Vertical integration

For a food business – Identification of opportunities to create a high value product and reduce food waste

The client and context:

· The client is a large scale, international food business. The company has a high degree of upstream vertical integration and goes from agriculture to transformed food products.

· The company commits to buy from growers large amounts of produce and they want to return the best possible price to growers.

The challenges:

· The client was looking for a high value transformed product to integrate into their value chain and to assess the right strategy to integrate that new product into the business (acquisition/greenfield/subcontracting)

What we Did:

· We explored a variety of potential transformed products which were not fulfilling the economic objectives of the project.

· We conducted a market study on a brand new product line which was holding a great market potential and returning the appropriate profitability. We then explored the integration of this product into the client’s value chain.

· We developed an implementation model involving a subcontracting agreement and a successful product launch. The work performed involved a selection of business model, a selection of supplier, operationalisation and financial modelling (for board approval).

What we achieved:

Doubling of the return to growers for the class 2 produce. Food waste reduced by 5,000t/year Creation of a new business line with a gross margin higher than the group’s average by about 10 percentage points. Improvement of the overall group’s profitability and €10- 15m value creation for shareholders.