Orffa: a successful cross-fertilisation of two leading businesses
eFeedLink recently spoke to Orffa CEO Eddy Ketels in an interview.
eFeedLink: Orffa and Excentials merged in January this year. What growth opportunities, particularly for your company's specialities and ingredients businesses, do you foresee from this merger?
Orffa was known and recognised as a leading distributing company in Europe. We have reached a considerable market share over the last ten years. Since our scientific and technical skills are second to none, we have started developing our own range of products, branded as Excentials.
These products are rendering solutions to major problems and concerns in the animal industry.
We wanted to separate these two business lines, for the shear fact that Orffa is renowned for its distribution function. Excentials constituted a proprietary range of in-house developed products. Our first step into the in-house development of concepts and products was made by setting up a separate company. 
Since the introduction of our Excentials company, and the Excentials range of products, we noticed a very strong cross-fertilisation between Orffa and Excentials.
In Europe, our home region, where our strong technical profile has been recognised for over 40 years, we started selling Excentials. Outside of Europe, given the speed of introduction of our Excentials range, we were asked by several of our key suppliers to also represent them.
The borderline between Orffa and Excentials had faded, leading naturally to a merger of both companies. Excentials, as a premium brand of in-house developed products, will continue to exist as a brand of the Orffa group. Orffa is selling its products in about 75 countries worldwide, with substantial growth. This shows that a solid technical development, and an investment in research pay off, even for so-called commodity products.
And Orffa is more than vitamins and minerals.
We are indeed selling and marketing vitamins, under the Elovitals brand, which we market in close collaboration and partnership with our key suppliers, with whom we have been working together for decades. Orffa adds an extra layer of quality control over the basic, standard guarantees.
Next to our commodity range of minerals, we are also working with hydroxy-trace elements. We managed to gain a leading position with these products in Europe in the last few years. The combination of technical excellence, with a commercially strong position, has been the cocktail for success, alongside an ever stricter legislation in Europe on the use of trace minerals.
It is our firm belief that what is happening in Europe, will also happen in the rest of the world in the near future. Europe takes a leading role in optimising animal production, in all its aspects: nutritional, environmental, quality and health. A clear example is the ban on the use of antimicrobial growth promotors and the tight regulation on the use of antibiotic medication. Given that our strong home base is in Europe, Orffa has ready concepts and products available to provide antibiotic alternatives.
Orffa is also active — next to minerals and vitamins — with amino acids, probiotics, emulsifiers, botanicals, acidifiers and toxin binders. All our products are developed on basis of solid European R&D, and come with a strong technical file.
How has the marketplace for trace minerals in the livestock sector changed in the past decade?
In Europe, the levels of minerals included in feed are and will continue to be reduced to levels essentially required by the animals. The use of minerals for other reasons, such as growth promotion, will not be tolerated anymore. Several influential research institutes have been involved in this initiative. Consequently, the use of more bioavailable forms of trace elements (Cu, Zn, Mn, Se) needs to be encouraged. That is why more and more companies are starting to use organic trace elements.
However, it remains hard to analyse the 'organicity' of trace elements, leading to potential abuse of product claims or blurring of the real effects and composition of the products. Even the EU commission and the EFSA (European Feed Safety Authority) have not really been able to impose a quantitative or qualitative method to differentiate between products.
