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News

Interview: Francesco Mutti

03/10/2024 - Madeleine Royère-Koonings , Sophie Colvine
Madeleine Royère-Koonings and Sophie Colvine met with Francesco Mutti, CEO of the Mutti Group, in his office on 11 September 2024 while the 2024 tomato processing season was on-going and were able to have a discussion with him on the crop, the market situation both in Italy and globally and his company’s strategy. 

We have been visiting a few fields and factories in Northern Italy for the last couple of days, and it seems that this year’s crop is particularly difficult?
 
Yes, this is the worst crop for the last 30 years in the north of Italy. The surfaces planted were increased compared to 2023 but due to the weather conditions since planting yields are very low at about 60 tonnes per hectares instead of about 75 normally so the volume processed will be greatly reduced compared with the 3.3 million tonnes contracted, to a total of maybe 2.5 million tonnes. In the south of the country, on the contrary, it is a very good season. 
 
Do you see this as an impact of climate change? 
 
It's very hard to say if it is climate change that we see in the north of Italy. We moved in two years, starting in 2022, with a significant drought and a lack of water, to the wettest year in a long long time in 2024. Fortunately, in 2022 the drought did not really hit the production of tomatoes. On the contrary this year it has been significantly hit and what we expect is a drop in yield per hectare versus our standards in the North of Italy where we are talking around 41.500 hectares, and some claim up to 43.000 hectares, while in the South of Italy there are only about 34.300 hectares but with a high production. So the estimation of the South will be close to 2.9 million tonnes while in the North, if we are lucky, we will probably run around 2.5 million tonnes. The balance doesn't change for Italy but it changes a lot for the companies that are producing mainly or only in the North. 
 
In the long-term how do you see the evolution of climate change?
 
Nothing specifically. I think that climate change is impacting us significantly, but it is very hard to measure it on a one-year basis. If you had asked me the same question two years ago, I would have said yes, because there was a shortage of water, which is not just the case in 2024. Remember that in the recent years 2020 and 2021, we had two fantastic crops in the North. Even 2022 was pretty good, 2023 a little bit less. And 2024, the worst ever seen, probably. Is that climate change? I do not want to say that everything that has an impact or that everything that happens is climate change. We should be very aware because otherwise it can be cancelled as an issue while I think we have to be very careful about that, knowing also that climate has always had changes. 
What I see in the future is that 2025 will probably be very tough for the sector in the north, in particular for the companies that are not able to change their price and market. The market is pretty crowded this year. So it will be a challenging year for us and for other companies in the North of Italy probably, even because the ratio of the south is very important. Private labels had a very strong decrease in terms of prices and also shifted from the north to the south. Why? Because in the south, they were aware after a couple of difficult years that there would be a big number of hectares, at the end, also for what was the situation at the time, a good production per hectare. In the north we have been aware since the beginning of June that production would not be there. We were not aware then of the current magnitude, but probably most of the players that are competing on the private label market did not really accept the fact of the south having these issues or uncertainties about the production expected per hectare. 
 
There was an article in France about climate change and Serge Zaka, an agroclimatologist, said that the tomato production might move north. What’s your opinion? 
 
It could be but it is the opposite of what is happening today. In the south we have a big production. So this would be alright, if the production in the south had been limited, much better in the north and fantastic in France. We had a fantastic production in the south, a very bad production in the north and a bad production in France. So it is very difficult to predict and in the short term, it can also be just normal changes that always happen. 
I believe in climate change. It should be one of the points of our interest and attention. Not just for the tomato issues but generally and globally. But I will not reconnect every single phenomenon to climate change. And again if this had been correct, Foggia  would not have had a production or a very limited production. But as I said it is fantastic in the south and bad in the north.
 
There also have been some issues in the south, like the closure of the Occhito dam. Water will probably be an issue in the long term? 
 
Remember that the biggest drought that we had in the South of Italy happened in the 80s. In the 80s they were completely out of water, and we were not talking about climate change at that time. The issue of the Occhito dam could be solved In a week. Remember California. Remember that in any case the amount of water that falls on ground is still hundred and eleven cubic kilometres per year. And it will slightly improve year by year. It will not decline because it is not going to other places. And if, as it seems, and it’s pretty clear, the temperature is getting higher, we will have more water in the sky. It is just an issue of when it falls. So this could be an issue but I will not draw lines based on this year. It is a much bigger element than what we think. I am not going to build a factory in Northern Europe because of this reason.
 
So, no plans for Mutti to build a factory outside of Italy? 
 
