Vion Food Group NV

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Vion Food Group NV

Postbus 380
Best, NL-5680 AJ
Netherlands
Telephone: (+31 0499) 36 45 55
Fax: (+31 0499) 39 30 84
Web site: http://www.vionfood.com

Private Company
Incorporated: 2004 as Sovion NV
Employees: 15,500
Sales: EUR 7.3 billion ($8.75 billion) (2006)
NAIC: 311611 Animal (Except Poultry) Slaughtering; 311612 Meat Processed from Carcasses; 325412 Pharmaceutical Preparation Manufacturing; 424470 Meat and Meat Product Merchant Wholesalers

Vion Food Group NV is one of Europe's leading food groups. The Best, Netherlands-based company is active in four primary divisions: Vion Ingredients, Vion Fresh Meat, Vion Convenience, and Vion Healthcare. Vion Ingredients includes the company production of natural raw materials, largely from its animal carcass destruction business. That business is one of the leading in its market, holding near monopolies in the Netherlands and Belgium, and a major position in Germany as well. It is also the oldest part of the group, with operations launched in the 1930s. The ingredient division produces raw materials for the food industry, as well as for the pharmaceutical, and other industries. Vion Fresh Meat is the new name for the company's meat division, previously known as Bestmeat, and created through the acquisition and merger of several major European meat producers in the 2000s, including the Netherlands' Hendrix Meat Group and Dumeco, and Germany's Nordfleisch and Moksel. Vion Convenience represents the company's entry into the prepared and convenience foods sector, primarily through the production of branded meat-based foods. Last, Vion Health Care, which operates through U.S.-based subsidiary Banner Pharmacaps, is the world's leading supplier of gelatin-based pharmaceutical coatings. With EUR 7.3 billion ($8.75 billion) in sales in 2006, Vion Food Group is one of the Netherlands' leading industrial groups, and a major player in the international foods sector. The company remains privately held, and controlled at 100 percent by farmers' cooperative ZLTO (Zuidelijke Landen Tuinbouworganisatie), formed from the Nord Brabantse Christelijke Boerenbond (NCB) in 2002. D. van Doorn serves as Vion's chairman of the board.

DESTROYING CARCASSES FOR PUBLIC HEALTH

Vion Food Group originated from the farmers' cooperative movement, and the formation of the powerful Nord-Brabantse Christelijke Boerenbond (NCB), near the end of the 19th century. The NCB was formed in 1896 through the merger of 30 or so existing farmers cooperatives. Many if not most of these, however, had only themselves just been created, in part in response through an appeal from Father Gerlacus van den Elsen. Known as the "Farmers' Apostle," van den Elsen formulated an organization that would represent farmers on a variety of levels, providing support services, as well as serving to provide social and political representation. Although initially conceived as serving the wider Christian community, the NCB ultimately evolved into a specifically Catholic organization. This was due to the overwhelming presence of Catholics among its North Brabant membership; in the rest of the country, Protestantism was the dominant religious current.

The understanding of the role of bacteria in certain infectious diseases, and the recognition of the need for hygiene as a means of controlling disease, and ultimately the epidemics that long had plagued the region, led NCB to take on a new role in the 1930s. Until then, disposal of animal carcasses, whether slaughtered for meat or having died of other causes, had been a haphazard affair. As a result, the decomposing carcasses represented a true health problem. In response, NCB established its own carcass disposal and destruction operation, called NV Destructor NCB, in the town of Son.

Destructor quickly grew into the Netherlands' leading, and soon only, carcass disposal business. The company later expanded its operation into Belgium, where it grew to dominate that market as well. Germany provided another growth area for the business, where it became one of the market leaders. In later years, the company's name changed to Rendac.

Soon after the launch of Destructor, the company recognized the potential for harvesting the variety of raw materials provided by the transformation of the skin and bones and other remains of the carcasses. Over time the company developed a range of products, and most notably gelatin, from its disposal business. These operations were then brought under a new company, Sobel NV, which became the parent of Rendac, a sister company Sonac, and others.

By the late 1980s, Sobel had begun pursuing another growth opportunity, that of the use of its gelatin production for the pharmaceutical industry. For this, Sobel turned to the United States, where it bought gelatin-capsule coating pioneer Pharmacaps in the late 1980s. That purchase provided the company with factories in New Jersey, as well as in Mexico City. In 1992, the company bought another major "gelcap" producer, Banner Gelatin Products Corp. The two companies were merged, forming Banner Pharmacap, then grew again with the acquisition of Chase Pharmaceutical Company in 1994. In that year, also, Banner opened two new production facilities, the first in the Netherlands, in order to serve the strong demand for gelcaps, and the second as a joint venture in India, taking advantage of that country's emergence as one of the world's leading manufacturing centers for the pharmaceuticals industry.

In 1997, Sobel extended further into the pharmaceuticals industry, buying a stake in New Jersey-based Sidmak Laboratories. That company had been founded in order to produce generic pharmaceuticals products; under Sobel, the company began developing its own line of branded products as well. Sobel took over full control of Sidmak in 2000. Sidmak's stay with Sobel proved fairly short-lived, however, and in 2002 the company sold Sidmak to Croatia-based Pliva for EUR 224 million.

MAJOR FOOD GROUP IN THE NEW CENTURY

The Sidmak sale was part of a wider effort of Sobel to reestablish itself as a food products company into the 2000s, and provided significant funding toward the company's transformation into the middle of the first decade of the 2000s. Part of the reason for the company's change in strategy came through the mature nature of Sobel's main business, which offered only limited future growth prospects.

COMPANY PERSPECTIVES

The mission of VION is to anticipate consumer needs, to fulfill those needs and wherever possible to exceed them by providing high-quality food products, ingredients and healthcare products, made from natural materials of agricultural origin.

