Danish Crown ceases operations in only Chinese facility
Leading Danish pig producer Danish Crown ceases operations in its factory in Pinghu near Shanghai after less than 6 years. Pinghu is the only pig processing facility the company has in China.
Customers of Danish Crown in China have been informed that the company is discontinuing its business operations in Pinghu following a strategic review. Likewise, the staff in production, sales and marketing at the processed meat factory have been informed about the decision, which will mean that 112 jobs could be made redundant, the company says.
Operational challenges
The factory in Pinghu opened in 2019 as part of Danish Crown’s efforts to expand its business in China. However, due to ongoing challenges the operation in Pinghu has not achieved the intended profitability for Danish Crown, and subsequent efforts to correct this have been unsuccessful, the company says in a statement. A strategic review was recently accelerated by Danish Crown’s new executive management team, concluding that the best options for the company are to either sell or close down its Pinghu operations.
“It is clear to us that the operations in Pinghu is not the right strategic fit for Danish Crown. Our preference is to divest the business, and we can confirm that we have signed a letter of intent with a preferred buyer and agreed terms for a divestment. While these talks are promising, we expect they will still take a few months to conclude,” says Danish Crown Group CFO, Anders Aakær Jensen.
Initial optimism
The factory in Pinghu supplied products to the Chinese market produced from Danish pork. The plant had a capacity of 14,000 tonnes of processed pork products annually. At the start, Danish Crown was particularly optimistic about the plant since it could sign an agreement with Chinese e-commerce giant Alibaba for the sale of the products to its 466 million users. “Our goal is to establish Danish Crown as a premium brand in China over the next 5 years. The Pinghu factory is the cornerstone of this initiative because it enables us to supply both fresh and processed products based on Danish raw materials to Chinese consumers,” the company said at that occasion.
Danish Crown struggles
The planned closure is part of the ongoing thorough restructuring of the struggling Danish pig company. The company suffers from the steep decline in the national slaughter figures which set in in 2021. In that year, Danish facilities processed 18,5 million pigs, even 1 million more than in the previous year. In 2022 however, the number of slaughtered pigs fell to 17.5 million followed by a sharp decrease to 14.6 million in 2023, figures from the department of agriculture show. The numbers for 2024 are not yet available.
