General manager Philip Smits:
"“Implementation of SAP signals next phase in The Greenery"
The CEO calls the SAP implementation a tricky and challenging venture, demanding necessary changes within the organization. "But we do consider the implementation a must. All our major customers have already taken this step. We can only grow as a partner if we are able to connect ourselves seamlessly to their systems. We already learned a lot by small-scale implementations in Zaltbommel and Greenery Benelux. I am confident that we will successfully achieve the transition by February. In the area of logistics, we started upgrading the employment of our locations and machines three years ago. One of the things we achieved so far is increased delivery: from growers directly to the customers. This development will continue in the coming years. Almost half of our total domestic produce goes directly from garden to customer. We consider it a logical development, as it reduces costs."
Growth in all products
With the SAP implementation, an important foundation for further growth is laid, according to Philip Smits. When asked where The Greenery will be in ten years’ time, he replies: "My expectation is that we’ll be able to show progress in all departments. I expect that the current distribution of produce will be maintained. I also think that we’ll have better returns, that our position in retail has seen further improvement and that we’ll have a strong position in the local-for-local market."
The Greenery model
In 2011 the Greenery saw an accumulated turnover of 1.6 billion Euro. For 2012, following the departure of the T-growers, the CEO anticipates a slightly reduced outcome: around 1.4 billion in revenue. Smits firmly believes in close collaboration with growers, as long as the marketing organization regulates the sales. "I know almost no success stories of major growers that are profitable operating in direct connection to supermarkets. Retailers are increasingly doing business with a singular entity, which relieves them completely of all the fuss, which can provide a wide range of features, distinguishes itself in logistics and guarantees quality and food safety. I see growing potential in the Greenery model, in which we work very closely with growers, but exercise the necessary control over the marketing of produce. Our market share in retail has grown impressively in the past two years, essentially proving the validity of our model."
Smits does not expect the market situation in the horticultural sector to change in any structural capacity, not in the coming years anyway. "Retail will remain the most important sales channel to the consumer and it will probably uphold its dominant position in the Netherlands and Europe. However, the pressure on Dutch export is likely to increase due to the progress of local produce in our main export markets. Additionally, the consumption of fruit and vegetables is under duress and the overlap with foreign seasons will almost certainly intensify. Therefore, we need to focus more on quality and taste, and we must continue to innovate in niche products. You can see that when distinctive, high-quality and tasty products are introduced, like for example in the snack vegetable sector, it has a noticeable and positive effect on consumption within the total segment. Obviously, the demand for commodity products remains strongest, but these should be of top quality. If consumption stagnates in the coming years, the growing demand for local and niche products can put considerable pressure on the export. Any product produced in Germany will no longer be imported."
Local produce
The first steps on the local-for-local market were made by The Greenery some years ago, with the memberships of the British tomato growers John Bearded Ltd and Conerways Nursery. "We are working on a number of production projects abroad, where we have a firm grip on the sales aspects. Next year we plan to launch a collaboration regarding the growing of tomatoes in Germany. And two of our outdoor growers will be propagating lettuce in southern France. So there you already have three major export markets being supplied through a collaboration with Dutch growers combined with domestic import. Our growers, of course, benefit greatly from this construction.”
"We also work closely with Mexican growers in their efforts to supply customers in North America,” says Smits. “We came into contact with them, when the export of tomatoes from the Netherlands to the United States proved difficult. We then decided to provide Mexico with our manufacturing expertise in order to give a boost to their production. In exchange for this knowledge, Mexico gave us the exclusive marketing rights for the US market. This venue worked out very well, especially in the sales of peppers and tomatoes. In cooperation with Greenco, we are now growing snack tomatoes in Mexico, which we market as Tommies elsewhere.”
The future of Dutch horticulture
Smits is by no means pessimistic about the future of the Dutch industry. "The microclimate that we have in the Netherlands, particularly in relation to greenhouse vegetables, is fairly unique. In addition, the cluster-like structure of Dutch horticulture: with education, seed houses, production, cooperative business models and logistic infrastructure all together in a limited geographical area, is also exceptional. We have the port of Rotterdam as a swivel drive function and unprecedented experience in fresh produce logistics. If this structure is maintained, I see no reason why we as Dutch horticultural industry should not remain on the top of our game. Of course we must continue to innovate. But I expect that innovations enable us to compete on a remarkable level."
GMO funding
Unlike his SUN colleague Gerjo Scheringa, Philip Smits expects that GMO funding will endure, albeit in modified form. "The expectation is that in June 2013, with the advent of the new CAP, the new GMO scheme is presented. GMO itself will remain, which is quite reasonable given the fact that many European countries still have to organize and structure their horticultural industry. GMO funds are intended to bring the industry to a higher level, and also to stimulate research and marketing. I believe GMO policy will certainly outlive the next five years, even if in a modified configuration."
According to Smits The Greenery is not dependent on GMO funds. "The subsidy almost entirely goes to projects involving growers, only a small portion is used within the sales company itself. These are purely projects that generate collective benefit in some way. If tomorrow the GMO funds would disappear, it would be very annoying for our members, but The Greenery would go on as usual."
Smith rejects any notion that The Greenery has used GMO funds in the past to bind growers to the company. "We would never do that. It’s true that the rules differed among the sales organizations, but these are now aligned. If a grower pays off his GMO obligations and unsubscribes as a member, he is free to go."
Cooperation with breeders
That seed companies are moving closer towards the end users, is not an issue for the CEO. "In the United States there are examples of intermediaries being eliminated from the chain, but in Europe we get along with breeders quite well. Seed companies often have much knowledge about upcoming trends in production, and we have our knowledge of the market. By coming together, you get a strong coalition and the retailer appreciates that. They are familiar with The Greenery as an important link when it comes to demand-oriented production, and they value our expertise in things like packaging and category management."
BRIC countries
Of all the BRIC countries (a grouping acronym that refers to the countries of Brazil, Russia, India and China) The Greenery is most active on the Russian market. "Russia is a strategic market and I expect that we will expand our commerce there in the coming years. In Brazil we are sourcing many products, but we don’t supply the Brazilians just yet. This is also true for India, where retailers have a hard time developing under the current structure and regulation. In China we have a small site for sourcing, and we occasionally do some shipping. I expect that in a few years our position in the Chinese market will have certainly strengthened, but it's not like we have a strategic plan for China as a contingency. However, we follow the market closely, but our focus is on Europe. "
On whether The Greenery will see profitable returns this year, Smits declines any specific comments. He does however, provide a small hint: "I think we’ll come out on top, but with a very tiny margin.”