SOME PROSPECTSSOME PROSPECTSFOR FOOD INDUSTRY INFOR FOOD INDUSTRY INEURO-MEDITERRANEAN EURO-MEDITERRANEAN

COUNTRIESCOUNTRIES

Jean-Louis Rastoin,Jean-Louis Rastoin,ENSA.Montpellier/UMR MoisaENSA.Montpellier/UMR Moisa

University of Bologna – AIEA2University of Bologna – AIEA2

– – february, 18, 2005 -february, 18, 2005 -

OverviewOverview

•The food system approachThe food system approach•World and Mediterranean World and Mediterranean

Food IndustryFood Industry•Markets & Strategies in the Markets & Strategies in the

EU Med FTAEU Med FTA•Conclusion : Opportunities Conclusion : Opportunities

& Threats for Med & Threats for Med CountriesCountries

The AgroFood System The AgroFood System ApproachApproach

Agrochim

Genetics

Agriculture Food Industry Commercializ

Consum

ers

Government : competition, norms & knowledge

Equipments

Logistic and services

Source : d’après Feillet (2002)

The steps of theThe steps of theAgroFood SystemAgroFood System

StageStage

Final Price Final Price Sharing %Sharing %

Domestic Domestic ConsumptionConsumption

%%

Agri.Agri. Ind.Ind. Serv.Serv. Ag Ag ProdProd

Food Food Ind.Ind.

AgriculturaAgriculturall 100100 00 00 9090 1010

TransitionTransition 7070 2020 1010 6060 4040Agro-Agro-IndustrialIndustrial 3030 4040 3030 8080 2020

Agro-Agro-TertiaryTertiary 1010 3535 5555 55 9595

World & Mediterraean World & Mediterraean Food IndustryFood Industry

The Euro-Mediterranean The Euro-Mediterranean Free Trade Association Free Trade Association

ImpactImpact

Billions dollars Retail stores Food service TotalFresh food 531 382 913Packaged food 1 148 828 1 976Beverages 614 601 1 215Total food 2 293 1 811 4 104

Country groupPer capita

GNI, $ (2000)

Per capita food retail

sales $

Total 1996-2000 retail

growthHigh-income >= 9266 79 3,2%Upper-middle-income 2996-9265 298 8,1%Lower-middle-income 756-2995 143 28,8%Low income < 755 63 12,9%

Source : Gelhar M. Regmi A., USDA-ERS, 2005, from Euromonitor, 2003

The World Food Market - 2002

Billions dollars Retail stores Food service TotalFresh food 531 382 913Packaged food 1 148 828 1 976Beverages 614 601 1 215Total food 2 293 1 811 4 104

Country groupPer capita

GNI, $ (2000)Per capita

retail sales $

1996-2002 annual average

growth

High-income >= 9266 79 3,2%Upper-middle-income 2996-9265 298 8,1%Lower-middle-income 756-2995 143 28,8%Low income < 755 63 12,9%Source : Gelhar M. Regmi A., USDA-ERS, 2005, from Euromonitor, 2003

The World Food Market - 2002

World retail sales of packaged foods - 2002

CountriesProduction ($

Millions)Employees (Thousand)

Productivity ($ 1000)

EU-15 650 2 800 2321 USA 575 1 500 3842 Japan 289 1 100 2623 France 140 430 3264 Germany 129 590 2195 United Kingdom 125 500 2506 China 118 5 500 217 Italy 95 270 3528 Spain 74 340 2199 Brasil 71 600 118

10 Nederland 55 110 499

21 Mexico 22 190 11522 Turkey 21 175 118

World 2 700 25 000 108

Source : our estimations from Unido, 1998

The Leading Countries in World Food Industry - 2003

Food Industries Food Industries BenchmarkingBenchmarking

AreaArea[1998][1998]

ProdProdtyty

Y/WY/W

(K.$)(K.$)

RatioRatio

AV/YAV/YScoreScore

MC-MC-EUEU 250250 26%26% 4,434,43

MPCsMPCs 6262 24%24% 1,491,49

-Bad competitively of MPCs Food Industrydue to lake of competition

Source : our estimations from Unido Database, 2001

LIBERALIZATION IMPACT ON EURO-LIBERALIZATION IMPACT ON EURO-MEDITERRANEAN AGRI TRADE 2001 – MEDITERRANEAN AGRI TRADE 2001 –

2015 2015 Source : adapted from Bchir, Ducreux, Fouquin, CEPII Source : adapted from Bchir, Ducreux, Fouquin, CEPII Mirage ModelMirage Model

•CGEMCGEM

•Scenario 1 : only industrial productsScenario 1 : only industrial products

•Scenario 2 : ag. & food ind. products Scenario 2 : ag. & food ind. products includedincluded

•Trade and Welfare effectsTrade and Welfare effects

LIBERALIZATION IMPACT ON EURO-LIBERALIZATION IMPACT ON EURO-MEDITERRANEAN AGRI TRADE 2001 – 2015 MEDITERRANEAN AGRI TRADE 2001 – 2015

