Last week RedStar and Looye Growers announced that they are going to merge. It is the news of the week in the Dutch tomato sector. As a result of the merger, Looye is growing into a major player in the Netherlands with an acreage that goes towards 150 hectares. The two companies have for a long time been focusing on tasty tomatoes and have a combined turnover of 180 million euro.
Over the past decades Dutch horticulture has to contend with a strong increase in scale. Over the past twenty years, the average size of a tomato company has grown from 1.8 hectares in 2000 to more than 7 hectares in 2018. This is evident from the most recent CBS figures.
Over the past decades Dutch horticulture has to contend with a strong increase in scale. Over the past twenty years, the average size of a tomato company has grown from 1.8 hectares in 2000 to more than 7 hectares in 2018. This is evident from the most recent CBS figures.
Permanent strengthening of position
In their announcement the two tomato companies, as the main reason for the merger, mention the increase in scale that takes place both on the part of the suppliers and on the part of the buyers. In this changing market, the two companies want to continue to strengthen their position with their brands and thus maintain an independent position as a 'company of families'.
Richard Schouten, director of GroentenFruit Huis, thinks the merger is a good development. "We see that two independent family businesses that manage their sales themselves, join forces and pool their product assortment in order to provide an answer to the increased scale. This way they remain appealing for purchasing parties and they can improve their market position."
Jan de Ruyter, sector banker vegetable sectors at ABN AMRO, also considers it a logical development. "We also see abroad that the increase in scale continues." He also understands the choice of Looye and RedStar for each other. "These parties have shown that they are strong in the field of taste. They work with their own varieties and develop brands themselves. This means that they operate in a distinctive segment."
According to Sjaak van der Tak of LTO Glaskracht, the merger is of 'essential importance' for the Dutch position on the world market. "The recent mergers are new answers to international market conditions, 'license to produce' and social developments, such as sustainable cultivation, climate & energy, healthy crops and professional entrepreneurship."
Trend
RedStar and Looye Growers are not the first to decide to merge together. In 2016, tomato giants Agro Care and Kesgro already decided to join forces. Since then they form a company of more than 150 hectares. This year, De Kabel and Schenkeveld also announced a merger. From January 1, 2019 they will form a company of 58 hectares.
Both De Kabel and Schenkeveld are members of Prominent. The producer organization is committed to scaling up, because, according to the producer organization, the current average company size of 10 hectares is not enough to remain competitive in the retail segment. Prominent sees three options for their members: a grower keeps growing his company himself, he merges with fellow growers or he chooses to join an association with his company. Recently, Mondial Group (29 hectares) opted for the latter option. With this, Prominent grows to 418 hectares.
Merging or new construction?
Jan (ABN AMRO) often asks entrepreneurs with expansion plans whether they want to start construction, or find like-minded people to merge together. Merging is usually not preferred in the first instance. "Most companies think of new construction, to keep control in their own hands. But if you can find each other in terms of vision and management, merging is a great way to obtain scale in a sector in which large parties on the sales side are dominant. This way you can leave your mark on the market. Also when it comes to future investments and sustainability, you need to achieve scale to take steps."
The same applies to smaller companies: scale is needed. Richard (GroentenFruit Huis) does not expect that the recent mergers will have direct consequences for the 'smaller' growers. "Smaller companies are generally organized in producer organizations that take care of the sales for their members and therefore also combine the strengths of the smaller entrepreneurs towards purchasing parties."
Jan de Ruyter also looks at the producer organizations. "There is a major role for producer organizations to introduce structure across the board in the sector. Product development and sustainability are important issues for the future. For companies that cannot partake in this merger trend, it is important to ensure that they also continue to develop in this area. Taste, health, content substances, but also sustainability with, for example, heat networks and geothermal energy - these are all trump cards for the future. That role can be filled in by a producer organization."
No obligation
Merging is therefore not an 'obligation'. Sjaak: "There will certainly be a future for large and small growers. It also involves quality and 'niche' products, a strong sales position and added value that make companies distinctive. Merging is subordinate to this."