Germany’s meat industry is facing a reorganization. The Dutch industry giant Vion Food Group, the third largest slaughterhouse in Germany behind Tönnies and Westfleisch, wants to withdraw from the German market and concentrate its activities more on the Benelux countries. For this reason, there is currently a “formal review of strategic options,” according to a statement from the group.
This departure has been hinted at for some time. After all, Vion has gradually relocated, sold or closed locations in recent years, most recently at the beginning of the year. “The market no longer seems attractive enough,” says Werner Motyka, partner at the Munich Strategy Group consulting firm and head of the food division.
And indeed, the pressure is high in the meat industry. There are many reasons for this. It starts with the fact that meat consumption in Germany has been declining for years and continues with import bans in some Asian countries, including China, due to African swine fever (ASF). However, many parts that are difficult to sell in Europe were sold there.
According to Motyka, the sharp rise in labor and energy costs, among other things, has also been a major factor, causing German slaughterhouses to lose international competitiveness. But the market is global and exports are an important business for local suppliers, who have long been complaining about eroding margins.
In addition, there is a constantly increasing number of regulations and requirements – and EU directives from Brussels do not play the main role, according to industry sources. “European market participants look at the goals of German agricultural policy with disbelief,” say industry observers.
This refers to the plan of Minister Cem Özdemir (Greens) to halve livestock farming in Germany in order to advance issues such as animal welfare and climate protection. However, fewer livestock farms automatically mean less business for slaughterhouses and processors.
The latest figures from the Federal Statistical Office on meat production in Germany also fit in with this. In fact, it fell again significantly in 2023, specifically by four percent or the equivalent of a good 280,000 tonnes. Commercial slaughterhouses still produced 6.8 million tonnes. By comparison, in 2016 it was still 8.25 million tonnes.
Since then, there has been a seven-year decline, particularly in the pork segment. Last year, 47.9 million pigs, cattle, sheep, goats and horses were slaughtered, as were 702.2 million chickens, turkeys and ducks.
In this situation, other countries are already positioning themselves to step in as suppliers in the future, including Spain and Poland. The corresponding capacities, especially in the pork sector, are often being built up with state support, it is said.
However, Germany is still self-sufficient in the meat sector. In 2023, the corresponding rate was around 120 percent, reports the Federal Office for Agriculture and Food. The number of animals for slaughter from abroad has already risen significantly recently. Pigs, for example: According to the Federal Statistical Office, in 2023 a good 1.5 million live animals were imported to be processed in German slaughterhouses. That is 32.3 percent more than a year earlier.
Market expert Albert Hortmann-Scholten from the Lower Saxony Chamber of Agriculture (LWK) explains this jump with the continuing high number of pig farmers giving up their businesses because they no longer see any prospects in this country. “On the one hand, they lack planning security for future new construction and renovation of stables, and on the other hand, they lack political support that their work is still wanted at all.”
The market is moving accordingly. Four years ago, there were 800,000 to 900,000 pigs being brought to the slaughterhouses by local farmers each week, but now there are only 700,000 animals, reports Hortmann-Scholten. And this number threatens to continue to fall, predicts the LWK representative. “This is causing overcapacity at the slaughterhouses.”
The market was able to cope with Vion’s closure of a large plant in Emstek in Lower Saxony in mid-February. However, many in the industry are looking at the announcement of the complete withdrawal with great concern, especially in southern Germany, where the group has its focus following a major acquisition program 20 years ago.
Vion emphasizes that it is not planning any closures. “We are determined to find the strongest partners for our German portfolio who offer the best concept for the successful future development of these companies,” says CEO Ronald Lotgerink.
However, the question is being asked in the industry as to who can actually take over the companies. Market leader Tönnies, for example, has no room for maneuver for antitrust reasons, at least in the pig sector. The only opportunities would be in the cattle segment, where Vion is considered the leader in this country.
Large competitors such as Westfleisch or Danish Crown, as well as the Müller Group from Baden-Württemberg, are said to not have the necessary financial resources. In the case of Danish Crown, there is also speculation that the Danes themselves are working on an exit plan for the German market.
If closing a business is ultimately an option, there could be serious consequences. “There are not many alternatives in southern Germany,” explains expert Hortmann-Scholten from the Lower Saxony Chamber of Agriculture. “If closures occur there, the transport routes for the animals to the next slaughterhouse will become much longer. But that goes against the animal welfare issue and also causes high logistics costs that have to be passed on to consumers.”
The Bavarian farmers are therefore just as alarmed as the state government there. At least the sentence “Sales steps in Germany at the beginning of 2024 have aroused interest in the remaining German assets” with which Vion explains its withdrawal plans in its statement is encouraging. Final decisions are still pending and will be made in discussions with potential interested parties.
Such interest is said to be shown by the Austrian and southern German-based McDonald’s subsidiary OSI, at least for a few selected locations. This is especially true as a former Vion manager is the managing director there. However, Vion is reportedly a supplier to Burger King – and with a long-term contract, it is said.