«We anticipated the end of quotas at an early stage by creating a group of French cooperative growers that now has over 12,000 cooperative members and works on an international scale.” »- Thierry Lecomte
«The strong positions we hold internationally are an asset for a competitive offering around the world.”»- Alexis Duval
What were the highlights of FY 2015-16 for you?
Thierry Lecomte: The decision to remove sugar quotas from October 2017 will be an important milestone for the European market. However, this liberalization doesn’t actually constitute news for Tereos. It follows on from the 2006 sugar market reform. The majority of it was included in the 2020 CAP reform, which we always keep in mind and we have anticipated. Our strategy is guided by the ability to take the right course to ensure well-priced agricultural produce in the long term. The strength of our model, from a cooperative grower’s point of view, lies in establishing a cooperative group that works with an overall sectoral vision and in having been able to build a largely open group on the international stage, at a time when export issues are growing ever more significant. It also lies in being able to rely on a balanced and diversified model at a time when our markets will face increasingly high volatility. In terms of our French sugar beet business over this year, Tereos has taken major steps forward aimed at improving competitiveness and continuing to offer sugar beet prices that are attractive to our cooperative partners in a deregulated market. Since the start of the sugar market reforms in Europe ten years ago, we have always been able to adapt and strengthen our business, and we are continuing to do so today.
Alexis Duval: Market environment throughout the year was very poor, probably one of the toughest the Group has ever faced. In this context, Tereos has shown great resilience, demonstrating the strength of its model. This is a prime source of satisfaction.
Moreover, the Group was able to strengthen its positions and continue implementing its long-term strategy, which aims to anticipate a number of major changes in its markets, namely the liberalization of the European sugar and isoglucose markets in 2017, globalization of the supply chain, changes in consumer habits and the rise of environmental and energy issues.
Let me give two examples. Firstly, the culture of continuous improvement in performance and operational excellence that we previously established is now beginning to bear fruit, as shown by the very pleasing operational results we recorded over the year.
Secondly, the development of our international trading activities and the distribution operations in our historical markets contributed to the Group achieving better control of the supply chain in order to offer our customers a very high level of service and food safety.
AS WE APPROACH THE PIVOTAL PERIOD IN WHICH QUOTAS WILL BE REMOVED, HOW HAS THE GROUP PREPARED FOR THIS MAJOR MILESTONE?
Thierry Lecomte: We couldn’t prepare for such an important change at short notice. We anticipated it at an early stage, as we gathered our resources over the years, by creating a group of French cooperative growers that now has over 12,000 cooperative members and works on an international scale.
With the end of quotas and the liberalization of the market, the European sugar industry will face new challenges, which may be a threat to the market but could also be a source of opportunity.
In a market that will come to show a structural surplus, export issues will take center stage. That is the sense we are getting of how our trading activities have developed since November 2014 through Tereos Commodities. Against this backdrop, the strong positions that we hold internationally, particularly in Brazil, become an asset for a competitive offering around the world. As far as our operations in Europe are concerned, the acquisition of Napier Brown in 2015 allowed us to strengthen our market share in the UK, the number-one export market for French sugar. Through its development in Europe, Tereos has built one of the most efficient distribution networks of the entire continent. This reflects a more volatile environment in sugar beet contracting to ensure we are visible to both our cooperative partners and our customers. In this regard, Tereos may rely on the strong links between the company and its cooperative partners, as well as its successful past experience in out-of-quota sugar beet contracting. Remember that even before the reform, out-of-quota sugar beet already accounted for half of our sugar beet business in France. This is the basis for the new long-term contractual framework put in place this year between Tereos and its cooperative partners for the post-2017 period. Lastly, there are growing issues around competitiveness. In this regard, Tereos can rely on its size and the performance of its sugar beet basins and industrial tools. In total, this should allow the Group to grow its business by 20% in France.
WHAT DOES THE END OF QUOTAS CHANGE FOR COOPERATIVE PARTNERS?
Thierry Lecomte: The cooperative model that Tereos has built over the years is a strong model for cooperative growers because adding value to agricultural produce is at the heart of its mission. It is also a model that brings security to cooperative growers because Tereos directly represents their interests within inter-trade bodies, taking into account the specific features of cooperatives.
When contracting post-2017 sugar beet was first brought up, we were the first group in Europe to commit to guaranteeing a minimum sugar beet price and to providing a framework capable of making our cooperative partners visible in the long-term. Over the years, Tereos has successfully demonstrated its commitment to paying its cooperative partners for their produce.
For French sugar beet, we had expected a volume increase from 15 to 18 million tonnes. We are finally going to exceed this 18 million tonne target. The confidence of cooperative partners in the model that we have built is the primary reason for this commitment.
HOW DOES YOUR MISSION GUIDE THE AMBITIONS AND DEVELOPMENT OF THE GROUP?
Alexis Duval: Our operations cater for basic human needs: primarily nutrition, then energy. Given the current demographic and societal changes, these needs are both fast growing and changing, particularly as regards nutrition. One of our major challenges is to meet this demand by increasing production while still ensuring sustainability and quality.
All of this is part of the reason for Tereos' commitment to sustainable production, from upstream agricultural activity to the nutritional profile of our products, via ever more virtuous industrial processing,