We are 100% Italian. We could go to Bolzano but we do not think it is interesting. Again for the moment we are 100% Italian and that is one of the elements of the brand. It is not necessarily certain in the future, forever. What is 100% sure is that we would never decrease our level of quality. But before doing it, we need to have very important and validated figures that tell us that we have to do it. Where, if and when is subject to evaluation. So not yet in the planning.
 
Moving to the markets now, what about the market in North America for Mutti?
We are the 1st Italian brand in tomato sauce in the US but Mutti is the brand leader in Europe with about 14.5% market share. Remember that our first competitor only has about 3.3%. But Europe is our main region. The US for us counts for a few points of our turnover. Mutti is strongly based in Italy, where we have more than 40% of our turnover. And nowadays close to 60% comes from abroad. And by abroad, we mean mostly Europe. We also sell in Australia where we are the leader, we sell in other countries, but Europe is where we play the game. So the US market is for the future. 
 
And in Europe what are your biggest markets? 
 
After Italy, our biggest market nowadays is still France because we opened in France much earlier than in other countries, we are the leader in France. We are reaching the marketing leadership in Germany and this country will probably become our first market in the near future. The UK is growing very very fast, we are having a very good success in the UK, we are very satisfied, but we opened only three-four years ago.  It is work in progress.
 
What do you think about the Chinese situation?
 
China is a terrible issue in my view because the growth in production has been unbelievable and unjustified. So what do I mean? So now, a demand that has for some reasons been supplied from China, it has been a decision both in terms of investment and else. 
There will be a big over production this year. In 2024 the worldwide production will be 46 or 47 million tonnes after we did 44.4 million tonnes last year. You should estimate the top of volume consumption per year runs around just about 40 million tonnes, maybe even below. The 44.4 of last year, due to the lack of production, the hole that existed, was pretty fair. We had some stocks but nothing really significant. If you have 10% stock once you have a big cushion so it is perfect. At 47 or 46, that means that you have an added volume that goes on top of stocks that you already have. So having 10% stock is for me the best you can have because if you have a lack in production, you have some room to compensate. If you add another 10% or 15%, then you have 25%. And if you have 25% on stock, someone is trying to reduce it to 10%. If I reduce it to 10% then someone has to move to 40%. I think there will be some level of panic in the market and that is mainly due to China, because at the end if we look at the production of all the other countries, it is reasonable, stable. 
California decided very correctly in my view this year, after a fantastic 2023, to step back to a normal production, which is what should happen. Now, there is room for Chinese products in some markets, definitely yes. What worries me currently, the first one is entering into the EU market in significant ways. I was in a work trip in Europe two weeks ago and I found a lot of private label products, on the back with mention: “produced not in the EU”. Other products could be, in my opinion, in some way contaminated. Because the gap in terms of price nowadays is so big that just adding a 20% or 30% can create a significant competitive advantage. 
The other issue is the production of a product like passata, which according to Italian law cannot be produced by diluting tomato paste, but it is not the case at European level. So the three elements that we should take care are: - first tracking extremely well what happens to the tomatoes produced in Italy or in Europe, - the second is transparency towards the consumer by putting the country of origin of the tomatoes in the front of the pack, it cannot be just in small characters at the back of the pack, it should be put in the front, - and the third point is that a product like passata cannot be obtained like in the juices sector by dilution of tomato paste. This is a terrible thing for consumers. Consumers have to know. If that happens then at least it should be clearly written for the consumer. This is the only way to start putting some pressure to push back a little bit on the Chinese production. 
But in any case it will be a long road. Then the other question is: are we sure China can produce what they said? The answer to me is no. I think that also from a market control point of view we should take, after the next few months, because there is a real invasion, what we should not do is scaring our consumers, what we should do is acting on a public level, because our farmers, our factories, our people, our workforce, and we are talking about a huge number in terms of Italy and other countries need protected against an unfair competition. 
 
So is there some action being undertaken at the moment? And who can do that?
 
Well, for the unfair competition, we have to wait another few months; meaning that the sector is pretty healthy nowadays, still, in terms of balance sheets but that will not last for long. Because again there will be changes in terms of pressure in international competition. Once the first signs appear clearly and they will appear quickly, that will be the time for an investigation. From a legal point of view, we should act as soon as we can because it is not only to protect our factories, workforce and farmers, which is already a very very important point, but it is for transparency towards the consumer. I do not know how much consumers would like to know - or not - if this product is coming from China or from countries where the workforce is not treated fairly. 
 
