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Focus on Denmark

Strategy for growth

By Melodie Michel , 30-Apr-2012

Co-operative the Tican Group has adopted several methods to improve production and ensure steady growth in the past 15 years, but the size and location of its abattoir are set to prove a challenge for the future.

Representing around 10% of the pig slaughtering market in Denmark, Tican has positioned itself as a local company, with 95% of suppliers located around the Thisted abattoir’s area.

“Our ambition is to be with customers that are not fit for Danish Crown,” says livestock procurement manager Henrik Lauritsen. “We are selling in the same markets, but to different customers. We are small, but try to be flexible on production. More importantly, we want to be close to every customer.”

Tican was created in 1931, and started expanding on the international market by merging with German processor Rose in 1998. Since then, the company has acquired plants in England and Poland, and opened offices in Cyprus and China. Subsidiaries now represent about half of the group’s turnover. Tican exports 45% of its production to the EU – mainly the UK with 16%, Poland with 11%, and Germany with 6%. The remainder (55%) goes to third countries – mainly Russia, Japan, China and Australia. In comparison, Danish Crown ships 65% of its production to the EU, and 35% to third countries.

Although its number of suppliers has halved in the past 10 years, Tican has increased slaughterings from around 1.2 million in 2002 to around 1.7 million in 2011, as suppliers improve their productivity. The company also buys 8% of its pigs on the free market on top of its regular suppliers.

However, in order to stay competitive, Tican needs to keep growing with its customers, which is a challenge in its downtown-located abattoir. “It would be difficult to kill more pigs in the current facility, so we are working to modernise it, but we have no project to build another one yet,” says Lauritsen.

The main obstacle to building a new slaughterhouse comes from environmental regulations, which mean building approvals can “take a while”. The company is looking at expanding its current facility, but also has to consider its impact on the environment, as the Thisted plant is located on a harbour. “One of the things we’re looking at is how to recycle heat. We want to install a chimney that could recycle the heat produced during the day to heat up water for cleaning during the night, and that would help a lot,” Lauritsen points out.

But with no plan to expand or build another facility, Tican has had to improve yield through management practices. In April 2010, the company changed its price ratio to encourage farmers to produce more pigs in the most marketable weight. Farmers are now deducted heavily for pigs lighter than 70kg and heavier than 90kg, but receive a premium for animals from 76kg to 83kg. Lauritsen says: “As a result, 90% of pigs are now in the 70kg to 90kg weight range, compared to 85% before the new ratio, and 53% achieve the premium. Customers are more satisfied and we are not receiving complaints any more. Money talks and the price ratio did its job, but we really appreciate what farmers are doing, as the factories are now running much more smoothly because of it.”

Tican also heavily deducts for low meat percentage, which has led the percentage of pigs eligible to be cured on the UK market to rise from 50% to 60%. Pig health is also considered in the price ratio, and is judged neutrally by government-employed veterinarians. Farmers can even be deducted on logistics – for example, if they are unable to fill the lorry bringing the pigs to the abattoir. “All of this improves efficiency and reduces the impact on the environment,” Lauritsen adds.

The company has also greatly improved efficiency monitoring in recent months, with the launch of a new web portal in January 2012, providing suppliers with a detailed overview of their results. On there, they can see salmonella levels in their deliveries, latest settlements, various deductions and the percentages of pigs approved for their UK contract. Every single pig is listed, and they can book a time for collection and killing. Tican is now planning to add charts, allowing farmers to visualise their progress.

A business strategy of improving efficiency, monitoring results and gradually expanding internationally has proved beneficial for Tican, as the company has been growing steadily over the past 15 years. However, the co-operative might need to involve external investors to facilitate expansion in the near future.

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