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24/09/2018

Pascual returns to its roots

VidalMaté. @trigo_limpioVM

During the final decades of the last century, Pascual comfortably held on to its leading position in the milk industry. The company, from Aranda de Duero, was a fixture during the process during that period to create a large dairy group in Spain with Puleva and Central Lechera Asturiana as partners. It never happened, and everyone went their separate ways, while the French companies in Lactalis become the leader, acquiring Puleva, and the Asturian cooperative grew through the Corporación Alimentaria Peñasanta, of which it's a majority shareholder.

In the case of Pascual, the performance of the distribution sector, with its focus on cheap private label milks, and progress by other manufacturers' brands and the group's own diversification strategy led milk to loose some of its steam within Pascual, and its presence on supermarket shares and its market share declined.

Today, Calidad Pascual aims to turn the page and remedy the current situation, going back in time by relaunching Leche Pascual so as to position its product as a market leader once again. The goal is for consumers to again associate Pascual with milk by means of a strategy based on quality at origin, from animal wellbeing on farms through to supermarket shelves, and on price, with a sustainability policy throughout the food chain, from field to table.

The inception and performance of Pascual can't be understood without the Tetra Pak manufacturer.

It was the '60s when the Caja de Ahorros Municipal de Burgos offered the Pascual siblings, whose parents owned a corner store in Aranda de Duero, the chance to purchase a small dairy cooperative in a poor situation called Industrias Lácteas PascuaI. A few years later, in 1971, Tomás Pascual—a strong proponent of innovation—singlehandedly launched the first cartons of shelf-stable pasteurized milk together with Tetra Pack. As a company, that led to unstoppable growth until it became the market leader while changing Spain's milk sector scene, possibly forever, boosting the culture of shelf-stable products compared with fresh milk which, until then, dominated the scene.

In the milk sector, the company became a market leader with a share of more than 15% in the high-price segment, producing more than 900 million liters, with plants in Galicia, Cantabria, Catalonia and Burgos. Good results in the milk segment, boosted by the chairman's initiative and interest in innovation, gave rise to a broad policy of diversification in other food sectors, such as juice, omelets, grains, pasteurized yogurts and egg products. This strategy enabled the group to obtain sales of almost 1 billion euros in 2007, as well as a large debt of 300 million euros (which today stands at 192 million) and the need to compete in certain sectors with global leaders, which required the group to exit them either entirely or partially.

In the case of fresh milk, and notwithstanding the group's diversification policy, the division was not affected at first due to the decline in general demand, which slipped by an average of 100 liters per person per year in 2000, to 70 liters at present. Leche Pascual, which was positioned at the higher end in terms of price under its own brand, suffered also from domination by sales of cheap milk from distribution brands and other cheap manufacturers' brands. Pascual operated for a while with its second brand, PMI.

This led, in the last few years, to a decline in collection to 412 million liters and a market share of 9.6%, the same figure as Puleva, which today is owned by multinational French company Lactalis, and a long ways away from Central Lechera Asturiana's 14%.

At this point, while maintaining a diversification policy with Bezoya water, Café Mocay, Biofrutas, Vivesoy, yogurts, egg products and Diversia in distribution, Pascual has undertaken a new milk strategy today that stretches from field to table. "We have a balanced and diversified portfolio where all of our brands are leaders in their categories," said Tomás Pascual. "In short, we are more focused than we were a few years ago, and our success depends on the balance between all of our brands."

This plan doesn't imply strictly returning to milk, but it does involve going back in time to its roots and reinforcing it as the pillar of its business, positioning itself more visually vis-à-vis consumers with a quality product, with the goal of achieving growth in the dairy segment that exceeds average growth of the market and, as a result, gradually recovering its market share.

At the source, there's the possibility of having a very controlled quality offer based on production by the 348 cattle farms with which the group has been working for years and whose farms comply with the four requirements for obtaining the Animal Welfare Certification: good feeding, good housing, good health and appropriate behavior. Farms certified as suppliers are located in natural areas and house around 90,000 cows, with a census of 850,000 heads of cattle. With a focus on the sustainability of the producing sector, since 2000 the group has applied the Productive Efficiency Program, which also seeks to ensure farms' profitability.

As a result, Calidad Pascual's farms with an average production of 1,040 tons and those that are part of the Productive Efficiency Program obtain an average of 1,312 tons, compared with the state average of 470 tons. Production per animal on farms in the Program is 10,972 liters, compared with the national average, which is 8,178 liters. Food is one of the four basic principles of animal welfare, and that includes a balanced diet based on fodder, around 50 kilos per day, together with concentrated feed, which is basically corn, wheat, barley, soy, rape or sunflower and the availability of around 100 liters of water per animal.

As for the environment, since 2008 the farms have applied these criteria to water, from usage to waste management, to the reduction of greenhouse gas emissions, with farms located as close as possible to the primary processing plants.

With regard to packaging, the most ergonomic, manageable cartons will be used, with a simple closure and different capacities depending on the point of sale: supermarkets or through the catering segment. Also with the environment in mind, there are plans to develop new ways to use recycled material or replace the retractable machine with a box so as to better protect packages when they reach the consumer.

The company will maintain and expand its milk offer in accordance with demand and consumer needs, including whole, fat-free, skim and lactose-free with seeds, which has grown by 27%. Pascual does not stray from its principles when it comes to sales prices, and believes that quality and sustainability throughout the entire chain have a price. The group won't get involved in milks on special offer or in the sale of fresh, unpasteurized milk, in line with its longstanding policy of selling products that do not require refrigeration.

Along these lines, dairy products will remain in a high-end segment, with 0.89 euros/liter for classic milk and 1.23 euros for a liter and a half bottle; lactose-free milk for 1.39 euros/liter and 1.65 for a liter and a half bottle, and milk with calcium for 1.43 euros/carton. The group has no plans to sell a private label milk either.

And all of these plans are based on a powerful advertising campaign, just like in the past.

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