French poultry supplier Groupe Doux is a company looking to the future after a challenging recent past. From June 2012, Doux spent 18 months in administration after pressure from raw material costs and a failed foray into Brazil. In a two-part interview, Stuart Todd speaks to Doux CEO Arnaud Marion, the turnaround specialist hired by the administrators and who has stayed on to lead the business into what he hopes is sustained recovery.
It has been a year since Groupe Doux, the French poultry processor, emerged from 18 months in administration.
Go deeper with GlobalData
A change of ownership at the company allowed the business to move forward – but it saw the founding Doux family relinquished control of the business.
French investment fund D&P took a 52.5% shareholding in Doux, with Saudi food distributor Almunajem attaining 25% of the company. The Doux family retained a 22.5% stake.
When Doux entered administration in 2012, the administrators appointed Arnaud Marion to oversee the restructuring of the poultry processor and its strategy. He was appointed CEO in December 2013 and remains at the helm of the business.
See Also:
Marion says Doux's road to recovery has focused on three main challenges: reducing the company's debts, achieving profitability and ensuring the long-term future of the firm.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData"This was a tall order but I think we've gone a good way to laying the foundations for Doux to stand on its own and compete," he says.
Having entered administration with debts estimated EUR450m – largely a result of rising commodity costs and also a failed venture in Brazil, the current figure is around EUR90m, Marion reveals.
"As for achieving profitability, this was in effect, a double challenge in that the company had, strictly-speaking, never really made money, its profitability having been fully-dependent on EU export subsidies which were abolished completely from 1 January 2014. So we've had to construct a whole new business model for Doux that allowed it to be profitable without external aid," he says.
Building a lasting future for the company owes a lot to the arrival of D&P as Doux's major shareholder and the decision by Almunajem – which Marion describes as "our principal partner and customer for the past 45 years" to exercise its option on a 25% stake. The D&P fund was, Marion claims, "the sole candidate who was ready to take on the investment risk that the company represented".
However, the durability of Doux's new shareholder structure was tested earlier this year when speculation pointed to the full or part sale of the firm. Brazilian food giants JBS and BRF were cited in the media as possible bidders.
At a press briefing in Paris in June, Marion confirmed Doux was attracting interest from several French and foreign groups but declined to identify them. "We are open to alliances and are ready to listen to what these parties have to say and consider whether we can do things together. But there is no sale process underway."
Six months on, interest in Doux remains strong, Marion asserts.
"With its important market share and strong presence in growth regions such as the Middle East – for example, we are the leading brand in Saudi Arabia – it's natural that Doux is attracting the attention of international investors who are either already active in the sector or want to be," he says.
"The fact that, to date, this interest has not been transformed into anything concrete, probably indicates, above all, that we are taking our time and not hurrying into anything. We were not in a sale process back in June and are not in one now. D&P, Almunajem and the Doux family are here to stay and have a common vision of the company."
However, Marion hints that there is room for another strategic investor – as opposed to a purely financial one – alongside the current shareholders in order to facilitate the company's transition from a recovery to expansive mode.
"It's likely that during the course of next year, there will be a change in Doux's capital to further strengthen our financial solidity and create a shareholder structure that will allow Doux to push on from where it is now. We may be in the world's top three poultry exporters but are by far the smallest, having a 15% share of the market compared to around 70% for JBS and BRF."
Putting Doux on a competitive footing with its Brazilian rivals is one of Marion's primary concerns. "What's become clear is that there's no future for small companies but with exports of 15,000-20,000 tonnes per month, Doux has the necessary 'critical mass' to be competitive."
For Marion, the key to Brazil's success is its monetary rather structural competitiveness. "A heavily-devalued real against the dollar gives Brazilian exporters the upper hand over its rivals on world markets and this alone."
He goes on highlight the gulf in wages between Brazilian workers and Doux's staff but is undeterred.
"We have a considerable disadvantage in terms of labour costs but we have been able to narrow the competitiveness gap by re-organising our business to encompass upstream integration, through regular investment in upgrading processing and production facilities and in putting the accent on diversification which cushions against the cyclical nature of the export trade."
He also underlines that wage inflation is a growing issue in Brazil, where there is full employment, with increases of between 10 and 12% at the lower end of the salary scale compared to 1% for Doux.
He takes comfort too in "the fundamental economic parameters", which he says are in favour of the EU economy and its businesses.
"In Europe, we're in a deflationary phase and prices are stable. Brazil, by contrast, is confronted with economic difficulties. Inflation is at more than 7% whereas in the eurozone it is close to zero. This contributes to reducing the competitiveness gap too."
Part two of our interview with Marion – in which he discusses Doux's new business model, its 2014 performance and its outlook for next year – will be published tomorrow.
