applause. We had to make a decision, and it was a pretty tough decision.”

But now, following a difficult 12 months, which has seen the company finally divest all of its UK processing operations, the company claims it has turned a corner. “We’re now in a position where the company feels pretty comfortable,”​ says van der Lee. “We’re a company that can make a difference in fresh meat. Our core business is meat and that’s an area we’re really familiar with.”

The company’s production standards and high quality, along with its robust systems, have helped maintain its position, says Bert Urlings, director, quality assurance, at Vion. He says consumer needs are changing and issues such as food safety and animal welfare are becoming more important all the time.

He highlights the fact that Vion has moved to visual meat inspection for pigs in the Netherlands, which has had a huge impact for food safety with far less cutting of the carcase. “The results have shown higher levels of food safety, with reductions in problems like salmonella.”

But he points out that you cannot move to visual inspection without having robust systems in place, all the way along the supply chain from tracking and traceability, to taking blood samples to check for mycrobacterium. He points to things like not cutting the carcase until it has been cooled down, thereby reducing the spread of pathogens. The result for Vion is that it has much lower levels of contamination, far below the legislative limits, and an improved food safety record.

Van der Lee says it is this reputation which helps to build the business. “We weren’t touched by the horsemeat scandal. And buyers will never say, ‘I’m in business with you because of your quality scheme’, but quality shows them this is a partner we can do business with because their house is in order.

“People know things can happen, but what happens afterwards is how you make the difference, and we have some good experience in handling issues.”

Urlings echoes this: “Something can go wrong, but what is really wrong is if you don’t recognise it, deal with it and take preventative measures. We’re all allowed to do something wrong, but you’re not allowed to ignore it and you need to act in a professional way.”

So with those quality standards, the ability to adapt and react to a shifting landscape, along with continued restructuring and the investment monies raised by the sale of its non-core divisions, Vion appears to be in a far healthier place 12 months on from its UK retreat.

“Everyone feels confident about the future for Vion Food,” says van der Lee. “But that doesn’t mean we can relax – there’s a lot of work to be done. A lot has been done and a lot will be done.”

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