Even taken into consideration that the merger between Looye Kwekers and Redstar was cancelled yesterday, 2018 was the year of tomato mergers in the Netherlands. The sector was shaken by news from this industry multiple times. Schenkeveld and De Kabel, Dukker and Zwinkels - and then of course the Looye Redstar one. Each a confirmation, but of what exactly? A sufficient increase in scale, strengthening management and making the companies ready for the next steps are the answers heard most often. Jan Opschoor has been the general manager of growers’ association Prominent since November 1st 2017 and is also connected to sales organisation Coöperatie DOOR: “Developments are coming rapidly. A lot of growers are thinking about whether their company is future-proof.”
Mergers within Prominent
Common denominator in all of the reports is the involvement of Prominent. The integration of Mondial Group, consisting of three growers, into Prominent hasn’t even been mentioned yet. The reports of mergers and cooperatives can’t be seen without the strategic plan of the grower’s association, which was extensively talked about early in 2018. The member tomato growers got together under the name Prominent 2.0 to talk about how they can still have a competitive position on the market in ten years.
As a company, you need to be a certain size to be able to professionalise as grower. This allows you to offer plenty of challenges and possibilities for growth to employees, and to bear the costs. The mergers are therefore not exactly a surprise. “As a cooperation, it’s important to look at the future and the continuity of your enterprises. Within Prominent, all growers have therefore been asked to put their vision for the future to paper, for their company and for them personally.”
Earlier in 2018, they also looked into the financial position of the individual growers. “Based on that we started talking with our members about the different scenarios to remain or become a future-proof company. However, an entrepreneur is always personally in charge of everything. They always personally decide the future strategy they want to implement for their company.”
Everything in-house or better together?
The developments within Prominent can actually be summed up with just one sentence: ‘creating an acceleration by cleverly working together.’ Prominent is the platform to facilitate its members in that. Jan explains that in broad lines, three flavours can be chosen. “An entrepreneur can personally expand until the desired size has been achieved, the entrepreneur realises that he can’t do it alone and finds a partner for a merger, or the entrepreneur enters into a cooperation by integrating with Prominent’s production company. The issues facing entrepreneurs nowadays when making such decisions, are so complicated, a more extensive management becomes necessary to keep up in the field of labour, production and technology.”
Prominent now has 30 hectares of their own production. These hectares are owned by the entire group of growers, and each grower is shareholder of the company Prominent. That own production also offers an option to growers, another flavour they can choose. “When growers conclude that they don’t want to continue independently, those companies can continue as Prominent production locations. But in that case, a company does need to have a strategically important position due to its location, its size or another reason that means the company ads value to the Prominent company.”
Once a future is finally being considered, even more options often come to light. “Acquisition, for example. That is how Mondial Group joined Prominent last year. When you want to offer an extensive range, grow year-round, have plenty of relevance on the market and enough of a base for a new packing station, you need strong companies for a good future-proof production basis.”
New types of ownership
The mergers and cooperations mostly seem to be a Dutch phenomenon. Not a lot of reports came from Belgium, except the report that investors joined Stoffels Tomatoes early in 2018. Jan has an explanation for this: “It’s about the development phase of a country, and about how a country has been organised. The influence of the clock and auction was considerably reduced a few years ago. In the Netherlands, cooperatives such as ourselves with DOOR and Harvest House are organised completely differently than the auctions of the past. This development can also be seen in Belgium, but the clock still plays a much larger part there. This doesn’t necessarily mean the Netherlands is ahead of Belgium. However, you can see that growers driven by the urge for innovation are willing to take steps.”
Most of the steps taken last year were mergers. “Once there’s one or two actual, successful examples, it gets growers thinking. Some discussions are taking place, but some growers decide something else. Some growers run a company with two or three siblings, so mergers aren’t (yet) necessary, because they can extend the management from within the family. In the meantime, companies let employees become fellow shareholders, this is seen much more often than in the past. Besides, younger generations view family businesses very differently. Naturally, they’re proud, but they’re open to new ways of running the company, new types of ownership, as well.”