An exception is made for selenium (Se). Only Se as selenomethionine bypasses the classical Se pathway, and can be stored in body tissue, constituting a Se pool for the body. Other forms are not stored and metabolised. Consequently products rich in selenomethionine are to be preferred. Se-enriched yeasts were the first generation, but are also characterised by a high variability in composition and organic Se content. Orffa has registered in Europe a product Excential Selenium4000, which is rich in active selenium, and standardised with a guaranteed amount of bioavailable Se.
Another issue is the human safety risks associated with trace minerals. Dust emission is becoming a major issue. Trace elements are toxic to operators in the factory, as well to farmers and animals using the final feed. That is why Europe imposes strict limits to dustiness (TLV). Selenium, a very toxic substance, is the first example, and other trace elements (Iodine, Cobalt etc.) will follow. We have been working on reducing the propensity to dustiness of our Excential Selenium, making it the product with the lowest propensity to Se dustiness.
Safety is crucial, and that is why we believe that our product will have a leading position at a global level. Already in Europe we have become a market leader in 18 months' time. This shows the potential of the product.
Tell us more about the development of the Orffa brand for vitamins over the past decade.
Orffa is a leading supplier of vitamins in Europe, and we have also developed activities in Russia, the Middle East, North and South America, and Asia. The quality requirements of Europe are the standard for our vitamin range.
Orffa has long-lasting relations with leading vitamin producers across the world. We cherish long-term partnerships. We will continue to promote and market our vitamin range under our own brand name (Elovitals). Quality control is second to none: over and above the requirements of FamiQS, we add a higher internal Orffa standard of quality control, and on top of these, we check on a batch level for contaminants and active ingredients.
People buying Orffa brands are secured of premium quality and service. This model has allowed Orffa to grow strongly – we have doubled our market share in the competitive European market in three years' time, to become the leading generic vitamin supplier. We are encouraged by this success, which enforces our intention to become a global player in vitamins in the years to come.
What are some of the biggest concerns of your customers these days?
Important to customers are security of supply and a quality guarantee.
Customers are also seeking technical support, in order to optimise vitamin, mineral and general additive use, to meet the challenges ahead of us.
It is clear the animal production will grow in the years to come, in order to meet the increasing demand for animal protein, and that of the growing and more prosperous middle class. This is clearly apparent in emerging markets. The requirement for greater and more efficient production goes hand in hand with the need for more attention to the environment (ecological footprint), quality, and safety (for the consumer, producer and animal).
Orffa's innovation department has been working on these parameters for years.
We were the first to introduce tryptophan and valine as means to reduce crude protein levels in animal feed. And for more than 30 years we have been promoting the potential of probiotics in replacing anti-microbial growth promoters. Most recently, with our Energy plus, we are providing a cost-efficient solution to produce cheaper broiler feeds, and with Excential Selenium, we have the highest bio-available Se source in our portfolio. All these products come with a file, backed up with solid research data, on the basis of which we have been able to secure EU registration. 
From 2014 to 2015, the global feed and livestock industry has generally not performed well. Prices of feed grains have been trading at low prices, consequently dragging down feed markets worldwide. How do you foresee growth in the feed and livestock industry for the rest of 2016, and how will Orffa make the most of this?

