Danisco Seed Sales Boost Confidence in New Market Conditions Following EU Sugar Reform

08/11/06 The reform of the EU sugar market regime is not only a challenge to the growers and factories. Danisco Seed, Holeby, which sells MARIBO beet seeds to about 40 countries, is also facing sharply changed market conditions.

In this season alone, the EU beet acreage has declined by around 10%, but Danisco Seed has nevertheless managed to increase sales.

President Niels H. Gram, Danisco Seed, estimates that sales of MARIBO seed in the EU could drop by 25% over the next few years. Some markets will more or less disappear. In Italy, until recently one of Danisco Seed’s focus areas, two thirds of the beet acreage has disappeared this year. Italy has therefore shifted from being a core market to a ”Miscelleneous” market for Danisco Seed.

Potential Exists

However, there are certain opportunities in markets outside the EU. Danisco Seed already has a strong foothold in the Russian and Belarussian markets, which offer huge potential. And Croatia, Serbia and Iran could also become attractive markets, President Niels H. Gram, assesses.

’In addition to these countries, we have singled out a few markets in the EU where increased efforts could improve results. These markets include Scandinavia, France and the UK.

Sugar production is to be cut by 25% in the EU, but this does not imply that all countries cut down production by 25% - some will cut more, some less. Ireland has already closed down its entire production while Italy and Spain have reduced their production markedly. We still see potential for increasing our market shares in some of the EU countries, and that is the strategy we intend to pursue,’ Niels H. Gram says.

Sales Data Boost Confidence

Danisco Seed’s confidence is underpinned by the sales data for the current season; the company’s market leading positions in Hungary, the Czech Republic and Slovakia are intact. Large market shares have been won in Denmark and Sweden.

’We carry the products in demand by our customers. Our new seed varieties, Belize, Palace and Kingston, have the properties in demand by industry and growers alike. They are of a high quality, are high performing and have a smooth surface,’ Sales and Product Manager Per Steen, Danisco Seed, emphasises.

Danisco Seed aims at maintaining the positive development by carrying varieties that outperform those of the competitors.

’We already carry strong products and more are in the pipeline. Seed varieties are replaced at an increasing pace; previously we carried a variety for ten years, but now we only expect to sell the same variety for 3-4 years.

Growers are very focused on the financial aspect whereas previously they preferred to know a particular beet variety. Today, growers pay attention to how seed varieties perform in official tests, and here we actually do quite well,’ Per Steen says.

Penetrating France and the UK

Having attempted to penetrate the French market for many years, Danisco Seed is now about to enter into a local company. Once on the market, MARIBO seed will most likely win market shares due to its qualities. This was at least the case in the UK where the Palace and Kingston varieties are well suited for UK growing conditions.

Niels H. Gram: ‘This year we will penetrate the UK market strongly while sales last year were more modest because our varieties were new on the market. We expect to win a large market share, and since the market is big – bigger than Denmark and Sweden combined – it could become quite valuable to us.’

Huge Sales Outside the EU

The reason why they have a fairly relaxed attitude to the EU reform in Holeby is that in addition to having confidence in their own beet varieties, Danisco Seed has gradually generated large sales outside the EU – in fact, more than half of the total volume. Russia and Belarus are the main buyers.

‘The Russian market has virtually exploded due to the high world market price of sugar and the relatively strong Russian economy. Since Russia is only 50% self-sufficient in sugar, sugar beet growing offers huge potential.

Our sales in Russia have nearly doubled and although we sell a cheaper product there, Russia has become our biggest market in revenue as well as volume terms,’ Niels H. Gram says.

Danisco Seed’s response to the EU challenge is therefore: Focus on certain EU markets and enhanced sales efforts in non-EU markets such as Russia, Belarus, Ukraine, Croatia, Serbia and Iran. According to Niels H. Gram, the latter could become interesting.

Sales of MARIBO seed in Iran have gone up from 5,000 to 17,000 bags. By comparison, the entire Danish seed market accounts for about 42,000 packages

High Activity in Holeby

Danisco Seed also has a minor sale of sunflower and pea seeds but beet seeds will undoubtedly continue to be the strategic focus area in the future.

’Sugar beet is our main income and growth will come from market developments,’ Niels H. Gram ascertains. Given the circumstances we are doing quite well and are confident about the future. We are certain that the future is bright for us.

On a 5-6-year outlook we may see a slight decline in volume but we expect our capacity here in Holeby to remain unchanged; we develop new varieties and we process and market the seed that we receive from the multiplication in Northern Italy and Southern France. We also undertake extensive internal testing and official testing here in Holeby and the growers can look forward to many new exciting varieties in the coming seasons.