Embracing the demand of consumers and society Strategic outlook for the EU poultry industry Nan-Dirk Mulder
Content 1. Setting the scene: a new market reality 2. Europe from a global perspective 3. Shaping the industry for competitiveness
Rabobank: A leading global F&A bank Rabobank group global presence
EU meat and egg market: pressured, with shift to chicken EU meat and egg market 1,000 tonnes Meat and eggs: +0.0% Meat and eggs: -0.6% 50,000 45,000 Eggs: CAGR -0.1% Meat and eggs: +0.5% Eggs: CAGR -3.2% 40,000 35,000 Eggs: CAGR +1.0% Poultry: CAGR +1.0% Poultry: CAGR +0.1% 30,000 Poultry: CAGR +0.8% 25,000 20,000 Pork: CAGR -0.2% Pork: CAGR +0.9% Pork: CAGR -1.0% 15,000 10,000 5,000 Beef: CAGR -1.8% Beef: CAGR +0.2% Beef: CAGR +1.4% - Eggs Sheep Poultry Pork Beef Source: Eurostat, Rabobank Analysis, 2013
Cross European decline in meat demand, but chicken keeps growing EU meat market by country change 2007-2012 CAGR: Market size 1,000 tonnes -0.1% (x 1,000 t) 600 9,000 CAGR: -0.7% 500 7,500 CAGR: -0.7% CAGR: 400 6,000 CAGR: CAGR: -0.3% -1.6% -1.0% 300 CAGR: 4,500 -1.6% 200 3,000 CAGR: CAGR: 100 1,500 -2.6% -0.1% - -100 -200 -300 -400 Poultry Pork Beef Source: Eurostat, MEG, AMI, Rabobank Analysis, 2013
Not only an European trend, also in the US US meat and egg market 2000-2012 1,000 tonnes 45,000 MEAT AND EGGS: -0.9% MEAT AND EGGS: +1.2% 40,000 EGGS: CAGR +1.0% EGGS: CAGR +0.5% 35,000 Population 30,000 CHICKEN: CAGR +2.4% CHICKEN: CAGR -0.4% growth 25,000 is 0.6% 20,000 PORK: CAGR +0.8% PORK: CAGR -1.2% 15,000 10,000 BEEF: CAGR +0.4% 5,000 BEEF: CAGR -1.8% 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Eggs Turkey Broiler Pork Beef Source: USDA, Rabobank Analysis, 2013
Same trend in the UK market UK meat and egg market 2000-2012 1,000 tonnes 6,000 Meat and eggs: -0.6% Meat and eggs: +1.7% 5,000 Eggs: CAGR +0.7% Eggs: CAGR +2.7% Sheep: CAGR: -4.6% UK poultry Sheep: CAGR: +0.6% 4,000 + eggs still Poultry: CAGR +0.9% growing Poultry: CAGR +0.1% 3,000 2,000 Pork: CAGR +1.1% Pork: CAGR -0.8% 1,000 Beef: CAGR -1.2% Beef: CAGR +3.8% - 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Egg Sheep Poultry Pork Beef Source: Eurostat, MEG, GIRA, Rabobank Analysis, 2013
Economic crisis: Trading down affects meat sales Sales channel Meat species Meat products ‘ Expensive ’ Veal Restaurants Ready meals Steaks Beef Breast meat QSR Pork Premium retail Sausages Poultry Minced meat Eggs Discount retail ‘ Cheap ’ Grains/vegetables Legs Source: Rabobank Analysis,2008
Industry fails to pass on higher and more volatile feed costs EU feed vs broiler, eggs and meat prices 200% 180% 160% 140% 120% 100% 80% EU Compound feed index 60% Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul 2007 2008 2009 2010 2011 2012 2013 Feed Beef Pork Poultry Eggs Source: Eurostat, Rabobank Analysis, 2013
Rising power of supermarkets, growing importance of discounters Food retail top 5 Discount share in food retail Italy Sweden Spain Finland Poland United Kingdom Bulgaria Portugal Spain UK Ireland Hungary France Netherlands Italy France Portugal Belgium Belgium Ireland Czech Rep. Hungary Germany Netherlands Denmark Czech Republic Slovakia Poland Romania Austria Sweden Denmark Lithuania Finland Germany 0% 20% 40% 60% 80% 100% 0% 20% 40% 2000 2006 2012 No. 1 No. 2 No. 3 No. 4 No. 5 Source: Lebensmittelzeitung, Rabobank Analysis, 2013
Rising consumer concerns as change factor in NW Europe Food safety Animal welfare Environment friendly Buy local Source: Rabobank Analysis, 2013
Volatile exchange rates; weak pound sterling strengthens UK position Exchange rates GBP based 200 180 160 140 120 100 80 60 40 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 2007 2008 2009 2010 2011 2012 2013 GBP / EUR GBP / USD GBP / BRL GBP / PLN GBP / JPY
The EU meat and egg industry challenge Economic Stronger retail crisis power Growing chicken Consumer concerns: demand, declining red Licence to supply meat and egg demand Higher and more Volatile Volatile supply of volatile input prices exchange rates agricultural products Source: Rabobank Analysis, 2013
Growth in UK poultry, egg and pork sectors EU Meat production CAGR 2007-2012 Why? Industry consolidation Buy British, Lion code Denmark Weak pound sterling UK Modernization NL Ireland Poland Germany Poultry Beef Eggs Pork France LEGEND Italy Spain
Content 1. Setting the scene: a more challenging landscape 2. Europe from a global perspective 3. Shaping the industry for competitiveness
