PAULUS KOSTERS: Thank you and welcome.
Ya, indeed we were going to do a joint presentation but we didn’t have time enough to study to
get a two-person act so you get one act after the other. But after that we have formulated five questions,
which we’ll distribute around the table. You get about ten minutes per table to get,
to try and come up with some good answers to the questions from your perspective,
and then we’ll have a reporting session back from the tables, so we’re looking forward to an exciting say,
hour and a half, we hope. My presentation will, and I think that’s the commercial end,
when you end BV, means limited. I mean, that you understand we’re just in
business. BV is something which in Dutch means limited. The two aspects in my presentation,
one is that I’ll show you the business model that is strongly related to innovation
as we handle it in my company. But the other is we’re also here because
we’re interested to expand our business possibly into Canada. So we’re here to find business partners,
and I’m not going to explain that much further because I think being in a company that’s
the only thing that you really go for. And I’m excited to
be here. This is, if you talk about drivers for me
as a company, I mean for me and for my company, this is
our main driver. And this is an interesting advice figure,
it comes from, it was published, used a lot by Tristan Stewart,
and it tells us about that we don’t have any food problem in the whole world.
Because if you divide the kilocalories harvested in this world by the population
we have about four thousand five hundred kilocalories per person, and that’s more than enough.
But we waste quite a bit of that. We waste about six hundred kilocalories
post-harvest losses. Then we waste a lot of calories by making
it into animal feed, we get out a little bit, but we waste about
twelve hundred calories by making meat of good, of freshly harvested
product. And then of course still we lose a lot by
processing and distribution. I’m not going to talk about the animal feed
part but business-wise we have always seen sustainability, and that’s
now passed, as Kees said, but when we stated ten twelve
years ago, we were looking for a sustainable, sustainability
as a main driver in our business model. And these are two areas
where you then look at. And it’s interesting if you didn’t have these
areas and can reduce them then we could easily feed nine billion people
from this planet. We don’t need a second planet, and we didn’t
find it anyways. And if you look to the food waste, this is
the European perspective, especially in the vegetables and in the rooted
product, the wastes are big. Up to 50% of the harvested
product it doesn’t reach the consumer, but ends somewhere, it gets lost somewhere along the road.
Okay, we see that not as a problem, we see that primarily as a business opportunity.
So our business as we have developed it, is upgrading the lower-grade product,
the vegetable, the by-product, all kind of nice names, as long as you don’t call it waste,
into high value products and ingredients. And the examples, which we also deliver on
a business-to-business base. I’ll talk about it a little later. Are things like high-quality vegetable juices,
dietary fibres derived from vegetables or carotene-rich natural ingredients,
which are, which fit a need in the industry as an ingredient. To make it a little more visible,
if you look at the…we call it hidden vegetables. Why do we call it hidden vegetables?
There are health issues in the society related to the fact that especially children,
but I think a lot of adults as well don’t eat enough vegetables. And if they don’t eat enough vegetables,
try and find a way to let them eat it, so bring them into a nice juice.
And it doesn’t matter if the cucumber was straight or crooked, before we made the
juice, you don’t see that anyways at that level. And also Innocent, is because vegetables are
low calorie, are trying to get more vegetable juices in
their smoothes, to get the calorie load down and still have
good taste. And we are happy to be also a supplier to
Innocent with our carrot, special carrot juice. Or make them into a
cold soup. And I’m sure that gazpacho, which is a Spanish
cold summer soup, was originally a way for the housewives
to get rid of all that produce which comes up at the end of the What do you do?
Well, you make a nice soup out of it. So that’s a nice opportunity for say,
the liquid side of the business. On the other hand, you also,
if you’re looking at vegetables and if you’re separating them into a
liquid fraction and a more solid fraction, you end up with a product you can call it
a pulp, but you can transfer that from a pulp to a
fibre. And these vegetable fibres you can use excellent
as an ingredient in many products. And, what is named there
are things like tapenade, instead of the olive you can also make it
nicely from red beet, and it has an excellent taste. You can put them into meat products, to dilute
the meat, and I’ll talk about that later because the meat industry is a good opportunity.
