Spanish food group Campofrio has experienced a successful year to date as the group’s strategy of investing in and building power brands begins to pay off. As part of our SIAL just the answer series, Michelle Russell caught up with Campofrio’s director of route-to-market development Luis Fernandes to talk about domestic economic challenges, key export opportunities for the company and its strategy for growth.
just-food: What brings you to the SIAL exhibition in Paris?
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Fernandes: This is the first time we are here presenting at SIAL as a group. Traditionally we had only our operating company from Portugal come along. We wanted to come here to show our export presence. We also came here to show, not only our new innovation in terms of product, packaging and positioning, but we came here to show a new concept that we started in the UK, a new sub brand called Campofrio Selection. The logic behind this is Campofrio pre-selects [cold meats] for you, so the best from Continental Europe, from Spain, Italy etc. We just launched this new range a few months ago in the UK with Bookers.
just-food: Would you look at trying to gain listings for the product in major multiple retailers like Tesco?
Fernandes: Yes of course. The UK for us is a very key market, but it is also a very difficult market. In our group we have recently created two divisions: market leaders and market challenges. Obviously the first is for countries where we are actually leaders, or very close to it, like Spain, France, Portugal or Italy. And then the other one is for countries where we have a small/niche presence and, consequently, bigger opportunities to grow. Within that second group is the UK.
just-food: What are the main challenges for Campofrio in entering the UK?
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By GlobalDataFernandes: Being very transparent with you, the UK is probably the only strategic market that I have never dealt with directly. But you have extremely good retailers, you have retailers with extremely strong private-label products. There is a huge difference between private label in the UK and in the south of Europe. In the South, in our product categories, the consumer prefers brands. In the UK it’s different. For the consumer, the fact that Sainsbury’s, for example, says this [private-label product] is the real thing and this is a good product, consumers believe it.
just-food: Which overseas markets do you see as key for Campofrio?
Fernandes: In terms of exports, Europe is clearly our first priority and within Europe we have identified seven key markets out of our home countries. They are the UK, the three Scandinavian countries, the Czech Republic, Poland and Switzerland. These are our step one in terms of developing. And we are always looking very closely at the usual suspects of Russia, China, India and some key African countries. We are, as we speak, assessing our halal range as this market is growing, not only in terms of the traditional cheap products, but also premium more quality products. We have started this in Belgium and we have a small halal range we are developing there.
In parallel, we have growth platforms in healthy products, like Naturissimos range, which we are expanding. It’s natural with a very clean look.
just-food: Is that what you are seeing in terms of innovation trends?
Fernandes: Yes. When you talk about health you can talk about several different aspects. So you have the ‘plus’, like omega 3, and plus calcium, which we are not so much into. It’s not so easy in products like mince, but in milk you can add calcium and it’s not questioned. Then you have more natural products. We position our product not like it is natural but that natural is the reason why the product is more tasty. Then you have snacking, something to eat in-between meals. We started [snacking innovation] some years ago in France and we are actually expanding heavily in the snacking platform. We have a team dedicated to snacking and we have been developing products for women. It is mainly an adult market, but in Spain we have a healthy snacking range for kids.
just-food: How are you finding the trading environment in Spain?
Fernandes: Spain of course is a country that economically is in a bad state. It has a 25% unemployment rate. But we are actually having good results in Spain for one simple reason: because we adapted. We thought outside the box and what we did was adapt to launch an affordable range. We either reduced or we develop the range to offer smaller quantities. We also developed other product alternatives, like cooked shoulder as a cheaper replacement to cooked ham. In the end, in a country like Spain, you have lots of people having a hard time, so if you want to continue to reach these consumers and not lose the battle to private label and cheaper brands, then you have to find an equation that works or you are out of the game.
just-food: Has the business been affected greatly by increasing commodity costs?
Fernandes: Yes of course. Our results are public. We are actually doing a very good job in terms of sales and top line but clearly the increase in raw material prices was very high this year. We had a huge increase, especially for pork. And then parallel we have countries like China increasing their consumption of fresh pork, so it’s also a lot about supply and demand. Yes it’s tough at the moment with regard to raw materials.
just-food: Earlier this year Campofrio outlined plans to spend EUR300m over the next three years on production, marketing and new products. Can you expand on this?
Fernandes: This is not under my direct responsibility but I can give you in a nutshell the overall logic. We decided we wanted to focus on less brands and bigger brands and create power brands. The brands we have in Sial are our key brands. We want to focus on investing and building big brands. This in terms of our current business; now, to be consistent with our long-term strategy, and to develop our growth platforms, like health and snacking, we need to bring innovation that will be meaningful, both for our consumers and for our customers. Talking about customers, our key strategy is to strengthen our relationship with our customers all over the world.
