Tulip adapts to meet new challenges
Great leaders must embrace change. It is a law of life and those who only look to the past or the present will inevitably miss the future. But talking about change hasn't been something the UK’s pork industry has been very good at, Tulip’s chief executive Chris Thomas believes.
“There’s lots going on and it’s important that we speak out about it,” he says in a soft voice that barely reveals his scouse accent.
Despite the industry – and pork processor Tulip – having lots to talk about, it hasn’t tended to do so in the past. However, Thomas is committed to ensuring that changes and the industry are talked about for all of the right reasons from now on.
In the boardroom of Tulip’s Warwickshire headquarters, Thomas, who started his food career at Mars more than 30 years ago, says his foremost concerns are high pork prices and low consumer take-up of pork products.
Pig prices (Return to top)
“I think it is important that pig prices continue to come down; over a long period of time they have been starting to fall, but they still have some way to go,” he says. “Every single day consumers are making choices over what protein to buy and if they are going to choose pork over other proteins, we have to make sure we have a cost-competitive supply chain.”
Lower pork prices may fit in with the Danish Crown-owned £1.2bn turnover company’s strategy of keeping costs down, but won’t find favour with the UK’s pig farmers.
Yet, Thomas says that’s not his aim. Reducing farmers’ margins wouldn’t work for either party, he claims. It’s all about developing a long-term, cost-effective and sustainable supply chain that allows farmers and Tulip to be more profitable, while keeping costs down, he says.
Everyone must have a fair deal, but Thomas – who joined Tulip as chief executive in May last year – adds with some frustration: “If you look at the price gap between the UK and the European market, it’s still higher today than it has almost ever been and this creates a swing in demand for imported products versus domestic products.”
Keeping the cost of production and manufacturing down would also appeal to supermarkets, which are currently facing stiff competition, Thomas continues. Price wars are putting a lot of pressure on all suppliers and are often the reason margins begin to slide, he adds.
Consumer shift (Return to top)
Changing consumer shopping habits have hit the major multiples more than the discounters or the supermarket price wars, which businesses like Tulip had to respond to with new products, Thomas claims.
“But, the price wars also make you cost competitive on every level,” he says. “We are constantly looking at our infrastructure, overheads and the other costs associated with our business. But, to be honest, the supermarket price wars are an ongoing trend and the real bugbear is actually how consumers are doing their shopping.”
Consumers have shocked retailers by doing fewer big weekly shops and instead buying what they needed for that day. “This is probably the most seismic change I’ve ever seen in the food industry over the past 30 years.”
A change in shopping habits was reflected in how consumers were choosing to eat at home too. “For instance, the average meal preparation time in the 1980s was about an hour,” says Thomas.
The average time it takes consumers to prepare a meal is now 35 minutes and two thirds of all mid-week meals are taking less than 10 minutes to prepare, he notes. The number of eating occasions for one or two people accounts for 55% of all eating occasions. “It’s a shift such as this one that is driving companies to make changes,” he adds.
Changes in consumer demand had also spurred Tulip to look at alternative ways of serving pork. “Conventional products that people think about – the big roast joints and carveries – they are not suitable for consumers short on time. But things like marinated pork chops and pulled pork are on the money,” says Thomas.
However, some changes can’t be addressed by supplying different products to meet consumer demand, which Tulip recently realised when it announced the closure of its Freshway Chilled Foods sandwich fillings business earlier this year. The closure resulted in the loss of 128 jobs at the site, which employed 208 people.
Acquisition (Return to top)
Tulip gained the business when it acquired the Parkam Food Group in 2011. But it lost a key contract with The Foodservice Centre that wiped out 50% of Freshway’s business, undermining its profitability. In response, just 80 employees were relocated to Tulip’s Wednesbury site.
Despite Freshway closing, Thomas is hopeful that Tulip, which still employs 7,500 people, will be a net-creator of jobs this year and next. “We had a huge investment in Cornwall announced in August, when Danish Crown pumped in over £16M to upgrade the boning site there and created 250 new jobs.”
In October, plans to invest £8M and create 45 new jobs at Tulip’s Ruskington site, which manufactures Scotch eggs and cocktail sausages for the retail sector, were announced. And this followed an announcement in May of the creation of 80 new jobs when Tulip revealed it would invest £2.3M into its Wednesbury plant, which is now dedicated to barbecue, slow-cooked and pulled meat products.
“We have a good track record of investment from Danish Crown over the past five years,” he explains. “More than £75M of investment has been made over the period, which has helped to create jobs and has also helped us to develop three leading abattoirs that are second-to-none in the UK.”
More than £37M was invested into Tulip’s Ashton, Spalding and Westerleigh abattoirs earlier this year to boost the business’s exports to China. China is a key target market for Tulip, since it consumes 50% of the world’s pork, he claims.
“To put that into context, every two years the growth in Chinese consumption of pork is the size of the UK’s market for pork. So it’s a really important market for us to access.”
Exports to China (Return to top)
This year, Tulip will have exported £30–40M worth of pork to China, which is a market that’s grown 20% year-on-year and doesn’t show any signs of slowing anytime soon, he believes. “Mainly because of the population growth in China, similarly because we’re seeing more and more evolution towards a western diet among affluent Chinese consumers.”
As a result, the types of pork products Tulip exports to China will also change very soon, says Thomas. China was a market where most processors would export offal, but over time it is becoming more of a primary market and was increasingly demanding the sorts of products consumers in the UK wanted.
Back in the UK, Thomas believes consumers will continue to change their demands, which will put pressure on suppliers to innovate. “We are having to become more attuned to consumers’ needs. If there’s a change in their needs, we’re going to accommodate that.”
The pork industry must adapt to these changes if it is to thrive – and that’s a sentiment Thomas aims to put into practice at Tulip over the years ahead to bring home the bacon.
Listen to our exclusive podcast with Thomas to learn about how the firm will innovate to keep its customers interested.