The actual depression is a short-term effect, induced by disease pressure and raw material prices. However, the main driver for growth is the growing need for animal protein. The growing middle class is consuming more meat than ever. Growth will largely not come from markets such as Europe and the US, but from emerging markets. Analysts forecast a CAGR of 3-4% in terms of livestock production.

Next to growth, qualitative aspects of production are also of paramount importance, especially in developed countries. However, with the global nature of the business, these requirements will also quickly dissipate to other markets.

What will Orffa's marketing efforts be like for its products in the future?

Orffa sees major growth for both its Excentials range of products, and Elovitals range. Consequently, both our Ingredient as well as our Specialty range are growing strongly.

Orffa's concept has always been the one-stop-shop concept – combining ingredients with specialties, and combining distribution products with in-house developed products. Our intention remains to offer a full package of products to the marketplace, whether in Europe or abroad.
We have organised a customer image review, done by an external, independent organisation. They have been investigating about 100 customers and prospects in Europe about Orffa.
And the key characteristics noted about Orffa are: professionalism, service, innovation, knowledge and portfolio. These are what customers like about Orffa. We want to keep things this way, and build on this to develop our business outside of Europe.
With the emphasis on sustainable agriculture and animal welfare, feed mills and farms increasingly have to meet these requirements in their additive products. Do your customers make demands that the solutions provided by Orffa meet these requirements?
Given the fact that the bulk of our business is still in Europe, we are facing these challenges on a daily basis — sustainability, hygiene, welfare, safety — which are important parameters when it comes to product development.
Since decades ago, Orffa has been involved in providing sustainable production methods (crude protein reduction, anti-microbial growth promoter reduction etc.) and we will continue to do so.
Our key products — emulsifiers, organic or hydroxy-trace elements, botanicals, binders — are offering cost-efficient solutions to meet customer demand.
We are also investing heavily in R&D to develop new concepts. Orffa is teaming up with leading R&D institutes, such as Wageningen University and Schothorst in the Netherlands, ILVO in Belgium and UFLA in Brazil, to research and develop new concepts for optimising animal production.
Where are Orffa's production facilities located?
We outsource production (as well as logistics and ICT). We have exclusive production partners in the US, Europe, China and India.
How do you see your vitamins and minerals product range change in the next five years to meet customers' expectations?

When it comes to vitamins, things are pretty straightforward. The market will grow steadily with animal production, and with the extra quality requirements to animal production. A steady growth of 3-5% per year seems realistic, given the increasing quality concerns of consumers.

When it comes to minerals, things may be different. The standard inorganic minerals, which are widely used, come with a high mineral excretion. In view of the environment, excretion needs to be reduced, which requires more efficient product forms, such as hydroxy minerals and organic minerals. Using such products allows one to increase product availability. Also human health aspects of mineral use will become more important – dustiness will become a major issue.

Separately, a mineral like selenium has major health advantages, since Se acts as an important antioxidant. It will consequently be more and more important to supply adequate amounts of bioavailable Se to animals.
What are the major regions and countries where Orffa currently markets and distribute your vitamin and mineral products to?

Today the majority of our sales are made in Europe, both for ingredients and specialties.

Our products are successful in the European feed industry, which is very demanding in terms of quality, performance and sustainability. These characteristics form the cornerstone of our promotion globally. We already sell our products and concepts in more than 80 countries. It is our ambition to become a global player, and we expect to grow in Asia.
Specifically, we now have direct operations in the US, Mexico, Colombia and Brazil, as well as in the Middle East and India.
We have started marketing our specialty concepts in Korea, Vietnam, Thailand and the Philippines. In the next stage we want to strengthen our presence in the Asian market, and develop activities in China, Japan, Indonesia and Australia.
We think that there is a need in the market for a high quality marketing and R&D driven company, active in both specialty products and concepts, and ingredients.
Please describe your presence in China.
So far we have no sales in China yet. Having said that we have a company in China and one in Hong Kong.
We are now in the process of product registration at the Ministry of Agriculture and of the company registration at the AQSIQ. We hope to finalise this in the course of 2016, allowing us to start introducing our products in the very large, but challenging Chinese market.

In China, vitamin B1, B2, B6 and B12 prices have surged substantially due to inadequate supplies of raw ingredients. Do you see this uptrend continuing?

China has developed into the main production base of vitamins – the lion's share of several vitamins is produced in China.

What we have noticed over the past years is that production capacity exceeds global demand. This introduces volatility in the market. Moreover, the feed vitamin market is a slowly growing market, rising with that of meat production. Fluctuations in meat production is also a reason of oversupply. However, in the long term, the market demand in China will be the motor for further growth.

Volatility is even more accentuated by the stringent environmental policies of the Chinese authorities. Reducing pollution levels is high on the agenda in China, leading to very strict control and drastic measures taken. Several factories have been forced to relocate, leading to reduced output. Very often vitamin producers, or producers of raw materials, are affected, leading to artificial price upswings, followed by downswings.

It is my belief that this volatility will continue to exist in the near future, given the above mentioned drivers, which makes it very hard to predict where prices will go to.

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