Interview Agricultural Life: Clarebout has doubled in three years
Clarebout belongs to the remarkable group of West Flemish agricultural and food companies that have reached the world top in their field. The potato processor has grown rapidly in recent years. According to Yves Capoen, the potato purchasing director, this is partly due to the growth of the total fries market, but above all by showing flexibility to customers; focusing on private labels and developing a close relationship with cultivators.
Clarebout Potatoes has experienced a tumultuous growth in recent years. The company has since become the largest producer of pre-baked, deep-frozen potato products in Europe. The company is number four in the world after two American and one Canadian company. In 2017, the company generated approximately € 600 million in revenue and € 22 million in profit. Clarebout is good for a production capacity of approximately 700.000 tons per year. Jan Clarebout (58) is the CEO and owner.
Clarebout has two production sites. One in Nieuwkerke in West Flanders and one 11 km away, just across the language border, in Waasten or ‘Warneton’. Both locations are located a stone’s throw from the French border. The Nieuwkerke location has two production lines and the larger complex in Waasten has five production lines. The end products are intended for sale under a private label.
The fries and potato flakes are therefore made on order by supermarket chains, fast food chains and the hospitality industry. Clarebout has opted to work for private labels right from the start. “We believe in specialization,” says Yves Capoen, potato purchasing director, about this. Clarebout does have a brand, Marquise, that customers, who need a ‘name’ for their products, may use. Clarebout has no growth ambitions in this regard. All focus is on the private label.
“We are in constant consultation with our customers to come up with new products and improved products,” says Capoen. “The initiative usually lies with them, because they are in direct contact with the customer. As Clarebout, we focus on a very close collaboration in the chain, each one with its own specialty. It is up to use to show flexibility. In terms of product development, but also with regards to delivery. If someone should call us for a fast delivery, he can come to us with his trucks within a few hours.”
Just like other players in the sector, the company has grown strongly in recent years. The growth is due to the rapid growth of the worldwide French fries market. The global French fries market has grown by an average of 2% per year between 2016 and 2021, as calculated by the market research agency, Euromonitor. The volume will thus have grown by 1,2 million tons over a five-year period to 13,3 million tons. According to Capoen, The Low Countries, as the potato countries par excellence, have the opportunity to profit from this growth.
Growth, however, is far away, for example, in the Middle East, South America and East Asia. According to Euromonitor, North America and Western Europe currently account for 5,5 million and 3,5 million tons respectively. To compare: Asia is only good for 750.000 tons. In the US, almost 13 kg of French fries are consumed per person per year on average. In Western Europe this is 7 kg. In other parts of the world, consumption is below 1,5 kg per person.
Where Farm Frites opted for a factory in Northeast China, Clarebout intends to continue to serve the distant markets from West Flanders. We thus do not work with commercial agents. Business is done by a commercial team at head office. Unlike commercial agents, they serve only one company. Moreover, Clarebout maintains a high priority when it comes to direct contact with customers.
The success of the French fries industry has a downside: it is becoming increasingly difficult to find qualified personnel. The number of employees has roughly doubled in the past four years to 1.400 employees. Although the head office is situated in Flanders and the owner is Flemish, the majority of employees is French-speaking.
This not only concerns employees from Wallonia, but from also northern France, which is very close, both geographically and culturally. “The employment conditions are better in Belgium than in France,” explains Werner Verstraete, who is primarily responsible for human resources and accounting. “This gives one a quicker view of permanent employment than what is common with French companies.”
In addition, unemployment in northern France has been quite high since the textile industry has moved to Asia. The French-speaking share is approximately 80% of the workers. The share is 10% to, at most, 20% with regards to the office personnel. Clarebout recruited a net amount of 100 people in 2018. The company is looking, once again, for an additional 60 people. “It’s a battle for talent, not just for us, but for the entire sector,” says Verstraete.
“The importance of technical education has been underestimated for too long,” says Capoen. “Parents encouraged children to pursue non-technical professions. This is changing, but we have to work with schools to assure ourselves of talent.” Verstraete adds: “We are not talking about old-fashioned assembly line work: that is all automated. It’s about people who can operate complex machines and who can analyse what went wrong in case of an error message.”
