Pea shortage pushes up free market prices; other stocks expected to tighten by spring: vegetable processors hope that economic realities will now sink in among wholesale, retail and industrial buyers, most of whom have stubbornly resisted higher-cost contracts in recent years.
Worries over potentially serious shortages of major processing vegetables in large parts of Europe, which loomed large last July and August, were reduced to just cautious concerns in the end. Despite a cool and cloudy spring in Benelux countries and northern France, too much rain in Romania and southern Hungary, and drought conditions "Drought Conditions" is episode 126 of The West Wing. Plot
Senator Rafferty, a new presidential candidate garnered much media attention with a ground-breaking speech about health care. in Spain and Portugal, by November it became clear that the supply situation for most varieties was manageable.
Jean-Pierre De Backere of Ardooie, Belgium-headquartered D'Arta, noting that yields for peas were down by about 10% and the availability of sprouts was off by 5% compared with tonnage during the previous season, commented: "This is not a problem because last year there were overstocks. Things should return to normal in 2006."
His partner, Johan Talpe, added: "I see a shortage coming over the next two months as industrial demand in England picks up. Prices will not go down."
"Some items are in short supply, which makes production more expensive. Nonetheless, all of our contracts have been met," said Michel Delbaere, managing director of Ooigem, Belgium-based Crop's. "We are keen to make sure common sense prevails and that sales prices will be at a level to realize proper margins."
Reviewing the peak growing season growing season, period during which plant growth takes place. In temperate climates the growing season is limited by seasonal changes in temperature and is defined as the period between the last killing frost of spring and the first killing frost of autumn, at which , Herwig Dejonghe, managing director and chief executive officer of Westrozebeke, Belgium-headquartered Pinguin NV, commented: "Cold weather in July and August was followed with summer-like growing conditions in the Benelux during September and October. This yielded a better than expected crop, which prevented a supply side disaster."
While the "nightmare scenario" of factories lacking enough vegetables to process did not come to pass, pricing problems remain acutely real, added the chief executive.
"Peas are now 20% more expensive on the free market. Sweet corn prices are also up, and by March or April there will be delivery problems for some suppliers," Dejonghe told Quick Frozen Foods International at the company's Langemark plant.
Talpe concurred with the assessment, stating: "Within several months, just before the new season, the shortage will become clear for all to see. Until then pressure will build and prices will not go down."
While free market prices have risen to what the Pinguin executive called "healthy levels," most processors have not yet been able to pass on the more expensive costs to end-users, as retail buyers continue to dig in to cover by digging; as, to dig in manure s>.
To entrench oneself so as to give stronger resistance; - used of warfare or negotiating situations.
See also: Dig Dig their heels.
Talpe discussed tactics employed by a major European supermarket chain seeking to purchase more than 60,000 tons of frozen vegetables Frozen vegatables (also freeze-dried vegetables) are commercially packaged vegetables that are sold in the frozen section of the store, usually packaged in either rectangular boxes or plastic bags. :
"They invite tenders from everybody in Europe. Two months pass, and no deal is concluded. Every day they receive bids from producers, and every day the price goes down one or two percent. Eventually somebody gets to do business with them at a loss. This is not for us."
"Processors are trying to cover themselves as best they can, because you can't sell what you don't have," commented Dejonghe. "The time will arrive when this frustrating market breaks, and higher prices will be received by those who have products available to sell."
"Difficult Year" for Pinguin in UK
A rise in end-user prices will come none too soon for Pinguin. Europe's second largest producer of private label frozen vegetables is in the midst Adv. 1. in the midst - the middle or central part or point; "in the midst of the forest"; "could he walk out in the midst of his piece?"
midmost of restructuring after sustaining losses over an 18-month period which ended last June 30. Turnover slipped by 1.3% to 150 million euros during the first 12 months, before advancing by 2.5% during the first half of 2005.
"It's been another difficult year," said the managing director, "with our UK operation losing 6.5 million euros. Elsewhere, a disaster in sweet corn emerged due to overcapacity o·ver·ca·pac·i·ty
Too great a capacity for production of commodities or delivery of services in relation to actual need: the problem of overcapacity in many large industries. streaming into the market from Hungary following its entry into the European Union European Union (EU), name given since the ratification (Nov., 1993) of the Treaty of European Union, or Maastricht Treaty, to the
European Community . The result for us added up to additional losses of 4.5 million euros."
The company's annual report, issued on November 14, candidly spelled out difficulties in the United Kingdom, a country that accounts for 36% of sales made among 46 nations around the world: "Pinguin's takeover of Fisher Frozen Foods in June 2002 was both a market and management problem, and resulted at the start of 2005 in a cash drain ... Overproduction o·ver·pro·duce
tr.v. o·ver·pro·duced, o·ver·pro·duc·ing, o·ver·pro·duc·es
To produce in excess of need or demand.
o in general and the slowing of market growth mean that average prices have fallen by ... as much as 8-10% in the United Kingdom. The downward price spiral was particularly marked during the last six months of the financial period."
