The newly formed company Campofrio Food Group has set itself some ambitious targets in order to secure future global growth
By Ian Armitage
In 2008, it was announced that Groupe Smithfield Holdings, S.L. merged with Campofrio Alimentacion, S.A., the largest processed meats company in Spain – a move that would create the largest pan-European company in the packaged meats sector.
The deal was finalised just before the turn of the year and Campofrio Food Group was born.
“The combined company is market leader in Spain, France, Portugal and Holland, number two in Belgium, and we have a very strong presence in Germany, the UK and Italy,” says Eric Debarnot, Senior Vice President, Business & Customer Development. “But we want to improve that.”
Headquartered in Madrid, the new firm operates under the Campofrio Food Group name, distributing products in over 50 countries.
“The merger has given us access to substantial synergy opportunities in areas like sourcing, manufacturing, and capital expenditure and we believe we have created a platform for future growth,” continues Eric.
Vision
Campofrio Food Group’s vision, it follows, is to be recognised as one of Europe’s leading food companies, offering a variety of high quality products, which, it says, contributes to improving the quality of life and the health of its consumers.
“Our goal is to be the leading European provider of high quality, meat-based products, and to ensure that our customers remain satisfied,” Debarnot explains. “As part of that, we will continue to grow and increase our presence around the world, while improving our brands all the time to ensure they lead the market. We are creating a company that is strong both locally and internationally.
“We will also continue to be proactive in private labels,” adds Debarnot, who explained that the best way to serve consumers is to be a powerful combination of strong local leaders who are close to local consumers and international know-how. “That is what we are trying to achieve and, through the merger, we are well on our way, complementing
our strong local ties with knowledge from other consumers in different parts of the world.”
Merging potential
The synergies between Smithfield and Campofrio are remarkable, particularly when it comes to an operational standpoint.
“There are a number of strong synergies,” agrees Karl-Heinz Kiesel, Senior Vice President, Operations. “We have become the leading player in the packaged meats market in Europe and are almost three times larger than our closest competitor,
but we can achieve even more.”
Karl-Heinz was named Senior Vice President, Operations, upon the completion of the merger late last year and was formerly the SVP of Operations for Groupe Smithfield, SL. He has extensive knowledge in fresh meat production.
“We have extensive knowledge in producing in and for the French market and can now add extensive experience gained in Spain and other parts of the world to our systems,” he explains. “It is a very good marriage and we have all the necessary attributes for success. Now is the time for developing a group wide strategy for moving forward and getting the most out of everybody.
“What’s next for us? Well, we decided that the time is now to strengthen our position even more and to achieve it. We are developing something called the ‘Campofrio Way’ as a means for leveraging our significant synergies in manufacturing and operations.
“Through this, we expect efficiency gains, amongst other things.”
Like Karl-Heinz, Eric is also eager to achieve more: “This is a major step in our strategy to grow our presence,” he explains. “We are now a bigger presence with greater purchasing power, while, as Karl-Heinz Kiesel has said, there are many manufacturing efficiencies to be gained from the merger.
“At the moment we have a matrix organisation,” he adds. “We are a group of interdependent companies, we will maintain strong local organisations, which are dedicated to the local consumers and handling the day to day business. We’re trying to keep all eyes on the ball and not disturb that process while we are putting on the top of that a very small, very cost effective head office organisation just looking at the strategy and working on efficiencies and exchange of best practices. Of course, handling international customers at some stage could be done centrally, but we’re not there yet; we’re laying down the ground rules for that, so at the moment we are really still a group of national companies.
“We are preparing the future. We want to be the leader and have to continue to find new ways of achieving that. Being a leader, remember, doesn’t just mean in terms of size – you need to be creative and innovative also. That’s a very tough challenge, but what we want to do and we all have a role to play.”
On its way
Campofrio Food Group has put together some very tight process to manage the merger and synergies effectively, as they are aware that most mergers and acquisitions fail at a very early stage if, as he says, “you don’t put together the right culture.”
As a result, Eric Debarnot and the rest of the Campofrio Food Group Leadership Team is focused on ensuring success. “Today, after only five months, we’ve managed to create a strong, unified spirit, which is amazing,” he explains.
“If you have people fighting against each other, it doesn’t work. So, we identified the values in both cultures that we wanted to be the ones that we would promote in the new business and worked, initially, at the leadership team level, at defining a new vision or mission for the company and then the supporting values and behaviours.
“Much of this work was focused on the intercultural relationship aspect because we believe that with strong local personalities in our companies, it would be important to understand how the French will relate to the Spaniards and to the Belgians, etc. So we focused a lot of our work on the new culture on diversity.
“We are working hard in this respect, making sure everyone lives and breathes the values of the merged entity and practices the right behaviours. It’s a very classic approach - simple, but you have to do it,” he continues.
Completing the merger, particularly in the current economic climate, is challenging, and there is still work to do.
“We’re putting together this company at a time which is very challenging,” says Debarnot. “Consumption is not increasing anywhere in western Europe and consumers are moving away from branded product to private labels, which is a threat to the profitability of most food companies. Of course, we produce private labels as well, but it’s a less profitable activity as you can imagine.
“The other risk is the financial instability,” he continues. “Having cash for acquisition is critical and getting cash is obviously not the easiest thing to do at the moment, so there are a number of risks. I think this is the same for everyone and we believe we are more prepared to face the risks now we are a bigger company. So if you look at our portfolio of companies today, we can compensate between one country and another.”
Mergers occur for a number of reasons. Sometimes it is because two companies together have better expertise in an area, are more efficient in an area or are trying to dominate a market; Campofrio Food Group falls into this category and Exec Digital wishes it every success.
View Digital Corporate Profile of Campofrio in Food and Drink Digital June 2009