Sobel's transformation took off especially from 2002, when the company paid Degussa EUR 265 million to acquire its hydrolyzed gelatin production subsidiary, SKW Gelatin and Specialties France SAS. That operation stemmed from a company created by Edouard Rousselot in 1891; the Rousselot company became part of Elf Atochem in 1977, then became known as Mero-Rousselot-Satia as part of Elf-Aquitaine's Bio-Industries Division in 1985. By the end of that decade, the company had changed its name again, becoming Sanofi Bio-Industries. Into the 1990s, the French gelatin business grew strongly, buying factories in the United States in 1990, in Spain in 1991, and then opening a factory in Kiaping, China, as part of a joint venture created in 1996. The company had by that time been acquired by Viag's SKW Trotsberg division, and in 1998 was renamed as SKW Biosystems, before becoming SKW Gelatin & Specialites France in 2000. Under Sobel, the gelatin business changed its name again, to Rousselot, and continued its expansion into the Chinese market. By 2006, Rousselot had added three new plants in China, at Wenzhou, Da'an, and Zhejiang.

While Sobel's annual revenues were said to top EUR 750 million by the beginning of the 2000s, the company—and its shareholder, the NCB (itself soon to undergo a transformation into the ZLTO)—sought still greater scale. Into the 2000s, the company put into place a strategy to develop an entirely new wing of operations, that of meat products. The impetus toward this change came from the NCB, which had overseen the creation of the Dutch United Meat Company (or Dumeco) in 1995. Formed through a merger between two slaughterhouse cooperatives, Encebe and Coveco, the new company was strengthened later that same year through a merger with the Gupa meat company, founded by brothers Guus and Paul Helmer. The Helmers became heads of Dumeco, while NCB's shareholding in the company stood at 20 percent. Dumeco quickly became one of the leading meat producers in the Netherlands.

Following the Helmers' departure from the company in 2001, Dumeco launched a growth effort in order to develop itself on a fully European scale. In 2001, the company made its first acquisition, of the pork slaughtering business of SturkoMeat, then acquired the beef slaughtering specialist Kroot, and an organic slaughterhouse, De Groene Web. In order to continue its growth, the company turned to its cooperative shareholders, which took a majority stake in Dumeco.

By then, the ZLTO and Sobel had taken a giant leap forward in their plans to develop the food products wing. In 2003, the company reached an agreement to acquire troubled German meats leader Moksel, doubling the company's total sales. As part of that purchase, the ZLTO and Sobel established a new company, called Best Agrifund, which became the holding company both for Sobel and the group's meat products operations, which were named Bestmeat Company. By July of that year, ZLTO had transferred its holding in Dumeco to Bestmeat. Then, at the end of the year, Bestmeat completed another major acquisition, this time of NFZ Norddeutsche Fleischzentrale, another leading German meats group. In 2004, the Best Agrifund name was dropped and the parent company for Sobel and Bestmeat became Sovion NV.

Sovion struck again in 2004, acquiring the Hendrix Meat Group from Nutreco. That purchase gave the company the second largest pork meat operation in the Netherlands and added more than 1,100 employees and revenues of EUR 75 million. Hendrix had originated as an agricultural products business founded by Engelbertus Hendriks in 1903; the company adopted the Hendrix name in 1937 and then, in the postwar era under the name Hendrix Feed, emerged as a major agricultural products group. During this period, Hendrix also established its own meat processing operations, and developed its own line of prepared meat products. Hendrix was acquired by BP Nutrition in 1977; in 1994, following a management buyout, the Hendrix meat products operations became part of Nutreco. In 1998, Hendrix merged with rivals Murris Meppel and Smits Emmen, becoming the Hendrix Meat Group. Nutreco initially held 50 percent of the new company, but then expanded its holding to 100 percent in 2003.

KEY DATES

1896:: Mass merger of farmers cooperatives leads to establishment of the Nord-Brabantse Christelijke Boerenbond (NCB; later ZLTO).
1930s:: NCB forms NV Destructor NCB in order to destroy animal carcasses; this operation leads company to develop a raw materials business, including production of gelatin, which is later brought under Sobel NV.
1992:: Sobel acquires Banner Gelatin Products in the United States, which is merged with an earlier acquisition, Pharmacaps.
1995:: Dumeco (Dutch United Meat Company) is created.
1997:: Sobel acquires stake (later raised to 100 percent ownership) in Sidmak.
2002:: Sobel acquires SKW Gelatin and Specialties France (later Rousselot) from Degussa for EUR 265 million; ZLTO and Sobel create Best Agrifund and acquire Germany's Moksel as part of entry into food products.
2003:: Best Agrifund acquires Dumeco, as well as Germany's NFZ Norddeutsche Fleischzentrale, forming Bestmeat.
2004:: Best Agrifund becomes Sovion and Bestmeat acquires Hendrix Meat Group from Nutreco.
2006:: Sovion changes name to Vion Food Group.

By 2006, the Bestmeat division had changed its name, becoming Vion NV. Sovion then represented the holding company for both Vion and Sobel. Yet the importance of the group's meats and foods operation, which had boosted the group's total revenues past EUR 6.5 billion, including EUR 5.4 billion from fresh meats, and the determination of the company to become a global player in the foods markets, led to the adoption of a new name: Vion Food Group. Under the reorganization of the company's holdings, Vion then created a new subsidiary, Sobel 5Q (referring to the "fifth quarter," a term used for the byproducts of the slaughtering process) for its carcass destruction and byproducts business. Vion Food Products had transformed itself into one of the Netherlands' largest industrial companies, and one of the leading global food products, for the new century.

M. L. Cohen