Global protein markets keep growing, but with shift to poultry and eggs Global meat and egg demand 1,000 tonnes 120,000 Pork: Eggs: Chicken: Beef CAGR: +1.8% CAGR: +2.4% CAGR: +3.1% CAGR: -0.6% 100,000 80,000 60,000 40,000 20,000 - Eggs Pork Chicken Beef 2007 2008 2009 2010 2011 2012 2013* Source: USDA, IEC, FAO, Rabobank Analysis, 2013
Poultry industry better positioned to benefit from new market reality Cost of production Production cycle length “Efficiency” “Flexibility” Eggs Eggs Chicken Chicken Pork Pork Beef Beef Salmon Salmon 0 10 20 30 40 50 0 1 2 3 EUR/KG Breeding Finishing Source: Rabobank analysis,. 2009 Months
65% of global growth is in Asia, only 10% in emerged markets Market growth estimate for key meat markets 2010-2020 1,000 tonnes 30,000 Rest:: Second tier: 20% First tier: 59% 21% 25,000 20,000 15,000 10,000 5,000 4% 2% - -5,000 Eggs Poultry Beef Pork Source: Rabobank, FAO, FAPRI, OECD, 2013
Asian countries lack supply power Key exporters of grains and oilseeds as sign of competitive power Net exporter Net importer Net importer Net exporter Source: Rabobank, 2013
Globalisation of the animal protein industry to kick off Globalisation in the meat industry Source: Rabobank, 2013 Where’s Europe?
Top 20 Global meat companies: Increasing role emerging markets Rabobank Global meat ranking 1,000 tonnes 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - Poultry Pork Beef Source: Rabobank
Fast industry modernisation in Asia: Need for products, knowledge and investors Modern value chain Higher incomes Larger companies Modern distribution Vertical integration Food safety Efficiency Yield Animal disease threat Value chain management High feed prices Source: Rabobank, 2013
Content 1. Setting the scene: a more challenging landscape 2. Europe from a global perspective 3. Shaping the industry for competitiveness
European industry does not benefit from large EU market potential Nordic countries High incomes High standards Low meat consumption 500 billion consumers Big differences in UK: competitive Added value market advantages Polen: Strong retail power 40 million consumers Consolidated industry A very domestic, Growing retail sector Germany fragmented, industry Traditional sales market Competive power Romania Southern Europe: Labor costs Traditional demand 300 EUR/month Lower retail consolidation Source: Rabobank
Need to create larger sales markets: regionalisation Northwest - 173 million consumers North- 20 million consumers East - 79 million consumers South East - 41 million South- 171 million consumers consumers Source: Rabobank Analysis, 2013
Eggs: Internationalisation process is just starting Egg packing Egg processing Local Local players players Source: Rabobank Analysis, 2013
More industry consolidation to improve market power Number of companies Future Old Volume Specialty -Category leadership -Small/mid sized retail/wholesale - Nationwide sales -Regional sales -Internationalization - Niche products - Market power - Regional products - Cost leadership Source:: Rabobank, 2013
Industry needs to create more market power Top 20 European poultry companies by volume Tonnes 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 - Source: RabobankEstimate based on public sources
10 Golden rules for winners in the poultry and egg industry 1. Focus on right market segments – fresh and added value 2. Become preferred supplier of a customer or brand your products 3. Manage the value chain 4. Be flexible in your supply chain 5. Food has to be 100% safe and trace-able 6. Be optimal price competitive 7. Have adequate scale and achieve optimal internal synergy 8. Spread your risks 9. Implement pro-active CSR in your company strategy 10. Product development should be a key area of attention Source: Rabobank Analysis, 2013
Saturated markets. Fine tune your market positioning Changing EU market trends Trading down Animal friendly Less trad. cooking Convenience Health Growth: Decline: - Chicken cuts - Whole chicken - Further processed - Beef - Egg products - Sheep meat - Value added - Table eggs - Regional products - Fresh pork - Animal friendly - Meat substitutes Source: Rabobank Analysis, 2013
Market development and innovation to be key in new reality PACKAGING HEALTH ANIMAL FRIENDLY MEAT FREE CONVENIENCE EGGS
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