Although Vion, as the largest pig slaughterer in the Netherlands, has a fair share of profit, its position is less strong than the collective of pig farmers who have united within the Pig Farming Producers' Organization (POV). That is a conclusion that can be drawn now that a protracted dispute of almost a year and a half has been settled this week with the intervention of the Netherlands Authority for Consumers and Markets (ACM).
On two of the three counts, the POV got what it wanted. Contracts may no longer be broken open and no limit may be set on subsequent payments. However, the ACM rules that Vion did not act contrary to the law, which makes claims seem difficult.
Back in time
To properly understand the situation, we have to go back a few years. In 2017, Vion started Good Farming Balance, based on the idea of strengthening ties with pig farmers. Until then, the pig market was a free market with a strong role for the pig trade. In view of shrinking animal numbers, Vion opted for the flight forward, which sounds more negative than it was intended. After all, it is an understandable initiative from the market leader, and also an opportunity for pig farmers who are looking for certainty. They finally had something to choose from besides the erratic weekly quotation.
Pig farmers who participated in Good Farming Balance were generally very pleased with the state of affairs. The situation changed when Vion single-handedly decided at the beginning of the corona crisis to suspend the promised guaranteed price (based on a basket of European quotations), because the uncertainty on the meat market was said to be too great. The guaranteed price turned out to be less reliable than expected in challenging times. This was quite a downer for pig farmers and caused quite a bit of irritation and annoyance, but that was it. Eighteen months later, the guaranteed price was reinstated when the risks for Vion were again manageable.
Wrong throat hole
In September 2022, Vion intervened again by removing the German pig price from the guaranteed price, because this quotation was too out of line. This rubbed the POV the wrong way. In addition to the fact that this had a disadvantageous price point for pig farmers, the representative did not like the fact that the decision was taken without consultation or participation with the sector. The POV then went to the ACM and invoked the Unfair Trade Practices Agriculture and Food Supply Chain Act (OHP Agriculture Act). This law aims to strengthen the position of farmers, fishermen and gardeners in the chain and has been in force since 2021.
After some back and forth wrangling, the regulator ruled in a provisional ruling at the end of last year that Vion is pushing the boundaries between what is and is not allowed. In the sense that Vion's practices are not contrary to the law, but are at odds with it. Vion then promised to voluntarily improve and that was the end of the matter for the ACM. Vion also promised to release the cap on the additional payment - which was included in the contracts as an extra safety measure at the end of 2022. The POV appealed this ruling and wanted to see in black and white that Vion was acting contrary to the law. However, the ACM does not agree with this in the final assessment that was released this week.
POV moral winner
This last point is disappointing for the POV, but the representative still emerges as the winner in the dispute. Without her efforts, Vion would still have had free rein to unilaterally break contracts. Individual pig farmers who might have started legal proceedings would probably not have succeeded. With the help of the ACM, the collective of pig farmers manages to bring Vion to its knees. The extenuating circumstances for Vion are that the law only came into effect in 2021, when the contracts had already been signed.
The question that remains is whether Vion would have gone all the way if its financial position were less dire. The meat company has been making major losses for two years in a row, which undoubtedly puts a lot of pressure on the management and the organization. In that capacity, it is a great stroke of luck for Vion that the ACM did not enforce it, but was satisfied with Vion's commitments. In that case, Vion might also have faced a claim worth millions.
New basket
However, Vion must regain the trust of its suppliers. The ACM ruling requires that contracts with suppliers must be redrawn retroactively from the beginning of 2024. The composition of the basket has been adjusted again, as was announced today. This basket consists of the quotes of Van Rooi, Westfort, Compaxo and the German VEZG. This gives the basket a more Northwest European character, as the quotes from Denmark, Spain and Belgium have been removed.