Specialist
Former director at 2 Sisters Food Group Ltd
Agenda
- UK pork and poultry trends, discussing coronavirus and Brexit impacts, CO2 shortages and third quarter product pressures
- Cost pressures and supply chain challenges impacting operating margins
- Cranswick's (LON: CWK) business overview, discussing move into poultry
- Competitive positioning vs 2 Sisters, Moy Park and Avara Foods, including potential market share shifts
Questions
1.
Could you highlight some of the key trends you’ve noticed within the UK pork meat and poultry industry over the last 18 months? How has coronavirus impacted this industry?
2.
What has been the solution to the pressure on third-quarter material – unpopular cuts of pig and poultry? What does it mean for players such as Cranswick? Are they having to spend more to find alternative solutions?
3.
Do you think there’s been any relief to the third-quarter material you mentioned with restaurants opening up? Would you say the supply chain and Brexit issues are still preventing that relief?
4.
What are the key factors creating the perfect storm in the market that you mentioned?
5.
You mentioned the nice-to-have lines might disappear over the short term. Were those lines quite important for the value-add and profitability, given the high prices that players can charge for such ranges?
6.
Would you consider the phasing out of some product ranges a long-term structural issue, with no quick exit from the situation on the labour side?
7.
What percentage of the processes and labour base was automated within UK businesses such as 2 Sisters and Cranswick?
8.
Have you noticed any player taking charge and leading the pack in automation?
9.
How would you say the CO2 shortage has impacted the meat and poultry market? How severe is this?
10.
Do you think the CO2 shortage has been caught just in time? Could some shortages still trickle through?
11.
How do you expect the CO2 situation to play out? The government can’t feasibly continue bailing out the CO2 producers, but it’s vital that it does given food is a staple.
12.
Would you expect CO2 prices to increase and put more pressure on everyone downstream in the value chain, such as Cranswick and its peers, the retailers and then consumers?
13.
You can determine the cost impact on the line from the issues we’ve discussed, but range reductions and fewer lines running mean you lose the scale you’d get through high utilisation, which is a negative impact. Prices can only increase so much, so I would assume players such as Cranswick and 2 Sisters are bleeding, as well as the retailers as they’ll have to incur some cost and then consumers through higher prices. Do you think that’s a sensible way to consider this?
14.
Supply chain and shipping costs have gone through the roof, and you mentioned exporting third-quarter material to China. Is exporting to China and other Asian countries another headache for the players? Might it be less impactful than the points we’ve touched on?
15.
What’s the viable alternative channel for players such as Cranswick, who were supplying to China and now need to push this product elsewhere?
16.
How is the rise of plant-based meats changing competitive dynamics for meat and poultry players? It’s still a very small market, but could this be a competitive threat?
17.
How would you position Cranswick in the market? What’s the company’s standing, strengths and weaknesses?
18.
What are your thoughts on Cranswick moving into poultry, given that’s a move away from its core product of pork? You mentioned the company being very acquisitive.
19.
Why did Cranswick’s super build for poultry surprise you? Do you think there’s less volume going through the industry than would be required for such a large new build?
20.
Would you expect any large market share movement across the major poultry players such as 2 Sisters, Moy Park and Cranswick, given the expansion, Cranswick’s poultry market position and the challenges we discussed earlier? Do you think anyone is better-positioned to move market share? Do you think the current environment is draining the water and hurting everyone?
21.
Is there anything we should be aware of, whether Cranswick- or industry-specific? We’ve touched on costs and the potential margin effects, but should we consider any effects around working capital?
