Annual report 2017
The meat industry is one of Marel’s three key protein industries. Marel Meat is a leading global supplier of integrated systems and advanced stand-alone processing equipment to the red meat industry – from live animal receipt to finished packs. Marel Meat contributed EUR 334 million in revenue in 2017, or 32% of total revenues, translating to an EBIT of 11.5% (operating income adjusted for amortization of acquisition-related intangible assets).
The consumer value of the global poultry, meat and fish market is estimated to be around EUR 1,200 billion. Meat is the largest market segment, with an estimated value of EUR 600 billion, followed by poultry and fish. More specifically for Marel, the market for food processing equipment and its maintenance for poultry, meat and fish is estimated to be around EUR 10 billion. Of this, meat processing equipment is estimated to be around EUR 5.5 billion and is expected to grow annually by 4-6%.
Integration was the key theme for Marel Meat in 2017. Over the course of the year we worked diligently on the integration of new team members into the front-line sales team as recent acquisitions have made us a full-line supplier to the meat processing industry. We unified our product offering and the team providing it. Our approach was simple yet effective: the whole team was trained to be able to represent the full product line, from farm gate to final pack. Intra-company logistics and wastewater treatment were also areas of focus, with successful projects undertaken in both fields.
The MPS (Meat Processing Systems) acquisition closed in 2016 and key elements in integrating the company were successfully realized in 2017 and will continue in 2018. The expertise and product offering of MPS support Marel’s growth strategy in the meat sector. The acquisition has made Marel a full-line supplier to the industry by closing the value chain gaps previously existing in the primary processing segment. Extensive new, full-line projects undertaken in China, South America and the US are clear testimony to the success of the integration.
Another major milestone towards closing the remaining gaps in our product offering and geographical reach was the acquisition of Brazilian meat processing equipment manufacturer Sulmaq in Q3. Sulmaq was operated as a stand-alone company in 2017 while Sulmaq and Marel developed strategies to optimize the synergies of the partnership.
Sales and service have to go hand-in-hand and integration efforts for the Marel Meat service organization were a key focus in 2017. We brought all service activities under one management structure and further strengthened our regional support teams through repositioning and training.
Our product offerings link up to cover the entire value chain. This was reinforced in 2017 with both the launch of new products and improvements to previous machinery. Marel Meat introduced a new design for the beef deboning StreamLine system that meets the latest hygiene standards and the SpeedBatcher by-product packing solution. We released an optimized Trim Monitor reject-system for meat, created a new paceline infeed and finalized the design of the I-Cut 130 for red meat applications. The I-Saw automatic frozen portioning machine was released in 2017. Our launch of the DeboFlex pork fore-end deboning solution was very well received with new systems delivered to Brazil, North America and Europe.
Our highly effective Innova software was a key aspect in the promotion of our full-line processing equipment. Our software is at the heart of many of our cutting and deboning solutions where product traceability is essential. It enables our customers to mitigate operational risk, providing full traceability from farm to fork.
The efforts of 2017 have placed Marel Meat in a strong position in the market for automated solutions. Automation is employed on many levels of processing and can range from simple machine installations to fully automated robotic lines, controlled by food production software that monitors and manages the production. We saw increased opportunities for automation at every processing step in both the pork and beef sectors in 2017.
Marel Meat focused on supplying stand-alone systems and equipment to the case-ready and food service sector. We have a strong foothold in this segment and flexibility and end product differentiation were key issues in 2017. We delivered systems and solutions that help our customers keep pace with the ever-increasing demands of retailers and consumers for case-ready products at competitive prices.
In 2017, Marel Meat continued to work on innovative equipment and software solutions for the industry. As a company thriving on innovation and the development of high-tech applications, Marel sees opportunities where others see challenges. Our teams at Marel Meat are adept at turning ideas into reality; challenges into solutions. Intelligent software applications have become an integral part of the meat production solutions we offer our clients.
Increasing automation at some of our more high-tech customers was a key issue in 2017. During the year, Marel Meat developed practical and efficient solutions for every level of automation. Each application was built on in-depth processing know-how, decades of experience and our innovative approach to intelligent automation. Some of our most successful projects in North America, Brazil, Europe, Russia, China and Australia included our intelligent robotic slaughter lines that have set a new standard in slaughter line robotization.
