Danish Crown unveils new cost-cutting measures

By Aidan Fortune contact

- Last updated on GMT

Danish Crown outlines savings strategy
Danish Crown has announced a series of initiatives to cut costs, including moving some departments to Poland.

It has announced a new savings target, identified administrative functions that are set to be moved to Poland, and delayed construction of a new head office in Randers until further notice.

The plans for a new joint head office for Danish Crown and Tulip Food Company were announced a year ago. The idea was to transform the former sausage factory in Randers into a modern office building with 23,000sq m of floor space, but these plans are now being put on hold. Danish Crown is also transferring 50 jobs from Randers to Krakow in Poland, with a view to “standardising, and automating a number of administrative functions in a new Global Business Services centre”.

It has also revised its cost reduction targets for procurement (excluding raw materials) from DKK500m to DKK650m by 2020/21.

The measures are an extension of Danish Crown’s 4WD strategy, introduced two years ago.

Group CEO Jais Valeur said: “We continuously review our strategy and, in three specific areas, we have decided to strengthen our efforts as we believe this will benefit the group in both the short- and the long term. However, these are not easy decisions to make as it means saying goodbye to a number of employees in different parts of the organisation. At the same time, we are postponing the construction of our new head office, which will no doubt be a disappointment for our employees in Randers.

“The situation is that the difference between the cost of producing a pig and the price at which it can be sold is being pressured by the low pig prices. As a result, we do not feel that this is the right time to go ahead with this project. Having Danish Crown and Tulip Food Company move in together still makes a lot of sense, but it will not happen at the beginning of 2020 as originally planned.”

Group CFO Preben Sunke explained the new target and the shift to Poland. “We have established a new procurement organisation, and our specialists have identified significantly higher potential savings than were originally estimated in our strategy process. These are not savings which we can realise overnight, but the process has confirmed that we were right to invest in new procurement expertise, and this is the reason why we are raising our target.

“This will bring benefits in relation to serving our customers as well as delivering specific savings. However, it is a complicated operation, and it is therefore important for us that the project is rolled out at a pace which is not going to adversely affect our business. The whole process is therefore expected to take two to three years.”

Related topics: Financial, Poland, Denmark, Pork

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