supporting the competitiveness of the european food and drink industry

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food and drink industry
CIAA CompetItIveness RepoRt 2010
Scope and objectives of the 2010 Competitiveness Report
This report analyses and sets out the priority areas which are critical for the long-term competitiveness of food and drink manufacturers in the EU.
The analysis has been done on several levels, by:
1. Presenting key competitiveness indicators; 2. Identifying the opportunities and threats for the EU food and drink industry compared to other
countries and regions; 3. Assessing the extent to which the Recommendations of the Commission’s High Level Group for the
Competitiveness of the Agro-Food Industry have been implemented; and 4. Identifying, and in some cases, confirming areas of action for policy-makers.
This report presents EU-27 data unless otherwise specified.
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Foreword
The 2010 CIAA Competitiveness Report aims to assess the performance of the EU food and drink industry in light of political and economic developments in Europe and globally.
A pillar of the EU economy, the European food and drink sector is a stable employer and manufacturer. Despite this solid base and stable but low growth in production, the EU food and drink sector growth is being outpaced by the performance of emerging economies. This is due, among other things, to:
• Low levels of R&D in EU food and drink companies; • Lower labour productivity growth in the EU; • Uneven industry-retail relations within the EU food
chain leading to unfair practices; • Currently stable but relatively high input prices for
raw materials in the EU; and • A highly-regulated business environment in the EU.
At the same time, the EU food and drink industry remains the largest exporter globally, although its export market share on global markets is declining. Surprisingly, after eight years of decreasing trade balance, in 2009 the EU food and drink sector registered an upswing due to a sharp decrease in imports during the economic crisis.
As a non-cyclical sector, minimally subjected to the flow of markets and the economy, the EU food and drink industry has been less affected by the economic crisis than other industrial sectors, allowing it to continue to operate well in a challenging economic environment without state support. Food and drink companies have continued to provide healthy and nutritious products to their consumers throughout the crisis, while maintaining their commitments, among others, to the promotion of healthy lifestyles and balanced diets, sustainable consumption and production as well as research and innovation.
Finally, the EU food and drink industry calls for enhanced political support for the implementation of all actions aiming to increase the industry’s competitiveness as identified by CIAA in this report. For the EU food and drink industry, this is the way forward towards fulfilling the objectives of the EU 2020 Strategy.
Jesús Serafín Pérez PRESIDEnT
Table of Contents
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2009 at a glance: Food and drink companies in the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1. Setting the scene: The food and drink industry – a pillar of the European economy . . . . . . . . . . . . . . . . 6
2. Main food and drink competitiveness indicators – an international comparison . . . . . . . . . . . . . . . . . . . . 8
2.1 Production value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.2 Labour productivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.3 Export market share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.4 R&D investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Special Section: High Level Group on the Competitiveness of the Agro-Food Industry . . . . . . . . . . . . . . . . 12
3. Specific food and drink industry benchmarks and requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.1 Food supply chain issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.2 Regulatory environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 3.3 Business input costs, including agricultural raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.4 Environmental policy and sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 3.5 Trade competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Annexes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 List of tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 List of figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 List of boxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Table of Contents
Key sector characteristics
• Stable manufacturing sector and employer, true pillar of the EU economy • Mature sector operating mainly in a mature market (EU Single Market), although in need of policy-makers’
support to maintain its export competitiveness • Competitive industry compared to other developed countries but losing competitiveness against emerging
economies • Robust non-cyclical sector, less affected by the economic crisis than other business sectors in the EU
Key competitiveness indicators
Quantitative Indicators
Production Value Slow increase in production growth compared to emerging markets but keeping pace with developed economies
Labour Productivity Increased labour productivity, but still lagging behind other developed economies
Export Market Share EU still first exporter, but with a decreasing export market share
R&D Investment EU lagging behind its competitors and not growing
Qualitative Indicators
Functioning of the Food Chain Uneven industry-retail relations within the food chain leading to the proliferation of unfair practices
Private Labels The dual role of retail and the misuse of Private Labels
Regulatory Impact Highly-regulated business environment and low predictability for business decisions due to regulatory change
Access to Input Products Currently stable, but relatively high price levels of input products
Environment and Sustainability Increased efforts towards sustainable consumption and production and towards decoupling growth from greenhouse gas emissions
Food and drink companies in the EU 2009 at a glance
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Setting the scene: the food and drink industry – a pillar of the European economy
As the largest manufacturing sector in the eU, the eU food and drink industry had a € 965 billion turnover in 2008. With 4.4 million employees, the industry serves over 500 million european consumers and many international markets. As a daily part of european citizens’ lives, eU food and drink companies respond to evolving consumer preferences for a large variety of safe, nutritious and quality products every day.
