Private label power
After several years of acquisitions, Provimi centralizes and focuses on its core business
From its beginnings, Provimi has characterized itself as a strongly international company, including the petfood part of its business. This identity has held true as Provimi Holding (the parent organization) has acquired other petfood manufacturers and established a network of factories worldwide.
While the holding group has always maintained a coordinating function, previously it gave a great deal of autonomy to the local facilities. A new strategic direction is now capitalizing on the advantages of a more centralized organization and Provimi's core private label petfood business.
The company is in the process of integrating all its petfood units into one new profit center called Provimi Pet Food Europe. The main purpose is to improve capacity to comply with the needs and requests of its priority customers such as hypermarket and supermarket chains.
Acquiring for growth
Provimi was founded near Rotterdam, the Netherlands, in 1927, with core activities focusing on premixes, specialties and feed. After many years of solid growth, the company entered the petfood business as part of a diversification strategy aimed at additional growth in higher margin segments.
The first acquisitions of petfood companies date to 2000, when pre-existing dry food facilities in the Netherlands, Czech Republic and Italy were purchased. Soon after, between 2001 and 2005, Provimi expanded further in Slovakia, Poland and Hungary, also becoming active in wet petfood through additional acquisitions in the Netherlands and Central/Eastern Europe.
The individual acquisitions have typically been driven by the holding group's long-term development policy of investing in companies that are well established in their local markets. The aim was to ensure a nice growth potential and allow further consolidation of Provimi's position in the global market.
Where already present, established product lines and strong local brands were retained, says Erik Bras, CEO of the petfood business. Examples include Propesko and Brasa in the Czech Republic and Dax in Hungary, distributed across Central Europe in garden centers and agricultural retail outlets that carry petfood products.
However, Provimi is predominantly a private label producer and does not intend to create or launch branded products. Instead, it's reinforcing the strategic focus on its business with pan-European retail customers.
Integrating the network
"At the beginning of the acquisitions process until 2005 to 2006," says Bras, "each factory, although part of the group, continued to be run mainly as a local independent business unit." Since then the new integration strategy has started to be implemented.
To date, almost all acquired factories have shed their old names. In countries with more than one plant, the facilities first merged under the name of Provimi Pet Food, plus the name of the country. For example, the last 2006 acquisition, the assets of the large French private label company SESA, went under the name of Provimi Pet Food France.
Since the beginning of 2007, all European operations have started to be integrated under the Provimi Pet Food Europe name. The new structure is designed to combine the benefits and synergies offered by the large scale organization with the faster action and decision-making support of local units for customers in their respective markets. Provimi executives believe retail customers are looking for partners able to provide the right, consistently high-quality products in large volumes while offering quick service.
Besides the strategic decisions taken at board level, the management of all day-to-day petfood activities in Europe is now coordinated through Provimi Pet Food's two main office locations:
- Budapest, Hungaryserving Central/Eastern Europe;
- Rotterdam, Netherlandsserving Western Europe.
Quality and safety
Part of the daily operations revolve around quality and ingredient safety. Bras points out that these are possibly even more important for a private label producer than for companies manufacturing their own petfood brands. In fact, a potential crisis like the 2007 US recalls has a doubly serious implication, he believes.
First, such a recall involves multiple brands from several clients. Plus, it can badly affect a retailer's overall brand name, spreading the seed of doubt about the quality of all products in its stores, even non-petfood products. This can jeopardize the trust of both the retail customer toward its supplier and the final consumer toward the retailer.
To prevent such a crisis, Provimi has developed an intensive global supplier auditing system, based on precise specifications and ranges of tolerance for several parameters. In addition to this focus on controlled qualitative selection of suppliers, Provimi has set up an internal auditing program of its many production facilities. The program includes the company's own standards and specifications, plus other industry quality standards such as ISO 9001 and HACCP.
"We want quality and production to be a little bit like cat and mouse," Bras says. He explains the quality department does not report to the individual plants; rather, the plants undergo regular quality audits by centralized staff.
Next up: more innovation
For the next year, the big challenge and effort for Provimi, according to Bras, will be to successfully complete the operational integration. This will allow the company to share in the expected increased market opportunities and emphasize aspects like innovation.
"When given more inputs from reliable suppliers," Bras says, "I'm sure retailers would be sensitive and available to exploring new products instead of just following the market's key players." He adds he is confident the project will succeed and expects full benefits by the end of this year.