Danish Crown - An attractive playmateProcessing strategy paying offDanish Crown gearing up for the futureDC Future on targetDC Future: An overall plan
Have you thought about visiting Denmark’’s Most Beautiful Pigsty at this year’’s Skanderborg Festival?

We have a joint task and a shared responsi- bility

-Kjeld Johannesen | CEO

We have a joint task and a shared responsibility. And we can only see the task through if we believe in it. Reducing Danish Crown’s payroll costs by 20 per cent per kilogramme represents a huge challenge. But we have come a quarter of the way, and I feel confident we can achieve our goal with the rest. You have to think what the alternative is.

Årsrapport 2009

Danish Crown’s CFO Preben Sunke explains that Danish Crown’s processing companies are largely to thank for this year’s supplementary payments to farmers.

27.11.09

Processing strategy paying off

Danish Crown’s value chain stretches all the way from field to fridge. Literally. From the grain growing in the Danish fields and being harvested to feed the pigs – to the liver pâté being served at the lunch table. In recent years, Danish Crown has developed from primarily being a slaughterhouse business selling sides of pigs to processing companies to performing much of the processing itself in various subsidiaries. And this is the right strategy.

Not that many years ago, Danish Crown was primarily engaged in bulk production.

In the meantime, high Danish costs have made it hard to make money in the export markets for products which have little to distinguish them from one country to another. Here, competitors in countries such as Germany and Poland have a clear lead because wages and a number of other costs are significantly below Danish levels.

Even though Danish meat is known for its high quality worldwide, some of the product value is added at the very end of the value chain where the product acquires the characteristics which are appreciated by consumers.

The aim of the processing strategy is for the company to optimise the value chain by processing more of its own raw materials. The strategy has proved viable by making a measurable contribution to the supplemen-tary payments paid to DC members.

In the past nine years therefore, Danish Crown has pursued a so-called processing strategy. The aim of the strategy is for the company to optimise the value chain by processing more of its own raw materials. Danish Crown has acquired a number of processing activities abroad to support market access for customers in the local markets. In this way, the company reaps the benefits of the entire value chain in production.

Market leader in the UK
Today, the Danish Crown Group produces processed products in Denmark, Germany, the UK, the USA, Poland and Sweden. It is a strategy which has proved right this year.

Our strategy plan sets out a specific and ambitious target for how much the joint subsidiaries are to contribute to the supplementary payments. We will be exceeding this target this year and are expecting continued growth, says CFO Preben Sunke. He continues:

The companies are beginning to approach or achieve the ongoing returns targets. This is most evident in the UK but we are also on track in the other markets, and all the companies are doing better. Developments have been extremely positive in the UK. Here Tulip Ltd has built up a strong market position for itself with an extensive assortment and satisfactory earnings.

Things are also looking up in the USA, and Plumrose USA is close to achieving the returns target.

This represents almost a doubling relative to 2007/08 and can be attributed to an increase in both sales and earnings in a year which has otherwise been heavily impacted by the financial crisis, also in the USA, says Preben Sunke.

Tulip on track
The same is true for Tulip Food Company, which is responsible for the Group’s processing activities in Denmark and a number of other markets worldwide.

Tulip Food Company has returned much improved results relative to last year. Tulip has adapted its costs stringently and really streamlined its processes, resulting in good earnings and satisfactory market coverage in Denmark, says Preben Sunke.

However, Tulip Food Company still has to contend with some of the drawbacks of having production in Denmark in the form of higher production costs, fluctuating exchange rates and greater fluctuations in raw materials prices.

Nevertheless, big improvements have been achieved, and they look set to continue next year, says Preben Sunke.

More sausages from Poland
In 2005, Danish Crown and the Finnish company HKScan started a joint venture in Poland which involved the takeover of the Polish company Sokolów. Sokolów is Poland’s strongest brand within meat products and the country’s second- largest meat business.

In Poland we have now achieved the desired market position. This year we have seen a strong improvement in earnings, which is a good starting point for further growth, Preben Sunke explains.

More processing across the Sound
The latest additions to the family are in Sweden. In 2008 Danish Crown acquired KLS and Ugglarps, and in 2009 went on to establish one of Europe’s most advanced retail-packaging facilities in Jönköping.

We are still building up our Swedish activities, but we are on our way to having a significant market position. Danish Crown has managed to establish a good foothold in Sweden in a relatively short space of time, and the work will now continue to achieve the targets for earnings and volume, says Preben Sunke, who is looking forward to fresh challenges in the coming year.

This year the processing strategy has demonstrated its worth, but that doesn’t mean we can rest on our laurels. All the departments are still working hard to meet targets, and right now the prospects for next year look quite promising, says Preben Sunke in conclusion.

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