FEED Business Worldwide - May, 2012
Sanovo: 'Ideal Company' for the global egg industry
by ANG Yen Yin
Eggs are a major food product and an affordable protein source around the world, whether in the form of raw eggs for home consumption, or liquid and powdered eggs that supply the processed food and catering industries. According to a report by UN Food and Agriculture Organization (FAO), world egg production jumped 73.6%, from 35.2 million tonnes in 1990 to 61.2 million tonnes in 2008, and is expected to continue to increase at an annual rate of approximately 2% through 2015.
Meanwhile, global demand for eggs, like that of other food commodities, is set to climb as the world population grows. The trend is further accentuated by the debt crisis in the EU and a slowdown in world economic growth, which reinforce consumer price sensitivity in favour of egg consumption.
Denmark-based Sanovo Technology Group, the world's leading turnkey supplier of egg processing equipment and facilities, is in the best position to ride the global layer sector's ongoing growth wave. With a heritage of serving the egg processing industry going back to the early 1960's, the company specializes in providing services ranging from equipment designs, engineering and installation, to commissioning and staff training.
"We are dominant in the European market, where the level of egg processing is relatively high by world standards - with more than 30% of eggs produced here being processed," says Roberto Roversi, Sanovo's head of product management.
The company saw vast potential of processed egg products in the commercial food industry some 50 years ago. It has since focused on creating highly-specialised and cutting-edge products for the egg processing industry, through its R&D centres and production facilities in Denmark, Italy, the Netherlands and the United States.
Today, Sanovo is a global market leader in the egg industry, boasting a complete range of advanced machines and equipment that meet international food safety requirements and standards. These include egg, loaders, egg breakers, liquid egg pasteurisers and egg powder processors, along with graders and egg packaging machines.
Focused on Asia's growth
Reputed for its forward-looking business strategy, Sanovo set its sights outside of Europe as early as 1970s. It ventured into the American and Asian markets and currently has sales offices in the United States, Argentina, Brazil, China, Japan, Malaysia and Taiwan, complimenting a distribution network with locations in 17 countries.
According to the FAO, over the past decade, global egg production rose by about 3% per year, with China accounting for 60% of output growth. With China's vast market leading the way, Asia will account for more than 60% of global egg output by 2015, according to an International Egg Commission's (IEC) forecast.
With both production and consumption moving to the east, Sanovo Technology Group notes the shifting spatial pattern of the world egg industry. "At present, North America, China, Eastern Europe and South America account for 80% of our turnover. But we foresee Asia along with Central and South America to be our biggest markets in the next five years," Roversi says.
The Asian market, in particular, holds both potential and challenges with different cultures and requirements and wide variations in industrialisation. China, for instance, only started using egg products as an ingredient in its food industry in the mid-2000, despite its status as the world's largest egg producer and consumer.
Culture, consolidation create opportunities
Thanks to its widespread vegetarianism and consequent shunning of meat, India, the world's second most populous country, abounds in egg producing and marketing, according to Nourredine el Molaka, Sanovo's area sales manager. "India is particularly challenging as we do not have a subsidiary there.
He explains that, It is a totally different market from the rest of Asia and requires a totally different approach," adding that, "However, we do have excellent agents in India and throughout Asia that serve as our eyes and ears in the local markets." El Molaka concludes that, "Sometimes it's good to shed the Western European perspective and put ourselves in the shoes of the local suppliers and customers," and emphasizes that the company has put made great efforts in adapting products tailored to meeting local market needs.
Besides China and India, Sanovo is also paying attention to burgeoning Southeast Asian markets such as Thailand and Vietnam, whose small and medium-scale farms are targeted customers for some of its lower-range machines. At the same time, a market such as Thailand or China are exceptionally lucrative: In both countries, integrators now account for a large, expanding proportion of layer inventories, meaning that they have already developed the scale economies required for investing in Sanovo's higher-end, large capacity machines.
What is good about Asia is not just its growth but the fact that it is being accompanied by rapid, unprecedented consolidation. As each of Asia's national layer sectors consolidates, it enjoys larger scale economies. This organic growth makes the country's layer capital transition from using Sanovo's lower end equipment to requiring its higher-end, larger capacity devices.
In that respect, el Molaka notes that Sanovo's long-term investments in Asia have already achieved regional milestones. This includes the recent establishment of the first and most modern egg processing plant in Pakistan using Sanovo's flagship equipment.