The company has been struggling with a number of safety incidents in recent years. Verstraete: “Safety is our top priority. One could think: the company has grown rapidly and therefore not all rules are being observed. It is not like that: because we have always been very aware of the risks associated with rapid growth, safety has become increasingly important. The accidents have had a huge impact on our people.” Being safe is a “permanent” priority for the company. Continuous actions are being launched in order to keep safety awareness high. In addition, Clarebout is also working on achieving the new ISO 45001 standard, the highest international standard regarding health and safety in the workplace.
“Everyone has invested”, establishes Capoen. More has been invested over the past three years in capacity by the entire sector than the growth rate of the market actually makes possible. There has been an enormous expansion in the entire sector, and that internationally; not only in Belgium, but also in, for example, Northern France, the Netherlands, England and Germany. We are then talking about the most important potato-producing countries in Europe. “As a result, the growth rate at Clarebout may also slow down somewhat and some pressure could be put on the prices,” says Capoen.
Competitor Agristo started using a brand-new factory at the end of last year. The production capacity has therefore increased considerably. Clarebout has also invested € 300 million in factories over the past three years. There is no holdback, but the pace will surely decrease, thinks Capoen. “It must all still get sold, mustn’t it?”
The drought in 2018 affected potato cultivation. It led to controversy regarding contracts. Cultivators often make agreements concerning the volumes with the buyer. If the volume cannot be met, the factory just buys the tonnage elsewhere. The invoice for the purchased potatoes is then returned to the farmer. For the farmers it means a financial burden in such a case. But, on the other hand, there are also years when the free market price falls below the contract price. In this case too, the contract plays a role and there is ‘profit’ for the farmer. “Proper hedging or balanced hedging by the cultivator is very important,” says Capoen.
The Algemeen Boerensyndicaat (General Farmer’s Syndicate) and, with a slightly less loud voice, the Boerenbond (Farmers’ Union), have asked the French fries industry not to keep the cultivators too severely to their contracts. The organization of the processing industry, Belgapom, reacted furiously. A contract is a contract, said Secretary-General Romain Cools. Cools suggested that some cultivators may have made insufficient efforts to deliver the tonnage.
Capoen agrees with Cools in essence, but is nevertheless milder. “A contract is a contract works both ways. In years when the price of free market potatoes was low, we also paid the higher price that was contractually agreed upon.” Usually, a percentage of the potatoes are sold under contract and another part is held for free trade. “If delivery is not possible, the ratio may not have been good.”
Capoen also sees that some cultivators have irrigated quickly and quite a lot and therefore incurred high costs. “Others have thought, or speculated, that the rain would come in time. Is it fair to exempt them now from contractual obligations, where others have incurred high costs to meet their obligations?"
Capoen also puts things into perspective. The number of actual problematic cases at Clarebout rather concerns dozens than actually hundreds of cultivators. “The perception is that it concerns a large group, but I think it will stop at 3, perhaps 4%, of the cultivators. Because every situation is so specific, we can only ask cultivators to come to us on time. If you have a contract, it works both ways. If necessary, we would like to be creative together with the cultivator.”
Capoen does not believe that cultivation will shift to Central and Eastern Europe. Belgian potato cultivators are generally of a very high standard and the conditions in North-West Europe are excellent. With the sea climate and sufficient rain under normal circumstances, we still have a competitive cost despite high land prices - due to the high yield per hectare.
A Belgian cultivator usually yields 50 tons per hectare without irrigation. “Compare that with Poland, Russia or Romania. Land is cheap over there, but the soil is also less rich and maintained. They are happy there with 20, maybe 25 tons.” The cultivation in North-West Europe is therefore safe. As far as Belgium is concerned, Capoen believes that the 100.000-hectare limit will be broken in the coming years. “I certainly see possibilities for growth in Wallonia.”
Clarebout buys the potatoes from approximately 1.500 cultivators. There has been some progress, but although the contracts never extend beyond a year, it is for the most part a permanent group. Capoen: “The relationship with cultivators is of the utmost importance to us.” Clarebout supervises the cultivation where necessary and advises on the varieties that are to be chosen. Clarebout also creates test fields in this regard. “But, we have no ambition to provide a serious part of our raw materials ourselves. We believe in the power of working with our cultivators.”
Source: Landbouwleven, www.landbouwleven.be/4144/article/2018-11-16/clarebout-verdubbeld-drie-jaar-tijd