Vion's management hopes to eliminate the leak in the German market with a new and far-reaching reorganization plan. Frantic attempts to turn the tide have already been made, but have not yet had the desired results. By divesting no fewer than four German slaughtering and processing locations, the company is making deep cuts in its own meat. This hurts a lot at first, but then it can also be a relief. The fact that competition is being played into the hands has increased sales and sales.
The news is striking, but not a bolt from the blue. In recent months, there has been a lot of speculation in the rumor circuit that Vion is 'planning something'. The closure of the location in Emstek was already specifically mentioned by Farmers Defense Force in October, but Vion loudly denied it. Probably to maintain peace in an undoubtedly complex reorganization file, although it does not deserve the beauty prize. In the background, negotiations were probably already underway with potential buyers. In a market with rapidly shrinking animal numbers, selling stainless steel is not an easy matter. Certainly not to direct competitors, but there are simply no other candidates.
Leaked plans
At the end of last week, rumors in the market flared up again. Vion would close the slaughter location in Emstek, it was said again. A deal is also said to be in the works with Tönnies. Questions about this to Vion's spokesperson were not answered adequately on Monday, but were not immediately denied either. Late Monday evening, a leaked draft version of a press release circulated through WhatsApp groups that Vion indeed has major downsizing plans in Germany. In addition to the location in Emstek being closed, three more locations are also being sold. Two factories at the major competitor Tönnies and also a slaughter location at the lesser-known regional player Uhlen. The leaked plans also made it painfully clear that internal communication at Vion is not watertight, because last summer the annual figures were already available before the embargo.
Cutting hurts
The divestments in the German market are not an isolated event. Last year the curtain also fell on two factories in Germany. In the previous years there were also a number of factory closures. Incidentatlly denied CEO Ronald Lotgerink wanted to leave Germany last summer. That would probably take too big a bite out of sales. It now appears that Vion is going to scale down significantly by cutting excess capacity. This hurts a lot in the short term. In 2022, a charge of €63,5 million was already taken for the troubles in Germany, although it is not clear whether this amount also includes the newly announced reorganization.
Starting points
In the longer term, the eliminated overcapacity can contribute to a better profit margin. But before Vion in Germany can actually fix the leak, a lot of water will probably still have to flow through the Rhine. A starting point is that the number of pigs in Germany increased slightly in November for the first time since 2020. This is a favorable development for the utilization of the slaughter capacity, also for the other slaughterers in Germany. In addition, German slaughterhouses have become more aware that China will soon reopen the borders for German pork, now that the export ban for Belgium was lifted last week. For Vion, it is hoped that the German activities will pick up quickly, because this major reorganization seems to be the last credible chance for German success for the time being.