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VION Food Group:

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Levon Harutyunyan

on 21 April 2015

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Transcript of VION Food Group:

Situational Analysis
Porter's 5 Forces
Meat Market Overview
Faced Problems of the VION group
Overview
History and Current Situation of the Company
The Case Issue
Situational Analysis and Meat Market overview
Problems Faced by VION group
Proposed Strategies
Conclusion
VION Food Group case study
Subject: Agribusiness Marketing and Finance

Lecturer: Prof. Nikos Kalogeras



Presented by:
Fani Magkana

Chaima Khatoui

Larisa Stepanova

Samer H Natsheh

Abdel Malek Hammami

Levon Harutyunyan


VION Food Group:
New Challenges

History and Current Situation of the Company
Competition
Created in 1930s as animal by-products processor
In 2008 Moved into convenience food business
July 1, 2006 became 7.1 Billion Euro Meat Company
- Focus is on beef, lamb, and pork markets
Moved into Meat Industry in 2004
Expanded through takeovers throughout 1980s
VION Fresh Meat
The VION Fresh Meat strategy is largely focused on margin-driven growth in the Dutch, German and UK markets, and increased export to Italy, France, Spain, Greece, Eastern European countries, the USA and countries in Asia. In line with the corporate philosophy of high business unit autonomy and market responsiveness, VION Fresh Meat and the constituting business units are linked with the other VION divisions and businesses on a pragmatic and transactional basis.
VION Ingredients
The VION Ingredients strategy is aimed at consolidation of its leading positions in the market for fat in Europe and blood products in China, strengthening of the Sonac position in natural casings, and expansion of Rousselot (gelatin) in South America.
VION Convenience
The strategy of this division revolves around innovation, consolidation and optimization of the brand portfolio, and further development of market research and intelligence. VION Convenience aims to further internationalize its product portfolio via sales offices, and the division is expected to double its sales to about €2.5 billion within the next five years.
- Healthy meat processing industry
- Long-term survival of the livestock farmers
- Linking primary production system and industry for food distribution and retail
Different departments and one separate business unit
Ownership
Private company owned by a single shareholder

- ZLTO (Dutch Organization for Agriculture and Horticulture, Southern Region)

- 18,000 members; 30-40% consist of livestock farmers

The Case Issue
What strategy should VION pursue to maintain the initiative in changing the European meat industry, and stay ahead of the competition?
Which of their strengths should they practice to perfection?
Were the mainstays strong enough to win the competitive race on the pan-European and even global scale?
Could they rely on the charts?
How could they make good use of the industry rules of the game to maintain the lead and put more distance between themselves and their competition ?
Threat of Potential Entrants
Medium
Power of Supplies
High
Power of Buyers
Medium
Threat of Substitues
Low
Industry Rivalry
Very High
5 Industry Wisdoms
Bargaining power of retailers increased

Bigger is better

Competitive pressure driving margins down

Differentiation is escape route

Farmers skeptical to form long-term partnerships

EU Meat Industry
EU companies focus on slaughtering and processing
Different ownership structures
International competitors integrate downstream activities
Lamb
- Smaller market but less crowded.
- Geographical regions established. Entry barriers through land control.
Beef
- VION is leader in production
Pork
- competitive pressure in Europe increasing
- consolidation likely to progress
Consumers
may get lower
prices, but the
risks to society
are higher
Pig and poultry
markets are
growing; beef and
sheep markets are
stagnating
a)
Have important cost advantages over VION (such as Perdigão)
b)
Very strong supply base (such as Danish Crown)
c)
Have outstanding technological capabilities and own important genetic assets (such as Smithfield)

Market challenges (industry wisdoms)
Defend the company’s current position (status quo)
Proposed Strategies
Move forward and grow in attractive market segments
Conversion to Cooperative
Sell the Ingredients division
Strategy 1
Defensive Strategy
Advantages
Strategy 1
Offensive Strategy
Put the new entrant out of the market
Make potential new entrants hesitant about competing


Strategy 1
Defend the company’s current position (status quo)
Disadvantages
Opportunity to avoid competition

More effective before the entrant become established
More preventive than effective strategy
Give opportunity to new entrants to grow
Less profits
Growing number of competitors

Disadvantages
Advantages
Difficult to attack all new entrants at the same time
Profits will be less since margin will be less

Advantages
• Big size of market

• Rapidly and continuously growing market

• Lower cost to produce than beef-pork

• Can also take advantage of eggs

• Consumers tend to buy more poultry
and eggscheaper than beef and pork

Disadvantages
• Strong competitors(Aviagen Group Ltd, Cobb-Vantress Inc)

• Find consumers preferences in the different regions of US-difficult, needs lot of money

• Don’t have the knowledge of the technology needed to produce

Strategy 2
Move forward and grow in attractive market segments (Expand in the poultry market in USA)
Converting Advantages
For the Company
• Maximize innovation through collaborative teams of high-impact individuals
• Attract, retain, and reward talented individuals by distributing risk while offering direct participation in governance and surplus
• Generate wide community buy-in, thus increasing the longevity of the enterprise

• Streamline an owners’ exit and maximize privacy of the transaction.
• Help an existing owner rest easy knowing her/his venture is being stewarded by experienced, competent, invested individuals.
• Enable the existing owner to sell at a control premium
• Let the existing owner take advantage of the Rollover (to shelter their capital gains from taxation)

• Distribute risk and maximize institutional and community independence
• Satisfy unmet social, economic needs and correct market failures
• Provide true community ownership, buffering communities from impact of outsourcing and market centralization
• Generate, circulate, and retain community wealth

Disadvantages of the Conversion
Very complicated process (needed many steps)
Difficult for prospective member-owners find financial sources
Needed time for the whole process (from other cases more then 1 year)

Owners Agreement: In some cases, owners will be excited at the prospect of conversion. In other cases, it could take years of negotiation.
Strategy 3
Conversion to Cooperative
Cooperatization can…
Converting Advantages
For the Existing Owner
Cooperatization can…
Converting Advantages
For the Community
Cooperatization can…
The separation will empower each division (because a focus will be given to each) because the two divisions will become completely separated operational, organizational and legal entities.
Possible strength in the financial structure and therefore the sale of the Ingredients division will maybe make it possible to repay loans and other expanses.
Possible sustainable leadership adopting this strategy.
Disadvantages
Lower level of diversification
Strategy 4:

Sell the Ingredients division
Advantages
Possibility of becoming profitable in the future

Taking into consideration only the advantages and disadvantages of the strategies mentioned above, we choose the strategy 4. In our opinion is the most feasible one.
On the other hand, if we had the financial performances of each strategy we would be able to decide for the strategy more confidently.
References
http://www.vionfoodgroup.com/
http://www.vionfoodinternational.com/en/
http://www.co-oplaw.org/conversion/
http://www.usitc.gov/publications/332/poultry1.pdf
http://journeytoforever.org/farm_library/ppp/ppp1.html
http://www.ifama.org/i4a/pages/index.cfm?pageid=1
Banner: The separate business unit
Prominent in the development and production of gelatin and
non-gelatin based oral dosage forms for the pharmaceutical, food supplement and cosmetics
industries. The business unit is mentioned separately since it no longer fits in with VION’s aim
to be market leader (top 3) in selected market segments.
Full transcript