Processed foods create new openings
With processed foods increasing their share of developing country consumption, there has been a marked shift towards processed egg products and processed foods containing egg derivatives. Consequently, FAO data clearly indicates that international trade of egg products has been increasing at a faster rate than that of raw eggs.
Facing an ever growing customer base that requires new, increasingly sophisticated capital equipment, Sanovo Technology Group sees the need for continuing expansion and innovation to provide the best and most efficient solutions possible. In early 2011, the company acquired Italy-based Italproject, a global supplier of robots and automation for end-of-the-lane process with over 40 years of industry experience.
The acquisition grows out of the need to expand its existing product line, coincident with surging demand for end-of-the-lane automation from larger customers. "Our customers are growing and doing something we don't have in our product range, so we have to acquire in order to add value to them. The addition of Italproject is just a natural progression in our business strategies," el Molaka explains.
Besides offering complete "Pack to Rack" precise packaging solutions, the acquisition of Italproject allows Sanovo to enter the business of robots and automation on a worldwide scale. This gives the company a platform not only in the egg industry, but the entire food industry supply chain.
This is in line with Sanovo's long-term vision to move beyond its egg handling and processing systems. In fact, the company has already leveraged the processed technology expertise it developed for egg handling to expand into diverse fields. These include capital goods used in the manufacturing of specialised vaccination equipment, poultry processing equipment, livestock enzymes and their yeast inputs. The resulting synergies also enabled Sanovo to greatly enhance the functionality and productivity of its egg handling products and analysing equipment.
All this was accomplished through a combination of in-house research alongside a decade of strategic acquisitions and investments. This eventually created the company's present structure of subsidiaries and operating divisions - Sanovo Technology A/S, Staalkat International, Sanovo Process Solutions, Rame-Hart, Foodcraft and the more recently acquired Italproject in one global group.
The integration of each acquisition's competitive advantages allowed Sanovo Technology Group to merge synergies across the board, providing a foundation of jointly leveraged competences under one company, such that each division can innovate and produce the best-quality products for its field of specialty. Such synergies that allow Sanovo to remain at the forefront of technical expertise - and are what distinguishes this company from its competitors, making it the global egg industry's leading supplier of processing equipment.
Roversi explains that. "We want to be one company that is doing everything possible - the 'Ideal Company'. That is why we are constantly growing and merging and getting a group of companies that can supply the whole egg industry in every kind of way."
Impact of globalisation on egg industry
Like any other industries, globalisation and changing trends in consumer behaviour and consumption habits pose new challenges for the egg industry. More than ever, consumers around the world are demanding higher quality products which are safe. At the same time, the global regulatory, economic and sanitary context is changing, with more and more consumers becoming aware of animal welfare issues, rearing methods and the way animals are fed.
For example, starting January 2012, European welfare regulation (EC/99/74 Directive) prohibited the use of conventional or battery cages for laying hens in the EU, requiring egg producers to provide larger and more comfortable 'enriched' cages. These must include nesting and scratching areas that allow for more natural behaviour.
"The rule forbids the import of eggs laid in the old battery cages for consumption, but these eggs are still allowed to be sold into the processing, albeit at lower prices," Roversi notes. While the processing sector is spared at the moment, he predicts that the EU egg industry will continue to polarise as the bigger operators squeeze out smaller-scale enterprises. If nothing else, the cost of complying with such regulations will squeeze out smaller, capital poor producers.
"We expect to see a reduction in the production of shell eggs," he opines, adding that the ban could have a negative impact on the European egg industry's competitiveness, as welfare regulation requirements push up egg production costs, while more eggs are consumed through products containing eggs, potentially outside the EU.
"That's why we are moving our equipment towards increased capacity every year in terms of R&D and product innovation," Roversi says, explaining that the company's advanced high-capacity egg loaders, breakers and packers help large processors improve operational efficiencies and reduce unit costs, thereby contributing to their bottom line.
The 'Ideal Company'
Having carved a niche in the world egg industry through an intense, five decade spanning focus on product development, strategic acquisitions and strong commitment to customer satisfaction, Sanovo Technology Group describes its continuous pursuit to be the world's 'Ideal Company' as its future challenge.
Roversi concludes that, "The strategy is not to compete in a single piece of equipment or for a single customer but to compete on all fronts, striving to be the 'Ideal Company' – a well-rounded company that integrates equipment systems, technical expertise, collaboration, synergy and everything." So far, Sanovo has built its success on being all things to all egg industry stakeholders, and is empowered to leverage these successes to the next level.
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