Of course salsas, soups, bread, meat analogs. Kees talks about it as well, a thriving industry
in the Netherlands where especially stricter meat, which is very similar in taste and bite to
real meat, one could say they also, the vegetable ingredients we develop play an important role. It can
go into pasta, it can go into snacks. So basically we have
developed ways to do that and we, and that’s one of the contrasts
with the presentation of Wilbur, we have decided on some key elements
to file for our own patent. And that for an SME company, that’s quite a decision, it takes time,
it takes money and you don’t know if you’re going to get money back. Well, the first patent was basically
the starting point of the company. I’m not going to tell you the story
but at least four investors had a patent applications, it turned into a patent and they turned that
into a company. And the patent basically described that you could make vegetable juice from [UNINTELLIGIBLE]
vegetables. It’s funny that it ever came through the procedure, but it gave a starting point that was sort
of protection for the company, and everybody was anyways thinking it was not worth spending money making vegetable
juice in the Netherlands, so we had a free field. So that was very important
in the start up, but the disadvantage is,
if you make a vegetable juice you end up with a commodity product. So though your innovation in the process is
excellent, even patent-worth, the end product’s a commodity and you could be competing with all the other
guys, and you end up at the price competition. So we were in the business to stay there
so we also developed a patent around the use of vegetable fibres as ingredients,
as they have some unique characteristics we’ll talk about later.
We don’t make patents or file for patents because we want to keep people out of the
business. We file patents because we want to be able
to offer to partners in the chains a certain
level of protection that you find time, you can develop time to get into business
together and make money. And the protection of a patent is an excellent instrument if you can find
a big enough application. I would never go for a single product patent. I’m not in the computer business where you
can get a patent for a chip and sell a few million. In food industry patents will always be a
very limited number on a very specific area. In our case we have decided to use as an active
two in our business. So where are we today? And then I’ll come
to the business model. We have done a lot of basic research, or we had a lot of basic research was done
of course was done by university and institute. We have ore focus on the application of the
research. We had a business opportunities identified
and working on, on what I called solid social threats. If
you react on hypes, you’re always too late. You have to look a
little but further in the long term and the long term when we
started the company was that sustainability was going to be a
requisite for companies to operate. That was our first step. The second of course,
was health. And if you talk about health, one of the aspects
is fibre, which is good health. So those trends, and
eating vegetables anyways. So we had two solid trends, and that’s the
driver in the business as well. We operating two demonstration plants,
and that means that we produce 5,000 tons of vegetables juice annually. So it’s quite a sizeable, but we look at it
as a way to demonstrate the system works and then we can expand from
that as well. And we deliver product to the food industry,
exclusively business to business and the products are successfully used. His is what I would call little bit, the core
of the business model.. Basically we are a research company with ongoing
research in processing a product to take the vegetables
into a higher-level product. On one end we occasionally there’s some IP
coming from that, and that IP will help our customers to get
protection in the chain. We add to the IP the application know-how,
which we develop together with the partner —this is a fifty-fifty joint venture—because
I don’t want to invest money in areas where others are
better. And we are not good at processing,
we are not good at having a lot of people around on the payroll, a lot of stainless steel, etc.
So with that aspect we have a joint venture with a very big carrot processor involves
his facilities, and they’re first, important part of our raw
material because carrot is one of the carrying crops
in our business. They have the flexibility, they have the systems and we learn a lot there and we teach them
a lot because they use our technology, and from their know-how we can develop better
technology. And of course finally the market is important. So we have close contacts with this company,
separate company which is still 100% owned by us but we are divesting that for a part,
is that we are involved in sales. So we are the customer interface.
The customer being business to business but they tell us what the final customer is
looking for. So many com—or the outside looks at us as a vegetable juice-procuring company.
That’s what we are from the outside, from the inside we are an sort of R & D company
which also produces some product. To drive this business model, I’ll explain that a little bit with this slide.
On one end there’s the business, there’s the knowledge, and there’s the R & D phase.
And if we want to go ahead and develop we are looking for R & D which is nicely financed occasionally
by the EU. The EU brings projects, there’s a lot of money
for projects, and the big R & D groups, like well, universities
and T & O etc. they need these funds for their development, for their strategic programs.
