Only a small number of company can safely say they have not been adversely affected by the economic crisis. One such company, which has continued to grow to the tune of 7% year on year, despite some of the most turbulent years in our recent economic history, is Gruppo Fumagalli.
“Our production system is virtually unique in Europe”, Francesco Pizzagalli, ceo of Fumagalli Group, proudly explains. “To achieve a truly high quality product, we manage and have direct control over all stages in the production process. From breeding to slaughter, from processing to aging. We have our own core methods, which come from years of research and which ensure we have as much control as possible over our production”. This USP is particularly sought after by international retailers and consumers, so much so that most of Fumagalli’s 40 million euros in turnover comes from international exports. Where, once again, quality not quantity is key.
“You won’t find our products in all the big Italian supermarkets as we refuse to enter into the price war”, Pizzagalli explains, during the long interview he gave us at the group’s headquarters, a stone’s throw from Lake Como. “We strive never to undervalue our product and this obviously means making the right decisions”.
Which countries are the most profitable for you?
Northern European countries and the Far East, especially Japan, where our turnover is already several million euros and our products are in major supermarket chains like Isetan. We also serve the Japanese restaurant trade, with clients who manage 1300 restaurants across Japan, meaning we are doing well in the out-of-home sector too.
Where do you sell your products?
We are working with a number of groups. Waitrose, for example, have stocked Fumagalli products since 1991, when we were turning over around 30 million with them. Today the partnership is worth several million euros, with nearly our full range on offer in their stores.
They are famous for high quality standards…
They make meticulous checks on the supply chain, regularly sending out their quality control officers and buyers to carry out controls on our production processes. Luckily we boast a system that allows them to monitor every step.
That sounds like hard work…
Absolutely. It’s not enough for staff to be skilled in production techniques, they also need to be able to maintain detailed and accurate records along the way. For every batch produced, the retailers scrutinise everything, from slaughtering to aging. They also inspect the livestock and check how our animals are being fed.
All this must be expensive to manage.
Very expensive, but it works in our favour as it means our unique products are proven to be just that, which distinguishes us from our competitors.
Do international retailers come to you for that reason?
Yes. We are a very attractive option to clients for whom an integrated supply chain, sustainability and animal welfare are important considerations. Just last week a German retailer working in the Hamburg area came to us specifically because they were looking for a supplier who could guarantee high-quality standards like our own.
Which other retail chains are you working with in Europe?
In France we are working with Carrefour, In Belgium with Delhaise. We also have lucrative agreements in Sweden and Finland.
What about the Usa?
We do have a low-key presence in the US but we do more business in Canada, where certain big names are very drawn to our supply chain policy.
You said that another one of your strengths is that you keep a lid on the scale of the business: are you not looking to expand further?
I believe that my carefully controlled supply chain is only feasible within certain limits of scale. I could allow for a growth margin of 20%, but going beyond that would mean costs that would hardly be sustainable. I would ask the question, what’s more important when it comes to sales, quality or quantity?
So no asking the banks or the Treasury to fund growth plans?
When I came into the business, my father-in-law gave me two pieces of advice: always remember that our people are our greatest asset and keep in mind that the business is called Fumagalli, not Fumagalli & Co. Therefore, our relationship with the banks needs to stay balanced.
What would you suggest needs to facilitate growth?
There are some real barriers to widening export capabilities that are partly down to protectionist health and safety regulations imposed by certain countries. However some of the blame is also held by entities operating in this sector who are stuck in an antiquated business mind-set and find it difficult to work as a team. For them the concept of an integrated pork supply system is incomprehensible. Historically, pork farmers and meat processors have never seen eye to eye.
Even the consortia haven’t done much to promote the quality of our products: the impression is that standards are falling…
That’s true. At a certain point the consortia became focussed on other things, rather than seeing the product as important in itself. For example, Parma ham is being sold today at the same price as an every-day item, which means something’s gone wrong somewhere. Over the last three years the market has seen production drop by around two million fewer legs of ham and yet the price never goes up, which is worrying.
Why has the product become so undervalued?
It has not been easy to predict the effects of changes that have taken place over the past decade or so. Retailers have changed radically and in Italy today manufacturers no longer own the price of their products. We have sacrificed quality for quantity. In France this has caused the closure of many SMEs. Today there are some signs the trend is reversing, with greater focus on premium lines that have a more balanced quality/price ratio.
How much are you investing in r&d and what can we expect to see in the future?
We have always reinvested all our profits in innovation. This year we invested 7% of turnover. We are financing a new line of sliced meats, high pressure processing and a cogeneration project. Safety and the environment are always at the forefront of our investment plans.
What about the upcoming Expo 2015?
We are working on something called Etichetta Etica (Ethical Labelling). All our product labels will display four petals representing sustainability, safety, the environment and animal welfare. Each petal will contain a link to a mini-site that tells consumers more about our values. The campaign slogan will be “our products mirror our values”. Behind all of this is the message that it is not all about endless discounts and advertising. I am willing to bet that today’s consumers are looking for something more.
