New Chinese fries adventure strengthens Aviko

At the end of 2018, known that Aviko sold its majority stake in the Snow Valley chip factory. In January 2020, 90% of Hongyan Louis' shares were acquired in northeastern China taken over. The deal was concluded remotely during the 'corona year', meaning Aviko can now bake fries in the country again. From the Netherlands, Dick Zelhorst worked on the takeover within the acquisition team. After years of being raw materials director, Zelhorst has been globally responsible for the entire process 'from soil to mouth' since last year.

First the collaboration with Snow Valley stopped and then a deal was made with Hongyan Louis. How exactly does that work?
"The collaboration with Snow Valley stopped at the end of 2018, Aviko had other ideas about the growth strategy to be followed in China. Our share was therefore sold in good consultation. China remains a huge growth market. We export extensively, but a local production base is essential to be a leading to obtain and maintain a position on the Chinese market."

So no longer export from the Netherlands, but produce locally. Isn't that detrimental to growers in our country, or positive for Cosun members?
"As with all investments that Aviko makes, the Chinese factory must also yield a financial return. A good return for the entire Aviko group - together with the other branches of Cosun - means that an annual surcharge is paid on the sugar beet price. The profit we make production in China, including that of our flake factory in Gansu, is paid annually to the Netherlands. Unless we want to invest in China, of course. The results are reported annually to the parent company."

What does your new strategy in China look like and which products does the factory focus on?
"We expect the demand for fries and potato specialties in China to grow further. It makes sense to produce regular fries in China. The specialties are mainly imported. At Hongyan Louis, initially only fries and cut specialties (slices, wedges) are produced. , etc.) is produced. Other potato specialties may follow at a later date. There are now plans for a capacity expansion. 50.000 tons of end product are currently being produced. This equates to approximately 100.000 tons of potatoes. The management of Aviko Gansu is being temporarily deployed to start up the new factory in Xilinhot and run it on an Aviko standard."

Is it conceivable that we will be eating Chinese fries in Europe in the future?
"That is not obvious. Northwestern Europe (the EU-5) has by far the best credentials for global export. Think of an ideal climate, efficient and professional cultivation, excellent infrastructure and a favorable location near sea ports. Production in China, the focus is mainly on local sales, and in other parts of Asia where large-scale potato cultivation is not possible."

What does potato cultivation in China look like, do they also have contracts or a pool there?
"All potatoes are purchased under contract for a fixed price prior to the harvest year. The working method in China is comparable to that in North America. We do not use other contract forms, such as a pool. In that country, doing business is different than here. , but our Cosun principles are also maintained there. How we behave and what considerations and choices we make do not change because we are in a different country."

Aviko is also building a new factory in Poperinge, Belgium. Wouldn't it have been better to invest more in this or does the Chinese strategy fit in perfectly with this?
"Based on its strategic vision, Aviko has chosen to combine the export of potato products with local production. We are realizing this with the construction of additional capacity in Northwest Europe, in Poperinge, and the purchase of the Chinese factory."

Other Dutch companies, such as Avebe and Friesland Campina, have tried it in China. Can you learn from their mistakes and make it successful?
"In 2006, Aviko started a potato flake factory in Gansu. This part has been performing very well within the Aviko group for years. Aviko Snow Valley also performed well. Only the difference in opinion led to the termination of the collaboration. The 15 years of experience and expertise in China provides sufficient confidence to make the new factory in Xilinhot a success. The takeover has no consequences for the flake factory in Gansu for the time being. However, we are looking at possibilities to process residual flows from chip production into flakes. Flake sales are also growing steadily. Further growth in flakes is necessary to consolidate and expand our market share in China.”

How does the coronavirus affect the Chinese potato market and consumption?
"The sales market for end products in the country has almost completely recovered. The catering industry is open and the Chinese are eating out. Locally, there is virtually no noticeable sign of the coronavirus anymore. It remains difficult to visit China from the Netherlands. very strict quarantine restrictions.”