On the supply side, a poor pea harvest in Britain compounded problems for the UK subsidiary, as peas represent 40% of its produce range. Unfavorable weather conditions led to abnormally low crop yields--and with a longer season came higher processing costs.
"The end result was extremely low productivity, small volumes and high costs. The smaller margins could not be offset against higher sales prices," summed up Luc Van Nevel, chairman of Pinguin's board of directors.
The company has taken drastic cost-cutting steps across the board to reduce expenses, which included a "radical slimming down" of management personnel in Britain. The overall workforce will be trimmed by 40% over time, with a permanent staff of 80 in place by February.
"We have stopped treating the United Kingdom like an island," said Dejonghe. "Pinguin Foods UK no longer functions as an independent department, but reports directly to Belgium and is being run with Belgian work habits in mind. This step is necessary for the company to perform more efficiently as a single unit in all respects."
In France, the Brittany-based Euragra division was closed. Production of mini-portions of frozen soups and sauces is is now taking place entirely at the Westrozebeke plant. Furthermore, permanent staff at the Pinguin Aquitaine corn and carrot freezing plant in Ychoux has been reduced from 50 to 18.
"We have found that the convenience foods market is quite difficult to get into, as loyalties to established suppliers are strong. A longer period of development than anticipated is required," Dejonghe told QFFI QFFI Quick Frozen Foods International .
New Investor, New Capital
On November 15 the company welcomed a new investor and a capital injection amounting to 5 million euros following the sale of Jan Dejonghe's shares to Management Deprez BVBA BVBA Besloten Vennootschap met Beperkte Aansprakelijkheid , a family-owned entity engaged in the fresh vegetable and citrus fruit trade internationally. Veerle Deprez has joined the board of directors, where she represents the syndicate's stake which, together with the Dejonghe family's remaining ownership, controls 45.86% of Pinguin NV. Other shareholders are: KBC KBC Kenya Broadcasting Corporation
KBC Kaun Banega Crorepati (Indian TV show)
KBC Koahnic Broadcast Corporation (Anchorage, Alaska)
KBC Keyboard Connector
KBC Kill Before Capture Private Equity, 12.9%; Bank Degroof, 5.58%; Lurberri, 5.34%; public investors, 30.3%.
"Our new partner knows the business well," said Dejonghe, who will continue to run Pinguin as chief executive officer. "Deprez is number one in the fresh vegetable business in Belgium and Holland. It owns Bakker in the Netherlands, which is a major supplier to the Albert Heijn Albert Heijn B.V. is a supermarket chain founded in 1887 in Oostzaan, the Netherlands. It is named after Albert Heijn senior, the founder of the first store which was a small grocery store in Oostzaan. supermarket chain."
Meanwhile, Pinguin aims to broaden inroads inroads
make inroads into to start affecting or reducing: my gambling has made great inroads into my savings
inroads npl to make inroads into [+ in Central and Eastern Europe The term "Central and Eastern Europe" came into wide spread use, replacing "Eastern bloc", to describe former Communist countries in Europe, after the collapse of the Iron Curtain in 1989/90. , as well as the China market. It recently established Pinguin Shanghai Ltd, a fully-owned company authorized to issues invoices directly. Sharp increases in trading activities were recorded last year, as exports from the PRC to Europe continue to rise.
On the new product front, Pinguin is expected to sharpen its focus on value-added ranges. As supermarkets are devoting more space to ready-made meals and vegetables, the company has responded with a range of vegetables in Doypack standup stand·up or stand-up
1. Standing erect; upright: a standup collar.
2. Taken, done, or used while standing: a standup supper; a standup bar. steambags packed to private label specifications as well as under the Pinguin brand.
Ready to serve after six minutes of microwave preparation, the line features four 250g items at the moment: Broccoli, Cauliflower cauliflower (kô`lĭflou'ər, käl`ĭ–), variety of cabbage, with an edible head of condensed flowers and flower stems. Broccoli is the horticultural variety (botrytis); both were cultivated in Roman times. and Parisian Carrot Mix; Peapod, Sugar Snap Pea Noun 1. sugar snap pea - variety of pea plant producing peas having crisp rounded edible pods
edible-pod pea, edible-podded pea, Pisum sativum macrocarpon - a variety of pea plant producing peas having soft thick edible pods lacking the fibrous , Soybean soybean, soya bean, or soy pea, leguminous plant (Glycine max, G. soja, or Soja max) of the family Leguminosae (pulse family), native to tropical and warm temperate regions of Asia, where it has been and Bean Sprouts bean sprouts
The tender, edible seedlings of certain bean plants, especially those of the mung bean. Blend; Romano Beans, Cut Green Beans green beans
long narrow green beans that are cooked and eaten as a vegetable and Parisian Carrot Mix; Peas, Sweet Corn an Baby Carrot In North America the term baby carrot is commonly applied to either miniature carrots harvested before their roots develop or adult carrots chopped into smaller pieces. Taking fully grown carrots and chopping them into smaller pieces was the idea of California farmer Mike Yurosek. Blend.