Communication is needed, as many consumers in France where we live believe that most tomato products come from China 
 
I would say that the production that is coming from China and coming into Europe, was a very small proportion, at least up to 2023, because China was not such a big producer and because they had some markets outside of Europe. They start entering the European market and now they start being on shelves. We do not have to scare our consumers; we have to do a proper job in communication.  
We should inform consumers. I am truly in favour, for example, on how we are reducing our impact on climate. But having the processing companies that at the end, are only running two months, that have to pay EU ETS tax, it does not make sense as it makes them uncompetitive on the global markets and creates an imbalance for the companies that at the end if you look with the precise annual impact it is ok, but if you look over the whole year, the impact is very very low, as it is just for 40 or 50 days. In these 50 days you just reach the peak, but if you look on an annual basis, you can take it out. And it is a primary industry with a long pipeline behind. It should not be protected, but we should not be disadvantaged. It is an element that pushes significantly towards a disadvantage and this is really easy to solve. The industry had managed to get an exemption but now it is being repelled and it is a big issue for the industry.
 
What do you see as the biggest challenges for your business in the next few years? 
 
Well there are many challenges, - one that is to continue producing with a climate that sometimes is moving a little bit around, - the second one is unfair competition, mainly from China and - the third I would say is continue giving value to the product that needs to get value because our factories, if you look at them with a long-term perspective have not moved much in the last 50 or 100 years. So if we want to become food companies, not just tomato processors, the step to move forward is to create a product that has value, that is appreciated by the consumer. That is the way to go and it is what we are doing. We try to be in the lead and we are a little bit. 
 
We had a question on the Instafactory:  Is it something that you want to implement on a large scale in the future or not yet? 

Not for the moment because it is a big investment. We are doing very well in general. We launched a product related to Instafactory last year that was unbelievably present in the chain Trader Joe's in the US that normally has no brand based and it sold pretty well. However, it is definitely still a niche market and not a market for huge volumes, only a few thousand tonnes per year. So rebuilding another Instafactory for the moment is a bit too early, maybe in the near future but not in 2025. First we have to finish the season and once we understand where we land, restart the investment that has been a little bit reduced. We are talking about something around 15 million euros per year which is not a small investment but not as big as in the past for our industrial structure. 
 
So what do you think makes Mutti so successful? What is your secret? 
 
I think it is a long-term view. It is the alignment of everything within the company, starting with the quality of the raw material, getting the best raw material, the sacrifices we ask our farmers sometimes when we reject their trucks sometimes, the investments, the ability to reach peak quality and the constant view that has been maintained. And a lot of effort! 
 
How do you manage to make premium products?
 
Having a strong customer organisation, in terms of quality, in terms of products, in terms of service, in terms of everything that starts with the raw materials, a long-term view, a very constant availability and a big effort. And after 30 years you get something!
 
What would you say defines a good product now, if you compare to 30 years ago? 
 
The standard of analysis has unbelievably improved in recent years, in particular during the last two to three years, with the development of new technologies and the capability of the controllers to find elements that sometimes are really not only hard to be detected, that are entering into an arena where measurements are quite a nightmare. So years ago there were parts per million, now we have parts per billion on many different elements. This will have an impact on the future of the food industry. Here I am talking about food in general, but tomato processors are not always considered as food companies as we do not really have the culture of a food company from many points of view. This is one of the elements that will have an impact on the sector in the future as the pollution is quite global, and when you go too deep, you will find everything everywhere. I am not necessarily talking about plastic but also heavy metals like cadmium or lead. You can find the perfect fish in clean water and it is full of plastic. If this fish is not edible, what about the fish worldwide? So what do we eat? Managing this issue with the legislation will be an issue in the future. 
 
Why did you say you don't see yourself as a food company?
 
I think in the tomato sector, we are not used to certain levels of control, not necessarily nutrients but for example the quantity of certain molecules that can be absorbed from the tomatoes like cadmium. This is something that as a company we are dealing with a lot in the last few years but I do not think it is a common subject in the sector.
 
Talking about technology, what do you see as the next development or tomato products or even a new way of making tomato products?
 
I cannot talk about our internal new developments but I do not see big changes in our way of producing generally but that will be a very nice thing to have. There have been constant improvements since the last big innovation of aseptic processing but no significant development since. If we could find an improvement that could bring the sector a step forward It would be very useful for the entire sector. 
What we try to do is to innovate on products. We have just launched the soup and we are working on different products.
 
They are all tomato based?
 
Yes, we are still a hundred percent tomato. Much more than tomato!
 
 
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