We continued to develop our overarching software solution, Innova. It is designed to control and monitor every aspect of meat processing to increase yield, quality and throughput. We work closely with our customers and other divisions within Marel to create systems and solutions that allow food to be processed in an affordable and sustainable way.
Our motto at Marel Meat is to keep our innovations on the cutting edge of modern technology, while delivering the exact functionality, durability and production stability our customers need to maintain their position in the meat processing industry.
Thanks to strategic acquisitions and organic growth, Marel Meat now covers the entire value chain; from live animal intake to finished consumer product. Our projects in 2017 reflect this scope, as larger installations and greenfield projects became more prominent. Some of our largest greenfield projects took us to Spain, France, Mexico and Korea.
We worked with GrupoJorge, one of Spain's largest meat producers, on extending the capacity of their existing factories, for example. In addition, Marel Meat developed completely new processing facilities for Granjas Carroll de Mexico in Mexico and for PuKyung Pig Farmers Agricultural Cooperative in Korea. Greenfield projects like these are our specialty, as they enable us to utilize our processing and technological expertise to help our customers reach their goals.
Customer story
The Foyle Food Group supplies high quality beef to leading retailers, manufacturers, food service providers and butchers across the world. It has now installed Marel’s Trim Management System in three of its five processing plants and reports major advantages gained from the systems.
“Our main reason for installing the Trim Management System was to be able to meet the increasingly varied requests for CL content,” says Michael McKay, General Manager at Foyle Food Group. The company can now measure and verify the fat/lean (CL) content in their meat supply and deliver final batches of meat of specified weight with a fixed CL as prescribed by the customer. The system also beats the human eye at detecting bones and other hazardous objects (down to 5 mm), enabling the company to meet increasingly high demands for food safety and hygiene.
“That is a great benefit and makes a huge difference to profit. As a matter of fact, we have gotten new customers onboard because of the system’s efficiency,” says McKay.
Animal welfare is and will always be an issue of the utmost importance in the protein sector. Consumers are conscientious and want products that are produced sustainably and ethically. Marel Meat worked closely with customers in 2017 on these issues, delivering systems and equipment that improve production sustainability, both in terms of raw material utilization and energy and water consumption. We emphasize helping processors to be flexible in their product offerings, while simultaneously adhering to animal welfare standards in the primary part of their processing and ensuring sustainability throughout the value chain. This applies to their processing facilities and their equipment set-up.
Wastewater treatment is another area where Marel Meat directly contributes to clients' sustainability efforts. The Marel Water Treatment division is a part of Marel Meat. This long-standing, internationally recognized division was integrated from MPS in 2017 and offers primary, secondary and tertiary treatments for all types of food processing wastewater. Marel water treatment systems are efficient, easy to use and characterized by low maintenance.
With different trends governing our sector, Marel Meat sees opportunities for expansion in both traditional growth markets and what some would call saturated markets. As a well-established provider with a full-line offering for primary, secondary and further processing, we see our basic growth being driven by traditional demands, for instance, for improvements in yield, quality and throughput.
In the more advanced sectors of the market, where automation and production optimization have already occurred, we see growth opportunities in the need for a sustained margin. Our approach is to introduce new technologies to increase automation and boost yield.
We have witnessed a clear trend in recent years towards increased requirements for automated systems and processing procedures. As processors face tougher competition with increased automation, they realize that they need to implement new technologies to stay on track and meet fluctuation in consumer demands.
In 2018, global production of beef and veal is estimated to rise by 1.9% to 62.5 million tons. Global trade in beef and veal is expected to grow by 2.7% and reach 10.1 million tons.
In recent years, India has been the world's largest exporter of beef and veal and is expected to remain in top place in 2018, closely followed by Brazil. However, it should be noted that unlike the other major exporters, India’s beef exports are based on water buffalo meat, as export of cow, oxen and calf meat is prohibited by Indian law.
The US is forecast to continue as the leading producer in 2018, accounting for 20% of total production, followed by Brazil with 16%.
On the import side, China (including Hong Kong) overtook the US as the world's largest importer in 2017.
In 2018, global production of pork is estimated to rise by 1.8% to 113.1 million tons. Global trade in pork is expected to grow by 2.6% and reach 8.5 million tons.
China continues to dominate the pork market, accounting for an estimated 48% of total production in 2018, followed by the EU with 21%.
The EU is the world's largest exporter of pork, closely followed by the US.
China continues to be the largest importer followed by Japan, which it overtook in 2016.