Broadening Our Portfolio: The Expansion Into Ingredients

Our strong relationships are what set us apart from other supply chain service companies, and have formed the basis of the way we operate. Working with clients over a number of years has built a secure platform from which we can support their supply chains at every step of the way from producer to end product. As we work more closely with our clients, and become a part of their procurement processes, we have begun to understand the changing needs in commodity supply chains for industrial buyers. In recent years our clients have enquired as to whether we could supply them with more diverse ingredients in addition to sugar. We pride ourselves on being adaptive, so to strengthen our relationships we decided to expand our portfolio and diversify our services further.

History

Despite being best known as a long-standing supplier of sugar, a closer look at the first 150 years of our business tells a different story. Although founded specifically for the brokering of sugar in 1861, Czarnikow handled spices (where we were once world leaders), edible oils, rubber, cocoa, coffee and, more unusually, tractor parts. This activity was commonly conducted over a shorter supply chain than we see now, and saw Czarnikow take part in arm’s length physical trading across a range of commodities. In 1991 however, we went back to our roots and focused purely on sugar.

Sugar is said to have the most volatile price record of all commodities, and our ability to maintain our position in spite of this is a proud achievement. Through key historic pressures over the past 100 years such as the rationing of sugar in the 1930s – 1950s, the International Sugar Agreement of 1968 and the 1980 Price Shock, Czarnikow has continued business despite volatility.

However, there is a more positive side to volatility that has helped us along the way: if the sugar market was completely stable, nobody would need to seek our assistance to mitigate potential risk. Therefore it was by being strategic about where to place our interest, and keeping our assets mostly away from physical assets (e.g factories, plant and machinery etc.), that we have been able to thrive as a relatively small business within an ever-changing market. Being flexible is at the forefront of everything we do.

This is how, as the multinational food and beverage sector required more service in their supply chains of ingredients and packaging, we realised that we could adapt yet again. Thanks to the strong relationships we have built over many years, we were frequently asked if we could supply other commodities in addition to sugar. End users are seeking more streamlined sourcing and procurement improvements of various ingredients, and suppliers are looking to maximise their global market opportunities and distribution services. We realised that we could meet this demand, giving us new clarity on our role. We are not ‘just’ a sugar company, but a supply chain service company that can span a broad range of commodities.

This new approach has seen us add 50 new products to our portfolio since 2018. See the below chart for more information on the specific ingredients we are now working with.

Driving change

In order to drive change we are doing what we always seek to do at Czarnikow: optimise our existing resources. Once we began investigating how we could broaden our product portfolio, it became readily apparent that the majority of our services are just as applicable for ingredients and packaging as they are for sugar. Services such as physical sourcing advice, negotiation, risk management, clever contract structures, transparency, shipping, finance solutions and sustainability are all applicable across a much wider spectrum of products. This has allowed our client relationships to deepen, as we become more central to our clients’ businesses.

We have seen that our global white sugar trading and distribution teams are able to offer additional ingredients and services to our existing client base without too much of a drain on resources or compromising our high level of service. When an account manager speaks to an industrial client, they can now discuss not only sugar but ingredients, packaging and VIVE. This serves to strengthen our relationships as we become established as a trusted partner across a range of products, broadening the opportunities that are available through a single distribution platform.

In terms of efficiency, there are also significant advantages. Although we are multiplying the commodities we provide, we are creating minimal additional expenditure. This is because we already have much of the required global platform and technology stack to execute this new business. Of course, this also has positive consequences for our profitability and capacity to reinvest in the services we can deliver to our clients. As our credibility across a range of products increases, new opportunities are generated at various points across a client’s supply chain. For example, by driving business with regional clients who have given us valuable feedback and helped us to shape this new avenue of business, we have gained both aggregation and confidence. This then gives us a stepping-stone to working with larger, global end-users, in turn opening up opportunities to work with producers on the supply chains of these larger clients. Our work in this area is being driven in an ever-revolving circle, both adding to our client list and embedding us deeper into the supply chains of our existing clients.

Efficiency and ability

With our expansion into ingredients and packaging, we are able to work more efficiently across a wider base of functions. The most exciting element is that across our other services the diversification beyond sugar means that we can also see these services grow, evolve and refine.

VIVE is the first example of this, as it now covers sugar, fruit, dairy, corn and potentially packaging. This should add immediate value, as industrial buyers will now able to use the programme across a range of products. Standardisation will allow their business to run more smoothly, and allows them to compare and contrast achievements in each product and start to use Big Data analysis. This approach also reduces audit fatigue and costs for the buyer.

Fruit processors are just one of many promising client groups to whom we can look to sell a range of our services. We can help with sugar procurement – and therefore also risk management, contract structures, physical negotiation, funding, credit, sustainability and others. We can also provide VIVE for their supply chains, and provide them with Citric Acid (which many of them buy in bulk). As fruit processors often bottle finished juice products, we can also assist the importation of exotic fruits and even PET. We can provide improved freight rates, credit terms, finance rates and overall consultation on the movement of goods. Finally, we can also buy their fruit for export: the opportunities available for these new working relationships are bountiful.

Case study: pineapples

We are at the early stages of working with our clients to source, negotiate, approve and deliver a range of value-added pineapple products. These include chilled and ambient juice concentrates, deionised fillers, crushed pineapple, pineapple pieces and purees. We keep up with the high standards and consistent quality that is demanded by the beverage industry, and are enjoying seeing our services at work for this popular ingredient.

Czapp

As our client base increases and our workload for each client expands, client communication will become particularly pertinent. Our investment in our new client portal, Czapp, will enable clients to clearly see information on what contracts they have open with us, and other relevant information. We are working on technology that will improve transparency of price and availability of price information for all of these products, and look forward to seeing how this innovates the way we work with clients.  

A global reach

As a sugar supplier we work all over the world, but of course there are some countries where sugar trade is not relevant. However, this changes with the inclusion of ingredients in our product catalogue. It’s not just new geographic markets that we can enter, but whole new market sectors that we’d never imagined possible, such as water companies, whom we now provide with packaging supply chain solutions. It can be seen then that a shift in the way we operate can open whole new areas of business.

Looking forwards

By having a more varied basket of products, we can create and cover many new and exciting opportunities. Though we are still in the early stages of these developments we are already seeing promising client response and traction. It takes time to infiltrate long-running supply chains and become known for a wider range of products, but we are encouraged by the changes we have seen over the past twelve months. In true Czarnikow fashion, we have identified a client need and it into a promising opportunity for growth. Czarnikow has always been able to reinvent itself. Continuously, the face of what we do changes: this is because as the world changes, we must be increasingly at the forefront of adapting to this change.