RANDERS, Denmark – Plans to build a new joint headquarters for Danish Crown and Tulip Food Co. are on hold due to low pork prices.
The project, which Danish Crown announced in 2017, involved renovating a former sausage factory in Randers, Denmark, into a modern, 23,000-sq.-m. office building.
“The situation is that the difference between the cost of producing a pig and the price at which it can be sold is being pressured by the low pig prices,” said Group CEO Jais Valeur. “As a result, we do not feel that this is the right time to go ahead with this project. Having Danish Crown and Tulip Food Company move in together still makes a lot of sense, but it will not happen at the beginning of 2020 as originally planned.”
Instead, the company’s focus is to reduce costs for procurement excluding raw materials from Danish Crown’s member-owners by 650 million Danish krones ($100 million) before the end of the 2020-2021 financial year.
“We have established a new procurement organization, and our specialists have identified significantly higher potential savings than were originally estimated in our strategy process,” explained Group CFO Preben Sunke. “These are not savings which we can realize overnight, but the process has confirmed that we were right to invest in new procurement expertise, and this is the reason why we are raising our target.”
Additionally, a new Global Business Services center in Poland will enable Danish Crown to consolidate, standardize and automate a number of administrative roles to control costs. The company will transfer approximately 50 jobs to Krakow, Poland, from Randers. The transfers are expected to generate 40 million Danish krones in annual savings.
“This will bring benefits in relation to serving our customers as well as delivering specific savings,” Sunke said. “However, it is a complicated operation, and it is therefore important for us that the project is rolled out at a pace which is not going to adversely affect our business. The whole process is therefore expected to take two to three years.”
1 Danish krone = 0.15 US Dollar