An anticipated break-up of Vion UK could herald a shift in the balance of power between supermarkets and the meat processing sector, industry sources have claimed.
Netherlands-based Vion announced, on Monday, its intention to exit the UK - its second largest market, with sales of £2.35bn - as “the scale achieved in recent years in food did not deliver the necessary competitive cost base.”
Industry sources told The Grocer it was “inevitable” rivals would cherry-pick from Vion’s spread of meat, lamb, poultry and pork operations across 38 sites.
“I can’t see an existing player looking to take on all those sites. They’re crying out for major capital expenditure and volume,” said one senior industry source.
And a carve-up could rein in retailers as the supply base would lie in the hands of “just a few meat giants,” a pig industry source added. “All of a sudden, the processing business will become more concentrated.”
Vion by numbers
Pork sites: 8
Beef/Lamb sites: 4
Poultry sites: 19
If the major protein players divided Vion’s spoils between them, it would leave Moy Park and 2 Sisters Food Group in chicken Cranswick and Danish Crown-owned Tulip in pork and ABP, Dawn Meats and Dunbia in beef and lamb.
And the supermarkets and foodservice groups would be “particularly interested” in developments at Vion UK, “as overlaps and market shares from potential new ownership combinations are taken into account,” said Shore Capital in a note.
An industry analyst added: “Security of supply is important to retailers and certainly in pork we have already seen Tesco move to try and protect its supply.”
Tesco announced direct supply contracts with its pork and beef farmers this month.
In its 2011 accounts, Vion admitted the UK operation “did not perform as well as expected”, as it was was “squeezed between input cost volatility… and consumers under relentless and growing pressure.”
But a senior industry source said Vion’s £350m purchase of Grampian in 2008 “gave them indigestion from day one.”
Vion told The Grocer it was “not putting any timescales” on the sale of the UK business. However, Dutch agricultural journal Boerderij reported that Vion was expecting a sale of the UK business before February next year.
Usdaw national officer John Gorle said he was “extremely concerned by Vion’s decision”.