Dūsseldorf-based GEA Group is one of the world’s largest suppliers of food processing technology, from farm to factory to table and beyond. Its thousands of products include systems used in dairy production, filtration, brewing, blending, granulating, sterilizing, bottling and packaging. It also provides technologies for the chemical and pharmaceutical industries, for instance, in processing tablets or converting raw materials into biochemicals.
The group profits from megatrends, such as the world’s rising population and growing industrialization. As the demand for more food constantly rises, the company’s chief executive, Jürg Oleas, is not content to sit back. He recently embarked on a radical company restructuring and explained why in an interview with Handelsblatt.
Handelsblatt: Mr. Oleas, you are restructuring your business to become more efficient and grow stronger. Where do you want to go?
Jürg Oleas: Our goal is to be everywhere that complex foodstuffs appear on the table. The world population is growing and prosperity too. That means foodstuffs must be used down to the last proteins, to feed as many people as possible. “Fresh from the farm” only works for the few who can afford that.
In emerging countries, more people are moving to big cities. You cannot feed them only with natural products directly from the tree and fields.
Does that mean that the trend toward convenience food is unstoppable?
This trend will be seen differently in many countries. I will give you an example. A consumer in Germany wants to buy orange juice. On one bottle, it says “from concentrate.” On the other: “from fresh oranges.” Many then think that “from concentrate” does not sound good, and reach for the other bottle. But the concentrate is much more environmentally friendly, because the oranges are pressed in Brazil, the juice concentrated and only then brought to Europe. With the right technology, you also can no longer taste the difference.
There are many discussions these days about processed foodstuffs: too much sugar, too much fat, too many additives. Do you sense a headwind?
I am often in Mexico due to personal reasons and have observed that the population there is constantly becoming more overweight. So now there is a penalty tax on sugar. For us, that is good: The manufacturer of a chocolate bar now needs another technology, if he wants to maintain the taste using half the sugar.
Technology can substitute sugar?
It can use a substitute material like Stevia. We have a lot of experience there. As long as consumers work on innovations, that is good for GEA. For example, take the warning about processed meats, by a research panel of the World Health Organization. What is the reason for the recommendation to cut down on eating meats like salami? Is it the salt? Is it the flavorings? Is it the fat? Then it could be that a manufacturer comes to a food technology supplier and asks: Could we make a salami and cut the fat in half…?
… Which only stirs up the mistrust of many consumers against the foodstuff industry …
That is the perspective of people who can afford something like that. There are, however, another 6 billion people who would be happy if they could even eat a chocolate bar. GEA does business worldwide. In emerging countries, more people are moving to big cities. You cannot feed them only with natural products directly from the tree and fields. Some, for sure, but not all. That is logistically impossible.
China has given up the goal of its one-child policy. Are you adjusting toward a greater demand for your milk machines?
One has to see whether that will trigger a boom. But it is correct: For the growing middle class in China, only the very best nutrition comes into question. Chinese parents do not trust the local food. But it’s like everywhere in the world: When it’s a question of what do I spend my money on, children and especially babies come first. And pets come second.
Why are the Chinese so sensitive about the topic?
There have been many scandals and setbacks for Chinese manufacturers in past years. So now consumer demands for quality are greater. High-tech applications are in demand, which domestic food manufacturers are also advertising. For us, that means the demand for our plants is growing. Ultimately, China and Russia are the largest milk importers in the world.
Despite the weaker economy in China?
Yes, we feel that too. In areas such as bottling plants for juices or iced teas, there has been too much invested. That will, however, swing back. The demand in China is growing, but not as fast.
Things are going well for GEA. So why the radical restructuring?
A group that wants to be able to survive long term must ask itself thoroughly every five to 10 years whether it is correctly positioned. If it does not do that, and profits from positive trends might suddenly disappear, it is often too late. Besides, we have determined that some competitors have begun to copy our concepts. Although that fills us with pride, we realize that others are catching up.
Which weaknesses will GEA target?
Administrative expenses are too high and we have frittered ourselves away in too many small units. That is obstructive for a growth strategy. After thorough analyses, a clear majority of our managers support restructuring from a position of strength – and that makes me proud.
When it’s a question of what do I spend my money on, children and especially babies come first. And pets come second.
Your employees see that differently. There were demonstrations because of the downsizing of 1,400 jobs.
The protests by the IG Metall union were on the first level against our “shared service center” concept, which outsources specific administrative services.
Why must GEA move jobs to Manila or Bucharest?
The outsourcing is due to costs. These jobs can be done just as well from there.
Does that fit the quality promise of GEA?
Absolutely. We are one of the last big companies that had not yet outsourced. Others took that step years ago.
What about the jobs in Germany?
We are having a very close dialogue with the workers’ council in Germany, where about 500 jobs will be eliminated. The goal is, however, to downsize as socially compatibly as possible.
The workers’ council fears that the work is no longer manageable.
It will cause a rumble, that is clear to us.
Why have you again stepped up austerity measures?
During the announcement of the program in the middle of 2014, we first estimated 1,000 jobs would be effected through 2017. After a detailed study, we raised that figure to 1,400. Our administration and the area to be optimized was bigger than we initially thought.
What exactly then differentiates the old and new GEA?
GEA’s structure is now no longer aligned with many small units. Altogether, there were 200 of them worldwide, each with their own marketing, development, distribution or service divisions. Through that, for example, each had another head. We have now pulled everything together into a unified structure with clear leadership responsibilities.
Martin Wocher is an editor with Handelsblatt, focusing on the the mechanical engineering and steel industries. Regine Palm covers commodities, machine makers and the trade fair industry for the paper. To contact the authors: firstname.lastname@example.org and email@example.com.