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CASE STUDY -

The island of So Jorge is heading to Germany, Greece and Belgium by exporting tuna from the Azores to Lidl's shops in these markets. Since March, over 98 thousand cans of Santa Catarina tuna have been exported and, by the end of the year, the expectation is to reach 100 thousand units for these countries and also for Cyprus. Meanwhile, the food retail chain is still studying new markets. By May, the export weight of the Azorean cannery already amounted to 30%.

The German food retail chain has had a link with Santa Catarina for 10 years now. The Azorean canning industry produces four items - tuna fillet from the Azores au naturel (150g), tuna fillet from the Azores au naturel (120g), tuna slice from the Azores au naturel (120g) and tuna slice from the Azores in olive oil (120g) - for Lidl's own brand, Nixe, the "only insignia with tuna from the Azores under its own brand". The cannery also produces the lower-price tuna Bela Aurora.

"Tuna exports with Santa Catarina cannery had been planned for some time before the Covid-19 pandemic", states Bruno Pereira, purchasing manager of Lidl Portugal. "Exports through Lidl with this partner started in March this year, with its Santa Catarina brand - namely by exporting tuna fillets in olive oil with fennel, with thyme and with oregano".

"We chose to start exporting seasoned tuna fillets - in olive oil with fennel, with thyme and with oregano - because they're differentiating products and, as such, they capture the consumer's attention. We believe that the competitiveness of our national products should be achieved through their quality and differentiation, because we can't - and do not have the intention to - run up against other countries' offers exclusively by price", explains Bruno Pereira.

These products, in addition to using "an artisanal fishing technique - pole-and-line fishing -, hold the Dolphin Safe certification seal, which attests their sustainability, meaning that, during the fishing process, no marine mammals were caught or mistreated". Moreover, "the aromatic herbs, in this case thyme, originate from the fajs of So Jorge, where different spices and aromatic herbs are cultivated."

Only since March in Lidl's export circuit, the export of Santa Catarina tuna to stores outside Portugal is still "at an early stage, but we believe the feedback will be positive". So far 98,700 cans were sent to Germany, Greece and Belgium. This figure is expected to rise by the end of 2020. "By the end of the year, we plan to export around 100.000 cans of tuna from Santa Catarina to Belgium1, Greece and Cyprus - and to new markets still under negotiation", Lidl Portugal's purchasing manager explains.

Santa Catarina Tuna was one of the products that entered Lidl's export list this year. Last year alone, Lidl sent 228 products made in Portugal to chain stores in 27 countries.

Fruit and vegetables, as well as sustainably caught cod were the star items, with a growth of 33% and 20% respectively. All in all, 20,000 tons of fruit and vegetables were sent to European markets, especially Rocha pears (11,900 tons), pointed cabbage (3,400 tons) and red berries (2,300 tons). This volume represents a 150 million revenue for national suppliers, i.e., 2 million euros more when compared to the previous tax year.

This year, there are plans to extend the number of categories to new domestic products. "We are assessing the possibility of exporting some national cheeses, according to some criteria already identified: prot4ducers' capacity and interest from the external markets where we are present," says Bruno Pereira.

Exports and pandemic increased canning production

The canning industry was one of the categories experiencing a sales rise during the early stages of the covid19 pandemic, Santa Catarina tuna sales included.

"In the beginning, there was a greater demand for food, namely for the canned category, which includes tuna. The tuna available in our stores includes our own brand, Nixe, and comprises several items, including tuna from the Azores, produced by Santa Catarina cannery", admits Lidl's purchasing manager. "Once the State of Emergency was decreed and the public saw that there were in fact no retail supply problems, consumers chose to plan their real needs more carefully and there was a gradual stabilisation of consumption in various categories, with a lower frequency of trips to stores and a higher record of shopping volume per trip".

At the Santa Catarina cannery in So Jorge there was a lot of work. "Those were days of great stress, caused by the need to respond to orders that increased exponentially for three weeks, to implement contingency plans and to manage fear of the pandemic in a working context. Fortunately, we had no cases of infection in our organisation. Our employees were exceptional in their efforts to respond positively to the market", says Rogrio Veiros, chairman of the board of directors of Santa Catarina.

"We must not forget that Santa Catarina is a factory on the Azorean island of So Jorge, to which there is only one boat once a week, so the logistical challenge of responding to a short-term demand is more difficult for us. In the meantime, there was also a strike at the Port of Lisbon, making things even harder for us", Veiros said.

But the sales 'paid off'. "Only in Lidl, sales in March quadrupled compared to the monthly average of 2019", stated Rogrio Veiros. "The lower-priced tuna had the highest demand and we are talking about a very high quantity. One of the brands reached almost half a million 120g cans in just a few days".

This year the cannery expects a growth on invoicing: the goal is to reach 20%. "The year of 2019 brought a positive evolution in production, we finally managed to accelerate our production, as a result of investments and small, surgical, changes in our factory. In terms of invoicing, we had an atypical year, because we were not able to follow the path we were on since 2016, of 10% per year", says the chairman. "This trajectory was broken in 2019, due to commercial strategy and positioning in relation to certain markets; however, in 2020, we expect to growth 10% and recover what was lost in 2019. Our goal is ambitious, to grow around 20%".

Entering new markets, through Lidl, will contribute to that end. "We expect growth in sales in the domestic market and in exports, with Lidl, to new markets where this chain is present. Santa Catarina aims to grow 20% this year, in its turnover, and we already closed the month of May within this growth pattern. Therefore, we expect a leverage in sales with our client and partner Lidl within this percentage of growth," said the head of the cannery in So Jorge.

Still, Veiros warns: "We must be careful in the analysis of canning sales, considering the effect of the pandemic, because, if in March we had exponential growth, we must not forget that final consumers filled their storerooms and distribution reinforced the product in stock. Moreover, the world is different and consumption habits are different, so we may face some surprises and at this moment the demand in the domestic market has already slowed down. In some cases, it is facing a true reversal".

But there are still high expectations for the foreign market. "This year we already registered export rates of 30%. Traditionally, we export a lot to Italy, the preserves from the Azores are greatly valued in this market, with which we have a long-lasting relationship. But we are growing a lot in markets like the UK, USA and the centre of Europe. With the partnership with Lidl we will further diversify this range of countries where the chain is present", considers Rogrio Veiros.

QUESTION -

Could Santa Catarina produce or supply to Lidl using a JIT approach?

Please state your answer clearly (yes or no) and justify, providing arguments to support your position.

Answer has to be 800 words