Issue Iss2 2010
With its innovative sourcing structure and high quality frozen products, Oerlemans Foods is continuing its expansion across the whole of Europe
Established as small venture in 1977 under the name Oerlemans Diepvries Centrale BV, the Dutch company has since grown and expanded into one of the European food industry’s largest names, Oerlemans Foods BV. The company specialises in frozen fruit, vegetable and potato products that are sold in over 50 countries worldwide through a variety of brands such as Oerlemans, Bauer and Keizer, as well as being resold through other private labels. The company has a range of over 1000 products, including organically and bio-dynamically grown produce and has been a pioneer in this segment. In 2007 international food producer, Vion Foods Group, acquired Oerlemans Foods.
The company has a head office in Venlo in the Netherlands and runs a further four production sites: at Broekhuizenvorst and Waalwijk in the Netherlands, and at Siemiatycze and Strzelno in Poland. With over 1000 items available, it is no surprise that each of these facilities is responsible for a different section of Oerlemans’ production process. Nonetheless, they all have the primary function of processing raw products into frozen products as quickly as possible; to qualify the company’s ‘fresh frozen’ standards, it maintains a very short four-hour span between harvest and packing.
Broekhuizenvorst, the company’s original location, handles a large portion of the overall business, manufacturing many of its frozen vegetables and frozen potato products. It is the facility with the largest overall annual production rate of approximately 65,000 tonnes of potatoes and vegetables. Meanwhile the factory at Waalwijk specialises in vegetable mixes and leafy greens. Spinach is the biggest such item for Oerlemans but it also grows and makes use of a range of other leafy items such as parsley and basil.
Poland’s facilities have their own specialisations too. Strzelno is a small state-of-the-art site turning out onions, broccoli and cauliflower plus fruits like cherries and strawberries. Siemiatycze is a much larger facility and handles individually quick frozen (IQF) vegetables like mushrooms and beans, as well as rice and soft fruit produce. Furthermore its location near the border between Poland and Belarus means this site is responsible for a large part of Oerlemans’ Russian market, the company’s second largest export market.
Pieter Kruithof, managing director of Oerlemans, explains how the company is able to maintain a rapid production process at its facilities: “We have a situation where raw produce is growing in a circle of 100 or 200 kilometres maximum around the factories. We grow a big part of what we need so transport times are reduced.”
This also doubles up in helping the company keep a low carbon profile, something that plays a part in its philosophy of showing respect for nature that extends through both its products and its operations. Potato skin peels, for example, are recycled in a biodigester and used to generate energy, whilst wastewater is cleaned and reused. The company keeps an accurate record of all these activities so that in markets such as the UK for example, where carbon emissions information is sometimes expected, it can be fully provided.
To do this, Oerlemans has a detailed sourcing structure that involves long term, in-depth co-operation with its audited suppliers. Pieter comments on its extent: “All of the steps during the growing of vegetables are registered by farmers so that we know exactly what kind of materials they have used on their crops. That way everything is tightly controlled.” The success of this system sees Oerlemans rarely changing the farmers that it works with, helping to forge a reliable and trusting relationship. Furthermore, because a lot of experience is needed to grow the high quality produce Oerlemans requires for its ranges, the company is able to offer items with consistent quality.
Pieter explains more on the way that Oerlemans works with its suppliers: “What we do is establish contracts with farmers for a set amount of hectares and a certain variety of vegetables. In other words, crop control. For example, with peas we might sign a contract for ten hectares. We then decide when the peas can be sown, advise on what kind of fertilisers and how much can be used. We also decide when exactly it will be harvested because that is very important for our production planning – we need the right product at the right time in our factories.”
Controlled, synchronised harvesting is essential to the company’s smooth running because it deals in such a wide variety of crops from various regions across Europe. Gaps prove inefficiency so the company uses specialised software to achieve maximum productivity. By taking into account temperatures and rainfall, the software is able to predict when a certain crop will be ready for harvest. Using this information, a tight schedule is organised and implemented throughout all of the facilities.
Being a manufacturer of freshly frozen products, Oerlemans is able to work with a versatile mix of customers. Pieter discusses this in further depth: “Our clients are spread all over Europe and overseas. We are in business with the leading companies in the retail, foodservice and industrial segment. Within the foodservice industry we work with companies who supply restaurant kitchen, hospitals and care homes, through our own brand, ‘Oerlemans’. When working with retail and industrial clients we are co-packing and as such developing jointly with these partners the best mix of product, packaging and logistical aspects at competitive prices.”
Pieter explains why he believes that big names have come to look toward Oerlemans for their products: “Oerlemans is a very reliable partner for our customers – hands-on, flexible and solution oriented. We make sure we consistently deliver good quality at a competitive price and compared to most of our competitors, we are more focused on the needs of our customers’ customers.”
Despite its firm position in the market, Oerlemans has been facing stiff competition. The last two years have brought very good crop harvests that have been beneficial to Oerlemans but also to many of its competitors. Concentration of buying power at the customer’s end has increased competition, influencing the pressure on margins. Furthermore, much of the west European market has stabilised, meaning there is little room for the company to grow its revenue in the area when continuing on the same base.
Moreover this has been compounded with more challenges in the form of environmental factors. Mentioning the recent heat wave and wildfires in Russia, Pieter illustrates how this will have a knock-on effect on the sourcing of raw materials within his company: “Because of the heat and fires there will be an export ban on wheat. Wheat prices have skyrocketed meanwhile. This will have an effect on our prices next season because our farmers can now choose to grow peas and beans or wheat; if the prices on those rise, so will the price on other vegetables and potatoes.”
He adds: “In the western part of Europe we have had quite a lot of weeks without rain, so it was very dry and that has had severe effects. On peas, for example, which we harvested anyway but there was a lot less than last year. A ten per cent reductionin harvest, basically translates to a ten per cent reduction in sales.”
Similar crop shortages have happened in Poland as well. A lot of the company’s fruits are grown at its Polish facilities but this year it is expected to receive 50 per cent less produce than it did in 2009. This has applied to all businesses growing fruits in the region and though it does not consider the result a crop failure, it is aware that such a large reduction in output will have an effect on costs
The future for Oerlemans is not all gloom, however, and the financial crisis in some ways benefitted it. Because people became more careful with their spending, many began to buy frozen fruit and vegetables in lieu of fresh produce because of its lower price. Now that the financial situation is beginning to stabilise and grow again, the company expects many of the people that turned to frozen produce to continue buying them.
Pieter highlights: “Many customers have experienced that the quality of frozen vegetables are just as good as fresh vegetables. Plus there is the advantage of only having to buy them once a week or even once a month yet still being able to use them whenever you want. This connects with the market trend that desires convenience.” To take advantage of this emerging interest, Oerlemans is also looking to develop tailormade concepts.
Furthermore, east Europe and Russia offer the company exciting chances for growth. Pieter concludes: “When you look at our sales, the UK has always been a very important export destination, but currently we export the same amount from Poland to Russia. Oerlemans Foods’ long existent local presence and knowledge are however key to really exploit the given opportunities. With a long history of market triumph, and with its confident outlook on the future, Oerlemans Foods is ready to cement its success.”