Although the indirect impacts of COVID-19 on the animal nutrition sector remain to be seen, companies have been able to stand back and reflect on the changes seen in animal protein markets so far and adapt their growth plans accordingly.
Feedinfo News Service touched base with Harm de Wildt, CEO of Trouw Nutrition (a Nutreco company with 8,000 employees in 32 locations worldwide) to ask him how he sees the rest of the year unfolding for his company and what his long-term opinions are.
First, he provided a status update for the 82 manufacturing units Trouw Nutrition operates globally.
According to de Wildt, Trouw Nutrition has been operating in a normal manner in all locations, with no exceptions and no missed deliveries. He is also happy to see that his business will be reporting a strong start to its financial year.
Where de Wildt remains a bit concerned is the Spanish market, where Trouw Nutrition has several companies, including its Iberian compound feed business, Nanta.
“Spain depends massively on tourism, and with the closure of food service businesses there, we believe there will be an oversupply of chicken, and it will take time to empty the pipeline. This will likely have an impact on our SADA poultry processing business,” he commented.
“However, we see pork not being as affected and high-value Iberian pig operation Inga Food continues to do well”, he added.
From a global perspective, Trouw Nutrition is working on its growth plans for the months to come, notably making progress in organic growth as well as in implementing its M&A strategy.
Nutreco and Trouw Nutrition were especially active in M&A activity in Q4 2019, with the acquisitions of premix company ANH in South Africa, Cargill’s compound feed business in Portugal, and Yantzi Feed & Seed in Canada via Shur-Gain (part of Trouw Nutrition Canada), so COVID-19 has slowed the momentum on the acquisition front. But according to de Wildt, the company is simply biding its time.
“Due to COVID-19, our projects are on-hold as no one really knows what the cost of capital will be,” he said. “But we have several projects in the pipeline, which we hope we will be able to resume at the end of the year”, adding that Trouw Nutrition’s overall long-term ambition has not changed and they remain in talks with their various partners.
He also said that preparations for the next phases of facility expansions are continuing.
“Pre-engineering phases have been approved for the operations concerned [N.B. de Wildt mentioned the US, Mexico and Canada as possible locations] and this will lead to investment proposals which we aim to discuss further towards the end of the year,” he said. “By then we’ll have a clearer outlook for 2021.”
Another potential area of investment for Trouw Nutrition moving forward may very well be its specialty feed additive segment, or what de Wildt describes as Trouw Nutrition’s ‘range of proprietary products with health claims for the animals.’
This segment started with Selko Feed Additives in the Netherlands, and also includes Micronutrients in the US since 2016.
“It’s a highly interesting category for us and it has become a substantial part of our business, accounting for about 15% of our revenue,” he said.
According to de Wildt his firm’s specialty feed additive strategy is threefold. First, the company is focused on mineral nutrition. For instance, Micronutrients is currently building its presence beyond the US. Second, it continues to grow its presence in enhanced gut health. And third, Trouw Nutrition also caters to the feed preservatives market with products such as organic acids and toxin binders.
“Our feed additive offering is also geared at reducing dependency on in-feed antibiotics. And there’s an extra benefit for us as most of these products need premix as a carrier,” de Wildt commented. “Today, specialty feed additives are embedded in our innovation focus. The segment requires dedication and we have even established a specific salesforce for the category.”
De Wildt argued that Trouw Nutrition’s specialty feed additive offering is global by nature. However, he also sees a trend for more regional or local brands accelerating as the world adjusts to the new COVID-19 environment and some companies may start re-thinking their sourcing strategies.
“Be it premix or some of the other production categories Trouw Nutrition is involved with, these markets tend to be local or regional by nature. Premix is local and we can look at that segment more on a country by country level. Our piglet feed range is more regional, whereas our specialty feed additive offering is more global. Some products travel, others less. And that won’t be changed by COVID-19,” he said.
Looking at the typical premix scenario, global markets tend to be fragmented and it’s rare to see a market where one company has a 40 or 50% market share—25% or 30% is more the norm, leaving room for some strong regional brands in a lot of the largest premix markets. And in de Wildt’s view, COVID-19 won’t alter the picture.
“I don’t expect any major changes,” he said. “In the European premix sector for instance, Trouw Nutrition has a large market share, followed by DSM and then Cargill Animal Nutrition. And buyers generally tend to have two or three suppliers. We see that pattern continuing. An exception that proves the rule is our exclusive premix partnership with ForFarmers, but those kind of agreements are not common.”
Despite the plethora of uncertainties caused by COVID-19 and what the crisis could unleash in the short-term, de Wildt’s long-term view is positive.
“World populations are growing and so is middle class income. We remain in a growth industry. I remain upbeat,” he stated.
But there are of course issues such as African swine fever in China, bird flu in Eastern Europe, or COVID-19 to some extent, which are seen to have implications for animal protein demand.
“For example,” said de Wildt, “the global consumer shift toward more poultry meat we are all expecting hasn’t been as pronounced in recent months due to COVID-19. This is hopefully a short-term effect. What remains to be seen is the impact COVID-19 may have on the consumers’ food choices. Or in China, it will still take a few years to restock the pig herd, but feed demand is looking better.”
However, de Wildt believes there is also another trend spotted in China and elsewhere worth keeping an eye on, which may have an impact on feed demand: the modernisation and professionalisation of farms.
“After COVID-19 large farms may see increased opportunities in home-mixing of feeds and could try to reduce their dependency on complete feeds. But this depends of course on the market and on the availability of raw materials and protein sources,” he commented.
Meanwhile, Trouw Nutrition continues to reflect internally on its various modus operandi in the shifting working environments and seeks to innovate in the ways its workforce interacts.
“The crisis has pushed us to be resourceful, embrace virtual interaction, and we will have to offer new services. Before the crisis we had embarked on a sales excellence programme and we have not lost any momentum here. On the contrary,” he said.
“And as mentioned, the crisis will lead to more home-mixing and more digitalisation of our farmer customers. Digital platforms can connect our animal models directly with the data being gathered at the farms. And piloting and prototyping on farms will be accelerated too. Due to this crisis, there will be less farm visits and I certainly anticipate an acceleration in digital farming technologies and by extension, precision farming and feeding.”