5 November 2020 - In 2018, Devenish signed a major refinancing deal to support the company’s growth to 2026.
The long-term funding package of EUR 118 million has helped support growth across the group, bolstering R&D and manufacturing capabilities, as well as facilitating M&A activity.
Despite challenging market conditions, the company remains optimistic about delivering on its objective of increasing turnover by over GBP 100 million to reach approximately GBP 315 million by 2021.
Richard Kennedy, CEO of Devenish, told Feedinfo in an interview: “Although we are expanding, Brexit and COVID-19 slowed our organic growth. We have put the infrastructure in place; be it manufacturing footprint, staff numbers, expansions, and we launched our global innovation centre. I am confident that we will hit the numbers and remaining targets of the investment period. I am pleased with our performance in general.”
And for 2021, Kennedy predicts a similar pattern.
“We aim to continue investing in our R&D, delivering on commercialising our research, and ensuring the profitability of our business and the businesses of our partners,” he said.
2021, however, will not be without its challenges for Devenish, namely the lingering effects of COVID-19 and the resulting economic effects, as well as Brexit.
Kennedy commented: “COVID-19 has no doubt created a tectonic shift in how businesses operate globally. COVID-19 for sure slowed down business in some of our markets but also sped up plans in others. There were ups and downs globally, but we have been diligently and successfully working to offset disruptions.”
“In fact, we saw opportunities coming out of COVID-19. It has opened a few windows and generated new sales for us. It’s also been an occasion to get a lot more out of existing resources and focusing on essentials,” he added.
Kennedy also mentioned the recovery from the fire Devenish experienced in November 2019 at its distribution centre in Belfast.
“Be it the fire or COVID-19,” he said, “we have proven to be very resilient and we reacted to market conditions very quickly.”
Being a Northern Ireland headquartered business, Devenish is naturally keeping an eye on all Brexit related matters too and constituted a team which has been working on the issue from day one.
“Any barriers to trade are going to impact export-oriented companies. But it’s the prolonged period of economic uncertainty surrounding Brexit and the government deadlines which have affected us the most,” Devenish’s CEO said.
“The Northern Ireland protocol did bring in some certainty. However, its implementation will be key, be it for external or internal market access. For us that is pivotal,” Kennedy went on to say, adding that there will undoubtedly be increased costs, especially from an administrative standpoint, and these will have to be absorbed somehow along the supply chain.
The Premix Market is Changing
Established in 1952, Devenish has manufacturing sites across Ireland, the UK, US, Mexico, Turkey and Uganda, and employs more than 750 people. The company trades in over 50 countries. Traditionally labelled a premix business, Devenish describes itself as more of a specialist in optimising nutrients across the food chain to improve food quality, human health and the environment.
“We see ourselves as nutritionists, developers of sustainable solutions for effective use of nutrients, more like innovators in the feed industry,” Kennedy argued.
“Premix is evolving and is increasingly integrating such solutions. So rather than a premix company, we are more of a sustainability business,” he added, putting special emphasis on the R&D side of Devenish’s operations which is an integral part of the company’s strategy.
Currently approximately 15% of Devenish’s revenue is reinjected into R&D, but Kennedy considers R&D as the core aspect of what his company does and the impact such efforts have on customer operations.
“Every time we sell something, we monitor performance at customer level. We work with customers to make sure they are also environmentally and financially sustainable,” he commented.
In Northwest Europe, Devenish’s traditional premix market, the competitive environment has intensified and the company was quick to realise that to grow in such a context it had to innovate and think out of the box in order to play a role that has impacts on the whole food supply chain.
“What’s crucial for a premix business is to move beyond commoditised premixes and the exposure to market volatility associated with the segment,” he said. “Premix today is more of a focus on the utilisation of nutrients and their added value. So, premix businesses must bring something new to the market.”
Kennedy added: “They must also continue to find partners as more capacity is required. We’ve even seen some companies leave this market, only to come back. And it’s important to work with the full supply chain you are in. Smaller premixers can be valuable partners at a local level.”
Global premix markets are characterised as fragmented. This leaves room for some strong regional brands. With COVID-19 and companies renewing their interest in regional/local expansions, Kennedy doesn’t see why animal nutrition businesses can’t be both global and local.
“At Devenish, we aim to be local with access to global innovations, finding local partners to drive efficiencies throughout the full supply chain,” he said.
“I see a future with more animal nutrition companies looking at collaborations and licensing of their technologies or even production sites to local partners. The IT sector did this years ago by setting up server farms across all locations. Why can’t we do it too?” he added.
Expansion Projects, M&A and Raising Equity
Over the years Devenish has grown its business and expanded dramatically.
For instance, the company partnered with Yem-Vit in Turkey in 2017, acquiring a 50% stake in a Turkish nutrition business in the process. This move provided Devenish with manufacturing capabilities closer to some of its key export markets. It was another step in the internationalisation of the business, giving an opportunity to expand further in the Turkish and surrounding markets.
“We have an emerging markets strategy,” Kennedy stressed, highlighting some more recent developments.
“In the US, we will have grown from two when we first started there, to six manufacturing sites by the end of the year,” he said. “In Mexico, where we already have offices, we are expanding and will open a new manufacturing plant early next year. Also, we have set up new business in Chile and in other areas.”
In his view, emerging markets want to capitalise on Devenish’s knowledge and the company is seeing the demand in these areas.
“Premix is a route to these markets. We then bring in the technologies and make them applicable,” Kennedy added, bringing up the example of Jamaican poultry firm Caribbean Broilers with whom Devenish signed a GBP 30 million, 10-year R&D and supply agreement in April this year. As part of the agreement, Devenish will build a Poultry Performance House on Caribbean Broilers estate in Jamaica, where joint research and development trials will take place.
"This is an important development in Devenish's international growth and a significant milestone in the rollout of our Performance House business model worldwide," he said.
“At Devenish we prefer to take a partnership approach with our customers. Like with Caribbean Broilers, we have set up, with the help of Tyson Foods in the US, additional Poultry Performance Houses which enable the application of our technologies at poultry producer level,” Kennedy added.
“COVID-19 has certainly accelerated our way of thinking about M&A and the focus on fostering local opportunities. We need to be more open-minded in terms of mergers. And we believe there is value in partnering with non-premixers,” Devenish’s CEO went on to say.
“Today,” Kennedy confided, “we are looking at raising equity to build our global footprint and we are exploring all types of options, be it with private equity companies or industry partners.”
Kennedy shared that Devenish is having ongoing discussions with the industry in its search of strategic partners. He also said his firm is examining a potential IPO.
“I am fully confident in our future. We have seen significant growth in our sustainability solutions and we’re looking to keep on growing.”