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on June 25, 2009

Veronesi: Anniversary for an industry leader

On the occasion of the company's 50th anniversary, Veronesi in Italy tells us about its feed business today and prospects for the future.

This has been a banner year for Veronesi, the group that can claim to be Italy's largest manufacturer of animal feeds and also a regular name on the list of Europe's biggest feed companies. Exactly 50 years ago, it opened its first feedmill. Moreover, the year 2008 has also marked the 40th anniversary of the group's poultry arm, Agricola Italiana Alimentare (AIA).

"Of course, this year has hardly seemed a cause for celebration for anyone in feed and livestock production," remarks Massimo Zanin, managing director of the feed business division at Veronesi. "It has been a difficult year in terms of trading, there is no doubt about that. However, we can say we are quite pleased with the performance of our group under these conditions and having the two anniversaries has given us an added bonus."

Main livestock-producing areas

A brief profile of Veronesi's feed business today would show that it is centred on seven mills covering all the main livestock-producing parts of Italy. Between them, these plants in the most recent 12 months of activity have produced 2.4 million metric tons of feeds, up from 2.3 million metric tons in the previous year.

The plants are concentrated particularly in the Venice area and across the north of the country, as a glance at a map of Italy reveals. The most northerly are five that form almost a straight line from Cuneo in the region of Piedmont through Cremona in Lombardy to a collection of three mills in the Veneto region, at Padova and Verona. The nearest plant to these lies only a short distance south, near Parma in Emilia-Romagna.

But the exception geographically is the more southerly location of the mill called Putignana. This is close to Bari on the Adriatic Sea, therefore positioned within the region known as Apulia and sufficient far south in Italy to be virtually on the opposite coast to Naples.

Verona is where Veronesi has its headquarters. The office building is located in a district known as Valpantena and local records show members of the founding family were active in milling grain there as long ago as 1500. The modern group bearing the family's name was established in 1952. At that time its origins were still in flour milling, but by 1958 it had opened its first feedmill on a former flour-mill site to serve farms in the Verona area.

The story was soon evolving further, this time through steps into vertical integration. In 1968, a leader in Italian poultry production called AIA became part of the group.

A register of Veronesi's poultry production activities in 1970 gave the annual volume of meat produced as 9,500 metric tons. Production has grown since then to a current level of about 300,000 metric tons per year.

Leader in eggs

During the early 1970s there came a diversification into growing turkeys as an affordable alternative to beef. Initial output of turkey meat was only around 2,500 metric tons per year, whereas now it is in the region of 200,000 metric tons annually. Along the way, Veronesi also has emerged as the Italian sector leader in eggs with a production and marketing of over 1 billion eggs per year.

Relatively, pigs have been a more recent addition, starting in 1985. Its role in the group has enlarged considerably since 2002, however, which was when Veronesi acquired the Negroni trademark to put alongside that of AIA in an integrated network of feed, farms and meat processing.

Negroni also embraces the brands of Montorsi, Fini and Daniel, and currently covers the production and processing of about 700,000 pigs per year. The group's beef-producing activities are numerically smaller at around 30,000 cattle annually while at the other end of the scale on numbers, there is a separate division raising 7 million rabbits for meat. All said, the business units give the group an annual turnover of over 3 billion. "An important point to remember about our feed business is that almost two-thirds of the production is dedicated to our integrated chain," Mr Zanin said. "From this, we obtain the experience that we make available to the free market,' meaning those customers who are outside the integrations. In fact, there are more than 600,000 farmers who buy their feeds from our company on a free-market basis, in addition to 2,200 farms that are connected in the integrated chain.

"In my view, it is the experience combined with our attention to safety, quality and service in the form of technical assistance that are the principal factors permitting Veronesi to confirm its leadership in the Italian market. Safety and quality can never be forgotten, of course. We explain to every visitor that we check everything in our feed manufacturing activities. That means checking the suppliers of the resources we use, checking the raw materials, running constant checks on the processing activities in our seven plants and carrying out quality control on the feeds we produce.

"Feed is the first step in the food chain. In order to have quality in the food, we need the best quality in all raw materials we use. That is why we are inflexible, checking all the raw materials we receive [by trucks, by train or by cargo boats where possible] in order to avoid the presence of undesired substances and to be sure that the feed we give to our animals or we sell to the farmers is the best possible."

Feed International asked Mr Zanin how much these manufacturing activities at the company had changed over the past five years. Farmers are becoming more professional and demand a greater professionalism from their suppliers, he replied. The feed manufacturer is not simply a supplier, it is more a partner for the farmer. Its suggestions to improve farm results on both zootechnical and economic levels must be good.

"For us, it is an absolutely strategic necessity to have successful farmers. Both of us need to take a positive attitude and to have trust in the future, which is possible only with good results. What this means most of all in practice is that the weight of the services you provide related to the feed is becoming more and more important. In these modern times, you could produce in the best way and yet it might still not be enough without the services behind it."

High cost of commodities

How much, we wondered, is the company's feed division being affected by the changes in the world prices of grains and of oil for fuel? Mr Zanin started by pointing out that the last 18 months or so have been hard for Italy's livestock farmers, who found themselves caught between sharply higher costs for commodities and rather low market prices for their animals, resulting in big losses.

"Our effort in this period has been to help them as much as we can by keeping cost increases to the very minimum, without changing the quality of the feed. Now, we hope for the farmers and also for us, that the prices of the feed grains will stay at the lower level seen here in Italy in recent weeks. It will reduce the production cost of all the final products, whether they are meat, milk or eggs.

"The new problem for us is caused by the international crisis in the financial sector for the simple reason that it can put the farmers in a bad situation with the banks. The risk for any farm that is unable to secure credit from the financial system is that it will be obliged to stop its activity. At the moment, we can only hope that something will change so the crisis is rather short."

Our next question was to ask where we should expect Veronesi to be as a feed manufacturer in the next five years, not only in size, for example, but also in relation to integration with animal production and meat processing.

"Both integration and free market' sales are important for us," Mr Zanin said. "Integration allows us to have a direct link to the final consumer with high quality products and well-known brands, controlling all the phases of the production chain. With it, we can guarantee the quality and safety of the final products.

"With our activities in the free market, we give the same possibility to the farmers. Looking to the future, I think that the trends in market prices both for raw materials and for animals or meat will have quite an influence on the relative proportion of total activity represented by each of the two possibilities. The goal of Veronesi is to increase its market share in feed production through selling on the free market and in meat production through integrated farmers."

Made in Italy

Will we see the company become more active outside Italy? His answer reminds us that exporting already provides a significant chapter in the Veronesi story.

"We often say that we are proud to promote the made in Italy' label abroad. In fact, our ham and salami with the Negroni brand is sold worldwide, from the US to Japan and Australia, while poultry meat products with the brand AIA are available in all European supermarkets.

"As a seller of feeds we are present already in some other European countries — Albania, Greece, Malta, France, Hungary — especially with fish feed, which is more technological than other feeds. Will there be more Europe in our future? You should never say never!"

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