Pork consumption declined in the EU between 2007-2014, so competitive power and market position are pivotal to success, found Rabobank’s report ‘The EU Pork Industry; Competitive Power Is Key’.
Rising export dependency, a growing number of product concepts, volatility in sourcing and overcapacity will continue to limit pork margins, the research claims.
Three strategies
As a result, pork processors should focus on three strategies. These are: reducing costs by boosting plant capacity and efficiency; optimising capacity through rationalisation or mergers and acquisitions; and adding extra activities to enhance their value. The latter could include developing extra deboning services or investment in farming to secure supply.
The research found five key success factors of EU pork processors: cost competitiveness, sourcing, efficiency, market approach and client access.
Recent decline in pork consumption was triggered by two developments: higher pork prices due to feed cost increases and trading down to cheaper proteins due to the economic crisis, said Rabobank.
Longer-term trends
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; as well as 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,” said Rabobank animal protein analyst Albert Vernooij.
“However, not all processors have suffered; a clear difference between outperforming and underperforming companies has developed. Outperforming processors have been able to stabilise margins through highly efficient production processes and cost price leadership.”
Rabobank said it believed the EU pork industry would see few opportunities for margin improvement in the coming years.