Crop's Stirs Up the Soup Market
Also very much on the steam scene for some time now is Ooigem, Belgium-based Crop's, which supplies the Delhaize retail supermarket chain with a wide range of products that includes frozen soups featuring recipes that run the gamut from Tomato with Meatballs, to Onion with Grana Padano Cheese Grana Padano cheese is one of the most popular Denominazione di Origine Controllata cheeses of Italy. The name comes from the noun grana (‘grain’), which refers to the distinctively grainy texture of the cheese, and the adjective Padano , and Chicken Soup chicken soup Chicken broth Folk medicine Jewish penicillin A fowl broth with a long tradition as a home remedy for URIs, which may be a nasal decongestant, inhibit growth of pneumococci in vitro, and stimulate immune responsiveness in WBCs Mainstream medicine A flavorfully accented with onions, potatoes, carrots, celery, lemon juice, white pepper, bouillon Bouillon, town (1991 pop. 5,468), Luxembourg prov., SE Belgium, in the Ardennes on the Semois River, near the French border. It is a small manufacturing and tourist center. , cream and parsley.
"We are driving the frozen 'Steam Express" category, both in vegetables and meal soups," said Michel Delbaere. "We are probably the only company that is packing top-quality steam products in every format--trays, bowls and pouches."
The managing director said that there will be more to come in meal soups in the near future, as Crop's expands its current range of seven recipes into new directions. In fact, when editors of Quick Frozen Foods International visited his office in November, there were 23 items ready to roll.
"In terms of taste, color, texture and vitamin content, the products are truly exceptional," he stated. "Furthermore, they meet three important criteria that are key for motivating purchase decisions among consumers--health, convenience and taste."
For maximizing sales of the retail soup range, positioning within the ready meals section of frozen food aisles in supermarkets is paramount. Delhaize stores in Belgium have done just that, and reportedly are achieving projected unit volume movement as a result.
Consumers Will Pay for Quality
"It is clear that people want high quality frozen meals, and are ready to pay the price for tasty and nutritious ingredients combined in the right way to deliver a superior eating experience," said Delbaere.
When it comes to raw materials, Crop's directly sources vegetables not only from the fertile fields of the Hesbaye region in Belgium, but also from southern Europe Southern Europe or sometimes Mediterranean Europe is a region of the European continent. There is no clear definition of the term which can vary depending on whether geographic, cultural, linguistic or historical factors are taken into account. , where last July it opened a factory in Portugal in cooperation with Ardo.
"This investment is essentially a conceptual copy of the HesbayeFrost factory in Geer, in that 90% of what we process comes from farms near the plant, which are closely monitored and controlled," said Delbaere. "Mediterranean vegetables packed range from individually-cored peppers and broccoli, to tomatoes, zucchini and eggplant eggplant, name for Solanum melongena, a large-leaved woody perennial shrub (often grown as an annual herb) of the family Solanaceae (nightshade family), and also cultivated for its ovoid fruit. ."
The Crop's chief executive officer pointed out that Portuguese farmers specialize in producing for frozen processing more so than their counterparts in Spain, whom cater primarily to the fresh produce market. He added that weather conditions are quite favorable for growing vegetables in Portugal, as moist winds blow in from the Atlantic Ocean Atlantic Ocean [Lat.,=of Atlas], second largest ocean (c.31,800,000 sq mi/82,362,000 sq km; c.36,000,000 sq mi/93,240,000 sq km with marginal seas). Physical Geography
Extent and Seas
Asked to comment about general business prospects for 2006, the managing director said: "Demand for vegetables continues to grow, as people are more concerned about healthy eating. So, the only thing needed is for the overall economy to grow. If that happens, business will be good."
Delbaere sees more consolidation coming within the frozen food industry. "Big brands are up for sale," he noted, "because diversified food corporations want to streamline operations and concentrate on their main business."
As for the frozen versus chilled foods market share battle, Delbaere remarked: "We must repeat the message over and over that fresh-frozen products lock in flavor, vitamins and minerals, and are fresher than chilled."
A From-the-Field Report
By JOHN M. SAULNIER
QFFI Chief Editor & Publisher