Not everyone associates French fries with Belgium, but no matter how you slice and fry it, this nation invented this popular food item. In fact, no where on earth are French fries as tasty as that come from Belgium. Consequently, it’s only fitting that Lutosa, a premium brand of frozen potatoes, should be located in Belgium. In fact some say, Lutosa is Belgian Fries at its best!
In fact, the company is headquartered in Leuze-en-Hainat, the Wallonia region of Belgium, where it also operates a manufacturing factory. A second plant, which is smaller in size but produces just as much, is located in Flanders.
Lutosa has a 30-year history associated with potato traders worldwide. But in 1978, executives there decided Lutosa could do more than just sell fries. It could become a value added company. Furthermore, the family owned business was purchased by Pinguin Foods in 2007, thereby creating the PinguinLutosa Food Group. Pinguin Foods specializes in frozen vegetables, fruits, pastas, cold salads and other items. Together, the PinguinLutosa Food Group is one of the largest reefer shippers in Europe.
Standing at the entrance of Lutosa, it’s common to see truckloads of raw potatoes arriving at Latosa’s production plant at Leuze-en-Hainat. The potatoes are sourced from throughout Wallonia and Flanders, Northern France, and the Netherlands, with some shipments of organic potatoes coming from Germany.
Each year, each factory produces approximately 350,000 tons of French fries from 750,000 tons of potatoes. The fries are produced by using only the longest segment of the potato.
But the value added comes from the fact there is no waste. The remaining 400,000 tons are used to make Lutosa’s value added potato flake offerings: industrial purees; fresh, pasteurized or frozen gnocchi; a host of potato specialties such as flavored mashed potatoes; hash browns; diced potatoes; dehydrated soups; a humidity stabilizer in bakery products; and snacks, chips and savory biscuits. Consequently, the company realizes an annual turnover of approximately $315 million.
Today the company exports its frozen fries and dehydrated potato flake products to 104 countries worldwide, including Australia, Japan, China, the Philippines,—even the Fuji Islands.
Dirk Desloovere, sales and logistics director for the company’s Potato Division, explains that the company prefers to sell its products CNF delivery to customers, whereby the seller pays for all freight charges to the destination port. “This way we can give customers a delivered price. It also puts the entire logistics flow in our hands,” remarks Desloovere.
But Desloovere adds that most customers don’t want CNF terms. “They have their own relationships with shipping lines,” he says.
In those situations, Lutosa sells FNS whereby the company organizes the containers at its convenience, on its premises and delivers the shipment to the vessel on which the customer has booked the freight. As a result, today Lutosa sells about half of its freight CNF and the other half, FAS.
Everyday some 10 to 20 refrigerated containers leave the company’s plant in Leuze-en-Hainaut, Wallonia for the seaports of Antwerp, Zeebrugge, Le Havre and Rotterdam, and some 70 to 80 trucks depart for customers in Continental Europe.
“We handle between 1,500 to 2,000 pallets daily,” he says.
Business Advantages and Challenges
Key to its business is the advantages Lutosa derives from being part of the PinguinLutosa Food Group. Those advantages were not realized, however, until recently because Lutosa was splitting volumes between freight forwarders who used Lutosa’s capacity for their own advantages in negotiating with shipping lines. But once the company switched to ShipEx, a full-service international shipping and exporting company that offers port-to-port services, it now negotiates directly with the shipping lines for volumes and price on certain destinations. Lutosa is also able to get real time information regarding the flow of its containers, transportation documents, bill of ladings, as well as know where the shipment is at all times.
“We integrated our systems five years ago,” Desloovere says. “Our customers are pleased and we are much more organized.”
In fact, by doing so, the company is now able to sell logistics services to customers.
This is important since potatoes are a commodity where a 1 or 2 cent price fluctuation can have a big impact on profitability.
“Booking space with a freight forwarder more than three months in advance, means we must give our price for an entire season even before we’ve made a contract with the farmer,” he said. If the rate is too high, compared to the cost of the commodity (potatoes), then the company can no longer be competitive.
Lutosa’s biggest markets are Brazil, South Africa, and Japan.
“We ship around 15 to 20 containers a week to South Africa, and about 10 a week to Japan,” he reveals.
The company also sells in North America, but faces competition from local producers who Desloovere refers to as the “big boys.” Setting the American potato business apart from that in Europe is how the commodity is traded on the Future’s Market. In Europe, farmers cover only 50 percent of the cost and also store potatoes and speculate prices year round for when they can command a higher price. This means Lutosa is subject to daily prices and the spot market. “We hope we can sell at 50 percent higher than the contract price,” he explains.
Meanwhile, freight forwarders are only willing to give Lutosa quotes no more than three months in advance.
“We must, therefore, give our customers a price for the whole season,” he says. “If we are too high, then we are no longer competitive.”
To make matters even more complicated are currency fluctuations, particularly with Australia and Brazil, he adds. “Sometimes this can be an advantage; but many times it is not,” he comments.
No matter how the potato market is priced, Desloovere comments that there is always worldwide demand, despite the fact the potato business is risk with small margins.
“We are concentrating on the BRIC nations,” Desloovere adds. “And we do not sell to fast food establishments who would want to control us.”
Lutosa’s biggest customer encompasses only 5 percent of the company’s total turnover. “That is why we are looking worldwide for customers,” he says. “We want to spread our risk.”
Lutosa also wants to negotiate directly with the steamship lines and ask for long term fixed guarantees for containers. At stake is the fact more break bulk is being shipped in containers and steamship lines are operating fewer ships on rotations. Consequently, Desloovere is uncertain what impact these conditions will have on its customers, but feels Lutosa is in a better position than it was in the past because of its relationship with the steamship lines.
“We talk directly with the steamship lines,” he says. “The freight forwarders fragmented our volumes.”