Needed: a new pork business model

Friday, April 3, 2009

© AgMedia Inc.

by KATE PROCTER

Despite a dodgy track record, alliances between the different components of pork production are the key to Canadian pork producer’s future says Jurgen Preugschas, president of the Canadian Pork Council.

Preugschas, who spoke at the London Swine Conference April 1, held up Genetiporc and duBreton as successful examples of an integrated value chain model.

DuBreton, which is based in St-Bernard, Quebec, is a fully integrated company that includes a marketing arm that has been successful in promoting specialized products. Genetiporc is its swine genetics arm. Breton Foods Canada is the pork production arm. Breton Foods invests in research and development to develop a sustainable business model that reduces the cost of production and develops value-added products.

DuBreton has taken a lead as one of the largest organic and natural pork producers and processors in North America, says Mario Lapierre, a duBreton spokesman who also spoke at the conference. He said demand for duBreton’s high-end products has not fallen off given the current global economic situation. The company predicts North American growth for organically produced food to increase by 20 per cent per year until 2011.

“The Canadian industry cannot produce commodity hogs, we have to have something completely different,” said Lapierre.

Preugschas said the industry’s current structure, where each component of the production chain acts independently without regard for how their actions affect the whole, isn’t working.

“We’ve been functioning in silos,” he said. Everyone has lived off what the producer produces with no real attempt to share the money or produce efficiently throughout the chain.

Preugschas said a successful value chain model would include an efficiency audit to ensure that a change in one stage of the chain does not drive up cost of production in another and reduce overall profitability.

Dr. Ernest Sanford, a veterinary swine specialist, said attempts at this have failed spectacularly in the past – both in Canada and around the world. He asked Preugschas why, given the failed examples, the pork industry should depend on this type of integration as a model.

“We’ve heard parts of this many times. It is not simple, but is absolutely critical for survival. I believe we can do it,” Preugschas responded.

Competitive production costs is one edge Canadian producers have in forming value chains over those in countries such as Denmark, where several producer-owned processing plant closures have recently closed.

“We need to be smarter, do more on branding and selling a higher-value product,” said Preugschas.

Efficient value chain partnerships will also inherently manage supply, which, Preugschas noted, is different from supply management.

“Let’s do the right job and sell it around the world,” he said. BF