Vion's German headache is finally over

Now that Vion has also found a buyer for the foodservice division, the meat company has largely withdrawn from Germany. In doing so, a wish of management is being fulfilled. The German exit strategy ultimately took two years and was sometimes accompanied by the necessary bumps, but it has certainly not become a disappointment. Now it remains to be seen whether a simpler Vion can start posting black figures again, because the company still faces major challenges. Where many Dutch agri companies expand across the border, not least because of shrinking livestock herds, Vion chooses the opposite direction. That seemingly atypical choice was suggested by consultants from McKinsey, who were hired in 2022 to think along about a recovery strategy for the company. Leaving Germany should help Vion to be organized more tightly. In addition, the sale of activities generates cash, something the company can use to strengthen its weak equity. Selling sounded easier than it was, because Vion was organized in a rather fragmented way in Germany, something that also always stood in the way of success. Moreover, the German cartel authority prohibited selling all activities at once to one party. Commercially, that would not have been the most attractive option either. Tönnies and Westfleisch missed out It is notable that the large German meat companies ultimately missed out. Tönnies seemed to be reeling in the biggest fish from the Vion portfolio. The deal for the acquisition of the cattle slaughterhouses in Buchloe and Waldkraiburg and the combined cattle and pig slaughterhouse in Crailsheim was in the bag, but the German cartel authority put a stop to it. Westfleisch then also publicly showed interest, but their bid for Buchloe was far outbid by the Irish ABP. Several Vion locations were in good demand, and reportedly good prices were received for them. Especially in the second quarter, the sale of several parts picked up speed. The sale of the growing foodservice division, accounting for 8% of total revenue, is, according to the company, the final piece for now. This will be transferred to the Group of Butchers. This is a cooperating group of private label producers backed by an investor. Vion is not entirely out of Germany yet. Four locations remain. These concern the best-hides activities in Memmingen and Eching-Weixerau (60% stake), which performed well in recent years. The same applies to the cattle slaughterhouse in Furth im Wald, which is also profitable. Vion also retains a location in Twist, where slaughter by-products are processed. Make or break Nevertheless, Vion will soon primarily focus on the Benelux. In terms of profile, the company will thereby become more comparable to other slaughter companies in our country. The differences in size will also become smaller, although Vion remains the clear market leader in the Netherlands. Unlike in Germany, Vion works much more concentrically in the Netherlands and Belgium. Locations cannot be closed easily, as has happened several times in Germany in recent years before the departure was announced. Due to the sharp decline in the pig herd, the locations are currently not operating at full capacity. So even after closing the German pain point, there is still work to be done. Downsizing the slaughter locations in Boxtel, Apeldoorn or Groenlo seems complicated, but seems necessary in the long term. Still to be seen Although the challenges remain, the loss-making German locations have been divested. The German sting has therefore been removed from the meat. After years of deep red figures, Vion has promised improvement for 2025. A year ago, top executive Tjarda Klimp stated that the company would be back in the black. Whether that actually happened over the full year remains to be seen. Unlike last year, Vion will only publish the annual figures after the summer, the company says when asked. That in itself is not a good sign, because Vion will probably not fail to bring good news as quickly as possible. At the same time, there are certainly signals that the meat company is on the road back under challenging circumstances.