(1)(1)Source : adapted from Bchir, Ducreux, Fouquin, CEPII Mirage ModelSource : adapted from Bchir, Ducreux, Fouquin, CEPII Mirage Model

Product

EU -> Maghreb + Turkey

Export 2001(M.$ 97)

Scenario 12001-2015

change

Scenario 22001-2015

change

Agri products 1 580 - 3% 66%

Food Industry 2 920 - 4% 132%

Total Ag & Food 4 500 - 4% 109%

Sold X - M 560 227 4 063

LIBERALIZATION IMPACT ON EURO-LIBERALIZATION IMPACT ON EURO-MEDITERRANEAN AGRI TRADE 2001 – 2015 MEDITERRANEAN AGRI TRADE 2001 – 2015

(2)(2)Source : adapted from Bchir, Ducreux, Fouquin, CEPII Mirage ModelSource : adapted from Bchir, Ducreux, Fouquin, CEPII Mirage Model

Product

Maghreb + Turkey -> EU

Export 2001(M.$ 97)

Scenario 12001-2015

change

Scenario 22001-2015

change

Agri products 2 580 3% 23%

Food Industry 1 360 5% 59%

Total Ag & Food 3 940 4% 35%

Sold X - M - 560 - 227 - 4 063

Markets and Strategies in Markets and Strategies in the Food systemthe Food system

•3 ma3 marketsrkets

• 44 strat strategiesegies

Innovative market

Thema : healthProduct : « Neutraceutics»Value : technology

Niche market

Thema : culture & eventProduct : « authentic » Value : geographical origin « terroir »

Mass market

Thema : day-to-dayProduct : basic, safeValue : price, segmentation

TheThe 3 3 Food products markets Food products markets

Food products marketsFood products markets France, 2001France, 2001

SegmentSegmentNet salesNet sales

(billions €)(billions €)Annual Annual growthgrowth

Standard Standard productsproducts 87 (73 %)87 (73 %) 0-1 %0-1 %

Innovative Innovative productsproducts 6 (5 %)6 (5 %) 15-25 %15-25 %

« Terroir » « Terroir » productsproducts 27 (23 %)27 (23 %) 5-10 %5-10 %

Total Food Total Food industry industry (domestic market (domestic market + export)+ export)

120120

(100 %)(100 %)2-3 %2-3 %

AgroFood Firms Generic AgroFood Firms Generic StrategiesStrategies

1 – Domination by costs /

Large scale production :

(Multinational Firms)

4 – Differentiation / typicity :

“ Terroir ” SMEs

2 – Cost cuts /[Big distribution subcontracting] :

SMEs - DLP

3 – Differentiation / innovation & mkg

segmentation :(Multinational Firms)

Price

Volumes

Adapted from Porter ‘s Model (1985)

AgroFood Enterprises AgroFood Enterprises Typology in South & East Typology in South & East Mediterranean CountriesMediterranean Countries

• State Enterprises in some sectors State Enterprises in some sectors (Sugar, Oils, Tobacco) in many PMC(Sugar, Oils, Tobacco) in many PMC

• Private Conglomerates in Algeria Private Conglomerates in Algeria (Cevital), Morocco (ONA), Tunisia (Cevital), Morocco (ONA), Tunisia (Poulina), Egypt (Lakah, Orascom, (Poulina), Egypt (Lakah, Orascom, Ghabbour), Turkey ( Koc, Sabanci Ghabbour), Turkey ( Koc, Sabanci Hldg), with MNEs partnershipsHldg), with MNEs partnerships

• Emerging SMEs by privatizationEmerging SMEs by privatization

CONCLUSION :CONCLUSION :Opportunities & Opportunities &

ThreatsThreats

FMNs StrategiesFMNs Strategies

• Interest for emergent mass markets Interest for emergent mass markets (today : Asia, tomorrow : Med. ?)(today : Asia, tomorrow : Med. ?)

• In search of leadership (market In search of leadership (market share)share)

•Organization : global firms Organization : global firms (investments in technology and (investments in technology and communication)communication)

• International management, but International management, but national governancenational governance

Med. SMEs opportunitiesMed. SMEs opportunities

•Traditional products : the Traditional products : the mediterranean dietmediterranean diet

•Reconquest of the domestic Reconquest of the domestic marketmarket

•Capture of the international Capture of the international marketmarket

SMEs constraintsSMEs constraints

• asymmetric competition with FMNs asymmetric competition with FMNs and with the « new producing and with the « new producing countries »countries »

• Capture a « territorial rent » (« AOP »)Capture a « territorial rent » (« AOP »)• Quality ControlQuality Control• Agriculture modernization to improve Agriculture modernization to improve

profit and raw materials availabilityprofit and raw materials availability• Insure TraceabilityInsure Traceability• Consolidate Equity to increase Consolidate Equity to increase

business cycle (Investment)business cycle (Investment)• => Improve the management level=> Improve the management level

A « mediterranean new A « mediterranean new strategy »strategy »

•Strategic alliance based on Strategic alliance based on regional AOP and enterprises regional AOP and enterprises networknetwork