How Tönnies was filleted by corona

'Meat baron' is what he is called in Germany. Then we are talking about Clemens Tönnies, owner of the largest meat company in Northwestern Europe. Recently, under pressure from supporters, he immediately stepped down as chairman of the German football club Schalke 04, a position he had held for no less than 19 years. In his own words, he no longer had time for this position now that his billion-dollar company had fallen into a huge crisis. The fact that he cannot complete the 20 years (or more) will undoubtedly gnaw at him.

Cheated on by the media
Tönnies was always able to operate relatively under the radar. Although the company has been ridiculed by anti-meat clubs for years, Clemens Tönnies can accept that criticism. The corona outbreak in Rheda-Wiedenbruck, in which thousands of slaughterhouse employees became infected, is a different story. The district in which the slaughterhouse is located had to go into lockdown again. The incident became world news and the criticism was unprecedented. In the Netherlands, Tönnies was pilloried by Trouw and De Volkskrant, she called the company's foreman a 'mourner'. You might expect some respect for someone who provided Europe with high-quality meat for years. But nothing is less true.

In the meantime, the peak of the crisis is behind us, or so it seems. Pigs are being slaughtered again in Rheda-Wiedenbrück, around 10.000 per day. About a third of capacity. This means that the oversupply of pigs in Northwestern Europe is slowly shrinking and the pig and piglet market is gaining more momentum again. Tönnies himself is looking ahead again. At the end of last week, the company announced its intention to acquire Lazar, a company in Germany with approximately 200 employees that cuts and shreds cattle and pigs. The German antitrust agency is reviewing the deal. 

Ban on migrant workers
The acquisition appears strategic. From 2021, Tönnies (and all other slaughterhouses in Germany with more than 50 employees) may no longer use hired migrant workers, all employees must be employed. The new legislation came about as a result of the corona crisis. The virus was able to spread so quickly, partly due to the reportedly poor and intensive housing for migrant workers. The idea is that if all employees are on the payroll, there would be better supervision of the living conditions of the staff. Violations do not result in lenient fines, which can amount to half a million euros.

Clemens Tönnies is disappointed with the legislation, he said in the German media. As a result, the flexible shell to respond to market opportunities disappears. Since mid-July, Tönnies has established 15 new subsidiaries, according to figures from the trade register. Critics think that the meat company wants to look for loopholes in the law, because these subsidiaries remain under 50 in terms of staff numbers and are therefore allowed to continue to work with migrant workers. According to a spokesperson for the meat company, the allegations are nonsense. Tönnies has indicated that it will comply with the legislation and intends to build 1.500 apartments under its own management in the coming months, it is reported. The meat company also has to be, as it is under a magnifying glass in Germany. Every step is checked.

Another challenge Tönnies is facing is a ban on exporting pork to China. Something that Vion and Van Rooi are also dealing with in the Netherlands, due to recent corona outbreaks. However, this does not seem to be the biggest concern given that China is close to crossing the border to reopen. 

Meat is becoming more expensive
In 2021, Tönnies will celebrate its 50th anniversary. Although the company has weathered some storms in recent decades, it has mainly benefited from the growing prosperity that came with additional meat consumption. The latter is under pressure in Germany. Consumption has been steadily declining for several years. The decline may become faster as meat becomes more expensive. Clemens Tönnies thinks that pork will become between 80 cents and €1,30 more expensive when animal welfare costs are passed on. According to him, this is not a good development, because schnitzels and chops would then become unaffordable. 

Apart from the corona issues, it will be a challenge to maintain the meat empire. A changing of the guard also awaits. Clemens Tönnies, now almost retired, will probably want to take it easy for once. The last few months in particular must have taken a toll on him. For the time being, however, he cannot transfer the meat company to his son Maximilian in peace.