DOOR is also talking to young people about new types of ownership. “Within DOOR we have a young potential programme, for the children of entrepreneurs. Young people between the ages of 18 and 25 who think along with us, with a separate group within the programme of young people who want to take over their parents’ company. Young people in particular have to be involved in current matters, regarding company succession, but also regarding robotisation, big data or internationalisation.”
Sharing purses
The year 2018 was bad for the production of tomatoes. The long, hot summer did the production no favours. It’s not unthinkable that a year like this will have consequences for the future of companies. Yet Jan has noticed something: “For us, the process of thinking about the future has already started. The best is when growers independently decide to work together, instead of from weakness. While you might expect two smaller companies deciding to work together, it’s actually the larger ones that merge. I think that’s surprising, it makes you think. After all, why would these growers decide to take this particular step? Perhaps because they’re enterprising growers who look across borders, and who hope to fulfil their ambitions at an accelerated pace by taking this step.”
Jan is the first to say that growers who haven’t merged aren’t enterprising. “Due to developments, growers start to think about whether they want to join in on the developments on the market or not. Not just in tomatoes, but also in bell peppers, for instance. Some companies in this production are already big enough to continue individually, while others, within Sweetpoint for example, decided to start a private limited company a few years ago. But we haven’t seen any major mergers yet. However, it makes sense that these are imminent, we just don’t know when they’ll happen yet.”
Taking such a step isn’t just done overnight, that should be obvious. “Merging is one of the options, but there are also other ways. The core of that for DOOR is that we see cooperation as step one, but doing business together is an even more challenging second step. After all, as entrepreneurs you start to partly or completely share your purses, that requires quite a bit. You’ll be investing together, carry risks together. You’ll hand in a bit of yourself, there’s no other option. Mergers are long-term trajectories, and Prominent makes growers aware that they have to think about things. We ask growers in what way they expect to be future-proof. Asking questions like that is actually step two, a step that we already got started on when drawing up the visions. We can bring growers who are open to mergers into contact with each other, but in the end, the entrepreneurs have to take care of it themselves. It isn’t our role to guide them through the entire merger process. There are experts to give advice in the field of organisation, financial, you name it.”
Leave room for investors
During a process like this it could also occur that a grower finds out at an accelerated rate that they want to quit. “They don’t have to switch to Prominent in that case, there are plenty of options. When a grower meets quality requirements, remains a member of DOOR for marketing and sales, and joins in on doing business together within Prominent, they could still fulfil an important role within the club. We will not and do not force people to take certain steps, we just wake them up, offer options and mostly try to offer an added value to our members by enabling acceleration and cooperation. If they then decide to stop, we’ll look into whether such a branch is an added value to our own Prominent production. But only when it adds value to the group, we wouldn’t buy a company if it didn’t. All growers then get a share in it.”
A share according to the share structure Prominent started working with last year. That structure also leaves room for investors. “The structure of the cooperative is such that investors can join at any time. Although so far that’s not under discussion yet. In this case the most important matter is that appealing to investors should add value for the members of Prominent as well, so they can get stronger from it.”
Jan doesn’t know whether more mergers will follow in the coming years. “But I’m certain things are coming for the sector.” In the meantime, DOOR calmly continues to work on their strategic plan with its members, which is all about enhancing the entrepreneurs involved, the market position and continuing to make the production available year-round. To take further steps in that, DOOR has asked for GMO recognition as a sales organisation. Besides, they’re working on a new distribution centre, and DOOR is looking for new options to add value to their products. “However, I’d like to keep the ideas for this to myself for a while longer,” Jan says. He wants to conclude by saying growers are always welcome to continue to enhance their market position by joining DOOR. “It’s important to add mutual value then, and there has to be a connection among the growers.”
For more information:
Coöperatie DOOR U.A.
www.cooperatiedoor.nl
info@doorpartners.nl
Jan Opschoor
j.opschoor@doorpartners.nl