Disposal of spent hens: options evaluation

Collective investment/structure options

93. There was limited interest from the producers in exploring collective investment and structure options at this stage in time. However, it is worth noting that several alternative company structure arrangements are possible and include:

• A private limited company with individual shareholders drawn from a spent hen processing enterprise, egg producing farmers and possibly other external investors
• A contractual venture where a spent hen processor invests with the backing of a guaranteed throughput from egg producing farmers
• A joint venture company, but with ownership from a processing business alongside egg producing farmers investing in a single block via a new co-op established for that purpose

94. To determine the appropriate structure, the motivations and investment criteria must be identified. Motivational factors for egg producing farmers include:

• Ability to meet RSPCA journey to slaughter times in the long term
• Ability to achieve better returns if possible
• Reduce costs (mainly transport)
• Secure the future of egg production in Scotland
• Improve another element of sustainability

95. Investment criteria for farmers include:

• Where possible a modest investment (the competitive nature of the egg sector encourages producers to retain cash for farm investment)
• Assessment of risk, albeit it is not a prime issue if the investment is small but this changes as the scale of investment increases
• Strong likelihood of a good prospect in returns and success
• The prospect of dividend returns, but this is not a short-term factor
• An exit route
• Limited interest in increasing any investment, it is mostly about compliance with the RSPCA standard
• Board influence commensurate with share capital

96. The abattoir facility review identified four options for the factory (see prior section). In each case, even with all the volume from Scottish spent hens, none of the options were financially viable. Additional throughput was necessary, and this would require to be secured from Northern Ireland and/or the North of England. A key unknown would be the cost of securing the necessary volumes given that existing processors will look to retain throughput for their own plants. They have made significant investments and will seek to protect their market share. Consequently, new entrants into the market will likely be disruptive and drive up the cost of procuring spent hens. Due to these uncertainties, it is likely that the farmers would consider the risk associated with the investment too high. As a result, determining a final structural option for the new venture became academic.