Strategy

 

A meaningful direction

Jean-François Loiseau, Chairman, and Paul-Yves L'Anthoën, CEO, take a look back at the past year and talk about the Group’s transformation plan

 

What is your evaluation of the year 2018-2019?

We are starting to reap the benefits of the efforts we have put in. After a difficult year for agriculture in 2016 due to climatic incidents, and a transition period in 2017, we have finished this year with a solid EBITDA figure. Our results are back in the black, so we can look to the future with confidence. This improvement shows that we have made the right choices in terms of our strategic direction, and demonstrates that the solid bases on which each of our divisions is founded make us agile. Of course, we could not have achieved this without the trust of our farmers and the exemplary dedication of our staff, because there can be no successful transition without commitment. Our staff’s performance has been remarkable.

 

What is the Group’s mission for the next few years?

Our fundamental mission remains unchanged: to develop our cooperative members’ production and support them during the agricultural transition, that is to say, a move
towards a more sustainable agricultural model. To support this model, we have structured our businesses into four complementary divisions: agriculture, milling,
livestock farming and malting. These divisions operate in two separate areas, firstly, France, where we add value to raw materials (processing, trading and partnerships with manufacturers) and secondly, an international operation for our malting business. And we achieve all this without losing sight of our key objective: to bring high-quality products to the market with the aim of improving the food we eat.

(...) support our farmer members in the transition to a more sustainable agricultural model.

Although the company’s main purpose has not changed, the environment is becoming more complex. How is the Group adapting to this new situation, and what are its aims for the future?

Indeed, the grain market is now truly global, and many of the players are international. Agriculture, which for the last fifty years has been sector-focused, is looking through a wider lens. It now has more involvement with the food processing industry and with consumers, both in France and across the world. Consumers are looking for long-term commitments. It is important for us to understand their new expectations and cater to the changing market. That means offering customers what they are seeking: healthy, meaningful products that they can trust, and giving them the full story. Without losing sight, of course, of the need to remain competitive at all times. Against this backdrop, two years ago we started working on an ambitious roadmap through which the group could grow while continuing to create value for our farmers. This roadmap is led by a fully committed management team. It aims to create a resilient and proactive agricultural model, based around our four complementary divisions. We are working to reduce our exposure to factors outside our control (the climate, market volatility, etc.). This means identifying other sources of revenue and concentrating on our strategic sectors, the areas where we have specific expertise from which we can draw value. This year’s decision to acquire Cargill’s malting business was a major step for the group, enabling us to capture value in a growing market, in a sector where our leadership is already recognised. It is through this new future-focused model that we will be able to continue to fulfil our mission to our members, customers and employees.

How is the Group achieving its transformation?

Our transformation plan has three major priorities. Firstly, to constantly strive for superior performance through operational excellence, thanks to the reorganisation plans we have put in place and our digitalisation initiatives. Secondly, to diversify our sources of value creation, through the channels in place in our farming area and through the support we offer to our malting business customers. Lastly, to grow the business in a sustainable manner, to meet the needs of our cooperative members and farmers, not to mention of course consumer expectations. Concretely, we are continuing to build structured, organised channels with the capacity to capture more value for our farmers and secure returns on their production. We work with agribusiness groups looking to build their supply chains. They have heightened traceability and reliability requirements. The CultivUp initiative, our own sustainable agriculture channel is a part of this direction, a vital one if we are to keep customers choosing our products. We have made a conscious decision to develop the use of channels, and we aim to reduce our exposure to export to 1 Mt. To this end, we have been instrumental in setting up the Grain Overseas export platform, in an effort to pool our strengths and limit the risks. We are also progressively transforming the business model behind our various divisions and reallocating assets so that we can develop more rapidly in growing markets. For example, in agriculture, in response to feedback from our
members, we have started working to reduce costs to render our operations more competitive and flexible. In livestock farming, we have begun working on traceability for chickens. Our milling operations are a vital part of the way we add value to grain. We are transforming in line with the size of the market, while constantly striving to improve quality. Last but not least, in malting we have taken another big step up internationally by acquiring Cargill’s malting business. This has brought an additional 600 people into the group; a real turning point in the Axereal story!

(...) move towards a model that creates higher financial returns so that we can better remunerate our partner farmers.

What role does digital play?

The growing strength of digitalisation is an integral component of the innovations we are counting on to build our future success. We are working towards this with two objectives: firstly, renew our relationships with our customers and cooperative members and secondly, structurally reduce our cost chains.

In practical terms, we are putting in place numerous digital applications such as our e-commerce platform, decision-making tools for our farmers and also optimised cereal origination management, streamlined lorry rounds, etc. With one retailer, we have set up a blockchain to offer total traceability for the poultry supply process. This is an excellent example of the progress we are making in the digital arena.

What strengths underpin your strategy?

One of our main strengths is that we cover the entire chain of expertise for grain, from seeds and origination through to storage and processing. This expertise, combined with our innovation and research efforts, not to mention our growing internationalisation, makes us a standard-setter in the grain industry. In the eyes of our customers, we provide complete solutions that add a high degree of value. In the eyes of our cooperative members, we are the ideal partner to help them maximise their returns on their agricultural production. Another specificity of our model is its governance, with the balance of political and executive powers. The Board of Directors and the Executive Committee work hand in hand, with sincerity and in the interests of our cooperative members. Lastly, we must mention the Axereal hallmark - our staff, who tackle each job head-on, with determination, and respect. Without respect, nothing can last. We should also add that being a cooperative means we can take a long-term view.

How does Axereal Group see the future?

We see ourselves sharing the operational transition of the cooperative and its industrial facilities with our cooperative members and our staff.
After fifty years of agriculture “strongly supported” by government, we need to move the Group towards an even more professional model that is closer to farmers’ needs and more innovative.
At the same time, we must plan ahead to meet the evolving expectations of customers and consumers, while remaining attentive to our behaviour as citizens.
It is up to us to move towards a model that creates higher financial returns so that we can better remunerate our partner farmers and boost our staffs’ skills.
This model will create profitable, clear and sustainable channels for both crops and animals.
We are putting the credibility of the Axereal model on a path. The aim is not to judge performance based on a figure on a certain date, but to take a long-term view: our cooperative works with and for members over an extended period. Our group must therefore be a long-term player both in our farming area and beyond, so that we generate revenue wherever there is economic growth: the development of our malting business is an example of this. To achieve these objectives, we are putting in place an active governance system under which the individuals elected to the Board of Directors are at the heart of the strategic decisions made across the group as a whole. This governance is complemented by a committee of elected representatives responsible for director compensation policy, and the remuneration and appointment of executive committee members.
Our future success will be orchestrated by a new group of committed, inquiring and well-prepared elected representatives. We are already laying the foundations by running a comprehensive training programme for two successive groups of 15 young farmer members (men and women).

 

Our choices, our commitments

We are fully aware of our social footprint and committed to a voluntary continuous improvement as a good corporate citizen.

Céline Montauriol, Axereal CSR manager
 

CultivUp, our sustainable agriculture strategy

To optimise the solutions we offer our clients, in time for the 2018 harvest we are developing a production charter encompassing a vision of sustainability shared by our industrial customers.