Challenges offer business opportunities

By Nicholas Robinson contact

- Last updated on GMT

Craven:'We were originally set up to deal with much longer volumes of less complex products'
Craven:'We were originally set up to deal with much longer volumes of less complex products'

Related tags: Hydrogenation, Trans fat

AAK’s md Martin Craven tells Nicholas Robinson that market challenges provide perfect business opportunities

Key points

Every manager has a pet project. But how many have a beast lurking in the corner of his site? Martin Craven, md of edible food oils and fats company AAK, does.

The company established its UK operations more than 30 years ago and has faced some testing times over the decades, Craven explains at the company’s massive dockside site in Hull.

“In the good old days we made a lot of hydrogenated products on this site,”​ he says. “Hydrogenated fats were renowned as being extremely good and were widely used in foods, until science moved on.”

The health issues associated with hydrogenated fats received bouts of attention in the late 1990s and whipped the food industry into a frenzied attempt to remove as much as possible. So contentious was the subject that in 2006, the Food and Drink Federation said an estimated £1.5bn worth of products were being dramatically reformulated to remove hydrogenated fats.

Respond to the challenge (Return to top)

But did Craven, who has been with AAK for 20 years, close his eyes and hope for the best? “Of course not,” ​he says. “The requirements of the food industry, retailers and consumers will always change and it’s the job of companies like AAK to respond.”

A simple example of AAK’s reaction to changing science and customer demands is a new £10M deodoriser, which Craven affectionately calls “the beast”​ as he points to the window to show where it is. “It’s been designed around ultimate flexibility, with regards to the types of products we're able to manufacture in – it our last investment of this scale was 10–15 years ago.”

The deodoriser is used in the final stages of oil refining and removes odoriferous material, free fatty acids and other undesirable minor products, leaving behind a bland oil with good shelf-life.

Craven’s beast has five compartments – or trays, as he calls them – allowing the facility to work on small 1t to 5t batches of oils with different fractions and ratios. “What we need to do now, instead of putting through one product in very big quantities, is put through more varieties of complex products.”

Investing in the beast is an example of AAK and Craven’s response to an ever-changing market, which is demanding nutritionally complex products with different flavours and even special properties. It is also a sign of the facility’s evolution and the company’s determination to move with the times, explains Craven.

“We were originally set up to deal with much larger volumes of less complex products and the site was geared around throughput efficiency and the manufacture of a relatively small product range.​” AAK’s head office is in Sweden, but the firm has sites across the world. Hull was used to produce mainly bulk oils. Now it produces margarines, shortenings and speciality oils among other products.

The Hull business diversified as demands changed and, in some circumstances, overhauled the guts of the operation to keep up. “We had pipe-work going through one process and then another and it could have been 100m long. You might have had one or two tonnes of product in there and it wouldn't have mattered if you pushed it through without knowing specifically what was in there,​” Craven explains.

Investment (Return to top)

Now, however, demands have changed and the business can’t afford to risk compromising the delicate balancing act of its customers’ specific requirements. So investing in technology that allows it to work on a small scale is essential.

Pumping money into new equipment appears to be paying off for the plant, which has an output of 300,000t a year and an annual turnover of £300M. Craven says business has significantly improved as a result of the recent investment, as well as others over the years. “We’ve just signed a three-year supply deal with Premier Foods, on the back of doing existing business with them, making us their exclusive oils and fats supplier,​” he reveals.

Bigger and better opportunities come from more efficient equipment and allows the company to retain its 500-strong UK workforce – 350 of whom work at Hull and the rest at its condiment-producing site in Runcorn.

“We’re investing in the Runcorn site too,”​ he grins. “It’s a small site and we’re just coming to the end of putting in £0.5M worth of new tray packers and we’ve put in a new mayonnaise manufacturing plant and, again, we're continually improving the efficiencies.”

Runcorn is a very small part of AAK’s UK operations. It produces around 20,000t of mayonnaise, mustard and other oil-based condiments and sauces a year. Output ranges from 1t pallets for manufacturers and supermarkets to twolitre bottles for foodservice.

Finance (Return to top)

Although he’s bound by company policy to keep quiet on Runcorn’s turnover, Craven reveals that 6–7% of the UK business’s annual turnover comes from the facility.

But investment in Runcorn is not determined by changing markets as much as it is in Hull. As a matter of fact, the £10M spent on the new deodoriser is just the tip of the iceberg for Hull, it emerges as Craven reels off a short, but costly, list of recent and future projects.

“We put in our bakery fats plant at Hull not too long ago and there’s an opportunity to upgrade that with a £2M investment; £5M recently went into our foodservice packing line, enabling us to deal with big chain restaurants and fish and chip shops; and the next phase is to look at adding another deodoriser, like the one we’ve just installed for £10M.”

After a few quick sums, it’s apparent that AAK’s UK operations could see around £30M of investment by the end of this decade.

And what is going to keep the company investing in the site in the future? “I would say there’s a move towards more natural ingredients and the removal of items seen to be artificial, as well as a move towards clean-label,”​ he says.

Something else that could keep Craven asking for more money to invest in his site are comments about obesity from the likes of the chief medical officer Dame Sally Davies.

“She’s saying there are too many fats in some foods and that’s big for our industry to try to address.”

He adds: “I don’t have the answer, but I would say to Davies that the food industry worked hard to reduce trans fats. I think predominantly the issues were addressed some years back and they’ve virtually gone. But the industry will work just as hard on reducing obesity now as it did to reduce trans fats then.”

Related topics: Fats & oils

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