although drink companies saw some impact particularly in the last quarter of 2009 (see Fig. 2). Although a shift was seen in consumer demand towards cheaper products and services, the food sector registered the biggest rebound after the basic pharmaceutical products industry.
Fig. 1 Evolution of number of companies and employment in the EU food and drink sector (2000=100)
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no of companies Employment Source: Eurostat, Structural Business Statistics (SBS), 2008
Since 2005, the number of EU food and drink companies has remained constant, as have the number of employees over the past few years.
Stability through the economic crisis
During the economic slowdown, food companies performed better than other manufacturing sectors,
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Box 1 EU consumer demand for premium meat and meat delicacies falls
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Percentage change in three months up to Feb 2010 from the preceeding three months
Legend: Size of bubble reflects employment in the sector. Red colour represents intermediate, blue – capital and yellow –
consumer goods. In case of sectors falling under more than one category colours are mixed.
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Decline goes on Rebound has started
Source: Eurostat, DG Enterprise – Monthly note on Economic Recovery, May 2010 based on nACE Rev 2
Fig. 2 Sectoral output performance since the onset of the crisis
setting the scene: the food and drink industry – a pillar of the european economy
EU consumer demand for premium meat and meat delicacies in the EU has been declining since the economic crisis swept the globe in 2009. A significant reduction in consumer demand for well-known meat delicacies such as Parma ham and Iberian ham was evident during 2009. The more expensive the meat, the bigger the fall in demand, as consumers ‘traded down’ to lower-priced options.
Consumption of meat delicacies of up to € 50/ kg went down by 30% during the second semester of 2009, while consumption of meat priced at up to € 70/kg registered a 50% fall. Some European restaurants have had to adjust their menus as demand fell, with consumption of foie gras in expensive Parisian restaurants taking a significant hit for example.
Source: CLITRAVI, Meat International
C16 Wood and of products of wood
C17 Paper and paper products
C18 Printing and reproduction of
recorded media
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C21 Basic pharmaceutical products
C24 Basic metals
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semi-trailers
Main food and drink competitiveness indicators – an international comparison
the 2010 CIAA Competitiveness Report builds on previous years’ reports and analyses a number of competitiveness indicators for the food and drink industries worldwide. the previous analysis showed that the eU food and drink sector was lagging behind other countries.
this year’s report shows that the competitive position of the eU food and drink industry has not improved when analysed in terms of evolution of production value, labour productivity, eU export share and R&D investment. moreover, emerging countries show enormous growth in production value and trade balance of the food and drink sector. Finally, the distribution of export market shares is shifting from established competitors to new emerging economies.
2.1 Production value
Slow increase in production growth compared to emerging markets but keeping pace with developed economies
Facts: EU food and drink production value continued to increase in 2008. However, food and drink industry production growth in emerging markets, such as China and Brazil, continued to outpace the EU-27 growth. During 2008, EU food and drink output grew faster than in other industrialised countries, such as Canada.
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50 2001 2002 2003 2004 2005 2006 2007 2008
Fig. 3 Evolution of production value in various food and drink industries (2001=100)
Source: Eurostat, OECD Stan Database, 2010
EU-27
Australia
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Food and drink industry output accounts for a high share of industrial output both in developed and developing countries. EU food and drink…