But they also need SMEs otherwise they don’t get the funding. So, for small as a [UNINTELLGIBLE] and a relatively
small part of the big chunks of money which are going
on in these kind of projects, we are connected
to all kinds of long-term research where we get inspiration
from, where we get ideas, where the next generation
product, where the next generation technology might
come from. And of course in the funding which is governed
by case, we also had some nice feasibility studies
where you might get some money out of it. We have a rule in my company on cash flow
management. And the cash flow, very simple, the cash flow which is generated in the business,
stays in the business. The cash flow, one could say, which is generated from these kinds of projects,
we spend on R & D externally. So I never have a problem on decision or money
for my R & D. The hours of my employees and myself are always
for free in any project. And the money which comes in from a third
party, from a fund can go to university or an institute
if we feel, or a subcontractor if we feel they supply
the right thing. And if we don’t have that money we don’t spend
it on R & D. It’s very practical, but the voice that you
get a bleeder somewhere here because it’s such a nice pet
project and the money runs out. Well, what is important
is that we feel that we are strong in making
the translation say from the knowledge to the applied knowledge.
Applied knowledge we bring into our business cycle, there it generates money and of course gives
a lot of feedback which then is interesting to dive the R & D. And business is about choices.
So our choices was and is vegetable. And especially in the beginning every other
week there was someone saying hey could you do
something in fruit? Yeah, we could do something in fruit, but
we’re not going to do it. We want to be a specialist in vegetable because
that’s a much more virgin area, than the fruit. And what are you going to
do in fruit in the Netherlands? We’re not a leading region in the world for
fruit. Because when we talk about fruit next to apples
and pears, the rest is coming from oranges and all those
other stings. That’s a very different industry, so stay
focused. Also, waste as a raw material. Even when it’s
not a financial driver, we are still from our principles always producing
from waste. I call it waste here just to get it exaggerated
a little bit. More than 95% of our produce comes from a
by-product from the industry what was rejected for its original purpose. That means that you are in a completely different
game of, we are never looking for raw material, we are never investing in raw materials.
When the orders are there we always find it somewhere. On the one hand that’s also a choice.
We were starting with an existing consumer market. Because we knew that at least we made a product
which would sell and we made a reference on the price. And then with the fibres we entered into a
new product-market combination. We had no clue what the prices would be of
the product, but we had a good idea on the benefits
and we thought that would translate to an interesting enough price to work on
that. And anyways by producing the juice we were at least we break even already
on 70% of the produce which we transfer. I mention the trends,
well it’s clear that we have a rather scientific approach in that, and very important, we like to build
new chains. Because we think from new chains, so partners that never worked together before,
it’s much more likely that you can develop new business. Going outside your original comfort zone helps
a lot. So if you look to the product which come out, the juice, well you can read the typical things.
There are a few aspects which are interesting and that’s why we build quite a nice market
share in Europe. We have, a, our raw material is different from raw material used with our competitor.
We have as a base a consumer vegetable, so not an industrial vegetable.
So consumer vegetables are grown and also in the breeding, looking for taste and for high-quality.
You cannot afford to buy those if you do a fewer industrial production.
But as we take them as a by-product, our raw material costs are low
and we have an extremely value in taste. And for vegetables that’s interesting,
because a vegetable juice especially is not that easy to drink as a fruit juice.
A fruit juice basically is sugar, acidity, and a little flavour. And a lot of calories.
Vegetable juice is much less sugar, a very different flavour,
a more subtle flavour and much less calories. So you have to have the flavour right
otherwise you have a product and it doesn’t taste well and it doesn’t sell.
But we also, and we get that because we do year-round processing.
And when you can do year-round processing instead of many, say,
vegetable oriental companies who doing a seasonal processing, your total investment costs and your operating…yeah.
You have a reduced investment, less fixed costs,
and you have much more level cash flow over the years. You don’t store end product,
you don’t store raw material. So your whole cash requirement in the business
is much less. And you’re flexible—we work mostly with
annual contracts, and if halfway the year they say,
ah we want to have a little bit different flavour in a juice or something like that,
we didn’t produce it so we can still adjust our recipes to them. Dietary fibre. Why couldn’t we file a patent?
Because it turns out that the way we prepare the fibre, and it’s a wet fibre, it’s not a dry fibre,
it’s a not a totally wet fibre, it’s a semi-wet kind of product.
It has a very interesting capability for moisture absorption, which leads to a much better structure in
the product. Improved structure without getting additives
in the product because you can put it on the label as vegetable,
and that’s of course not a bad quotation. It’s allergen-free, no gluten or anything.
Many products which are enriched with fibre of course are enriched with fibres
from a cereal background, so they are not applicable to people who have
a gluten intolerance. Of course the good health is very important, because there you have a driver for industries
to be interested to work with that kind of product. And the fibre has very low calories.
And I’ll give you an example, little bit in round figures for the meat industry.
