28 October 2022 - 2023 is lining up to be a fresh start for Italy’s Gruppo Veronesi, a leading Italian integrated animal protein company and Italy’s leading feed supplier.
As Massimo Zanin, CEO of the company’s feed division, puts it, next year will be a restart after two and a half years of extraordinary events, during which Veronesi - like many others in the supply chain - was forced to manage the short-term issues, putting aside the medium- and long-term goals, and “freezing strategies”.
For Zanin, 2023 will be a year wherein his company will continue to optimise organisation and improve production efficiency and flexibility through increasingly automated and safe processes, while also focussing on customised products, to quickly satisfy the requests of the supply chain. Organisational flexibility will also be crucial in the future for companies needing to adapt to the possible changes that will come from the market.
According to Zanin, Veronesi’s feed business is closely linked to the logic of the supply chain in Italy. This proximity, in his view, is what constitutes the real asset of the company. And in times of difficulty such as the current market situation, such intimacy with the supply chain is increasingly strategic.
“Italian animal husbandry is characterised by an important weight of integration in the poultry sector, by increasingly strong chain links in pig farming, and for some years also in cattle farming, with upstream (animal supply) and downstream (slaughtering and transformation) increasingly important connections,” Zanin said, adding that Veronesi’s integrated model is a point of reference throughout this chain.
Meanwhile, Italy’s annual industrial compound feed production has in recent years amounted to 14-15 million tonnes per year. According to Zanin, the panorama of companies active in this sector is naturally varied, from large national producers to Italian branches of multinationals, from specialised producers to small local mills with a production of a few thousand tonnes per year. He estimates that there are over 400 plants of all sizes in the country.
Veronesi’s own annual feed production is estimated at more than 3 million tonnes; 70% of which is used by Veronesi’s own integrated supply chain and 30% is sold on the free market. The company operates seven large feed mills across Italy and its feed products are distributed in areas with the highest livestock population densities.
“We enjoy a particularly high level of efficiency, both for the high volumes produced in each unit and for the very short average delivery routes,” Zanin commented.
“Today our feed production is concentrated in Italy, and we think that our growth can continue, especially by increasing market shares where integration leaves room, like in the dairy sector, through the right combination of technical consultancy and commercial force,” he said, adding that his company is thinking of maybe replicating the Veronesi model in other countries.
On the international front, about 50% of Veronesi’s fish feed production is already destined for export to Europe, Asia, and Africa.
In Zanin’s view, Italy satisfies its feed needs, which limits the import and export activity to a few specialties. About 40% of feed made in Italy is destined for poultry, 30% for pigs, 25% for cattle, and the rest for all other species.
However, he warned that the growth of the last two years witnessed by Italy’s feed sector will probably be offset by the adjustment foreseen for the current year, similarly to trends underway in most European countries. Hence, why he insists on organisational flexibility.
Challenges Ahead
Looking at raw materials and the exponential price increases that took place in the last two years, Zanin said that none of the protagonists of the livestock supply chain in Italy - from feed producers to breeders, from slaughterers to final consumers - have ever been accustomed to such strong and lasting increases, and therefore actions implemented were often late and not sufficient to cover the higher costs.
“Prices were therefore the problem that had the greatest impact on the feed sector in Italy, much more than the availability of the goods. After an initial strong fear of product shortages, the market quickly adapted to the new situation, changing the origin of goods and, where this was not possible, replacing them with similar products,” he said.
“By importing over 50% of its needs for cereals, both corn and soft wheat, and an even greater percentage of soybeans and its derivatives, Italy inevitably has a strategic dependence on producing countries. The big concern for the next few months is more generally about the poor harvest in terms of both quantity and quality of maize across Europe,” he added. “This will force feed producers to turn more to alternative sources, slowing the possibility of seeing a price drop in the short term.”
In the meantime, to offset higher costs and speed up shipments, Veronesi has been working with railway company Rail Traction Company S.p.A., increasing its rail shipments and reducing the use of trucks on roads.
“Veronesi has always been active in the search for alternative routes to the road for the transport of the raw materials, trying to optimise the available infrastructures,” Zanin said. “We have been using barges for many years to transport raw materials from the port of Venice to some of our feed mills, but the limited network of canals and the perennial scarcity of water forced us to stop.”
In recent years, Veronesi has increased volumes transported per train. “Today almost a third of the raw materials we need, or about 1 million tonnes per year, arrive at our feed mills by train or by container transported by ship,” Zanin commented. “In addition to helping us to be more sustainable, it contributes to reducing costs and allows us to concretely address the shortage of truck drivers, an increasingly widespread problem.”
The outbreak of African Swine Fever (ASF) in Italy that occurred in January this year was limited to a few cases of wild boar in restricted regional areas. However, according to Zanin, the main increases in production costs for pig farmers, remained feed costs, although these are now offset to some extent by higher prices for live pigs.
His concerns are elsewhere: “If I had to choose an [non-feed related] element that Veronesi had to undergo and which had a significant impact, I am undoubtedly thinking of bird flu.”
“Even if everything is difficult today, higher costs are managed, and sooner or later the solutions are found in the shortage of personnel. But even the best professionals are unable to cope with farms forced to stop due to outbreaks of bird flu, and the management of the restarts must respect times and rhythms different from those we would like,” he said. “For our feed sector, it means being forced to produce less, it means putting in place the necessary organisational flexibility. And flexibility will also be the key word for the future, to adapt to the possible changes that will come from the market.”
Be it the “pandemic, staff and driver shortages, transport costs, bird flu, ASF, farm and meat image management, raw material costs, drought, energy costs... the list goes on,” Zanin argued. “I think that in no other historical period we have had so many variables at the same time. And it is precisely the combination of all these challenges that made 2022 a particularly difficult year to manage, with a much more short-term focus than the strategic horizons we were used to.”
“The hope for all, in addition to wishing for a rapid end to the Russian-Ukrainian conflict, is being able to glimpse a horizon of greater stability, which the analysis of the markets would suggest, even if a few rumours are enough to move this precarious balance. But we want to be optimistic and see a better future for the Italian and European feed sector.”