The meat industry at least in Europe is under pressure. First they have an ecological footprint which
is not very favourable. So they have a problem in that, also when you look into think about back to
the earlier graph I gave you. There’s a lot of food going into meat which then is not any more available
in calories to feed the population. So the meat industry is from that point
in a corner where they have some problems. Secondly there are some health issues connected
to meat, not to meat as such, but to the volumes of meat that are eaten
by say, the Western societies. It’s pretty high in calories,
it’s pretty high in fat, and it’s zero fibre.
And those things can be repaired. And you can, in any meat product which is
a processed meat, so any burger-type of product it is possible
to use the vegetable dietary fibre and put that into
the meat, 5-10% or even higher. Which has an advantage that the taste of the
meat is still absolutely the same, because those
burgers are always seasoned in one way or another
so you can easily compensate for that as far as necessary. You get a fibre
in a product where has never been a fibre, so it helps
in the health. It reduces calories, and it’s cheaper. So looking at the economics of that, basically
raw material costs for us are zero, because we take vegetables we get juice out of that and we have a basis
which we then upgrade, refine into a fibre. And say the transfer
price from the first stage to the second stage is about 12-15 Euros per
ton. Then we sell it to the meat industry for about
the double of that. Of course there’s [UNINTELLGIBLE] profit or
something to be done between that. And by selling this we replace for the industry
the meat which is then another 3,750 Euros, so another
1,250 higher. And they get the opportunity to make a sort
of a health claim about rich in fibre, or fibre present. This by the way, is the most difficult part
—if you talk about barriers for innovation. How do you get a meat industry salesperson
telling that, oh I have a better product because there’s
less meat in it? Marketing of products which are very innovative,
it’s a very difficult story. I see some recognition around some tables
I think. So often we have at the technical level very quickly understanding between companies,
between us and a supplier in a sort of a joint [UNINTELLGIBLE] development area,
oh this is good, this is a good product. And they have to sell it in their company
to their marketing and to their retail and to their launching data etc, etc.
So we technical people are very quick, but it’s the marketing which is slowing us
down. But this gives just in some round figures an idea that you can instead of being a commodity
vegetable business that you can from vegetables build a different
business, and that’s what we are doing.
So, for concluding remarks, where are we? Well, I’m in Canada and I’m
here because we feel that we are now after ten twelve years so
established that we want to expand the business.
We’re interested to build international satellites, or cooperation, you name it.
See if we can create a business case with other companies or industries or whatever’s
in-between and go from there. And whatever business, I gave a few ideas
on how you could develop such a business, but that’s where we are. I think we have a
business model which as it is much more knowledge-driven
than physically-driven that we can expand, we can interact easily over the frontiers
in Canada and in other area to develop that, and I think what you could offer in a cooperating and new chains as we always like to work with
new partners, with new business areas. Is that there is a potential good margin to
go into some new markets in the food processing. And I hope you got out of this story on one
hand the business model, and on the other hand the pure business [UNINTELLGIBLE].
So I’ll leave it for that because the questions we’ve prepared
will give you ample opportunity to go into detail. Some urgent questions are welcome. AUDIENCE QUESTION: Where are you sourcing your product?
Are you sourcing it at the processing facility at that [UNINTELLGIBLE] product or whatever
that’s left behind? Or you know I can think of vegetable processing
in this province where a lot of product gets left right in
the field. Their trucks are full, they’ve harvested enough
peas for the day, they can’t take anymore, they just bypass
the crop and it’s left behind… PAULUS KOSTERS: We never take field product.
Because in my quality assurance system, I cannot work with the field product.
But for example, the carrot processing facility where we have our joint venture with,
in the preparation of the field carrot into the mini-snacks or the half-produce for
catering, or the preparation for
the freezing industry, they have about 20% waste
. And that 20% which is already in a certified
system, if you look about traceability, that’s where
I source my raw material. And we do that with our local
partner, but we also do it with, if you talk about
organic, a specialized unit where they process a lot
of organic vegetables, and we contract with them. But we never contract
ahead of time. Of course we have contacts, and we talk. But
we buy the stuff when we sell, have sold that [UNINTELLGIBLE] again. But we don’t source from the field.
And we don’t source either, because that’s another question that often
comes up, from retail return, because that is not for us, in the volume. And we typically produce 25 tons of product,
of end product in a day, and you can’t have that from small packages from the supermarket,
you need some bulk in there. Any other urgent questions? Okay, thank you.