Everything Australian food exporters need to know in 2017
Major food retailers have almost unprecedented buying power, driving down prices for suppliers and putting the global food production and processing market under pressure. Atradius has developed a newly-published food market monitor to help exporters navigate this fiercely-competitive marketplace.
The report focuses on 12 key global markets: USA, Germany, France, Belgium, Spain, Denmark, Italy, the Netherlands, Ireland, Poland, Hungary, and Portugal. It found that there is a significant amount of consolidation taking place within the industry as companies look to merge to insulate themselves against drops in demand for certain products, as well as volatile commodity prices.
Broken down by country, the report offers key insights including:
The food and beverage manufacturing industry is one of the largest in the country, employing more than 1.4 million people in more than 21,000 companies, generating revenues of around US$760 billion. The market is tipped to grow by a modest 1.6 per cent in 2017, which is below the expected GDP for the same period. This is largely due to relatively benign agricultural commodity prices, as well as new requirements imposed by the US Food and Drug Administration for manufacturers to include nutritional facts on packaged food to reflect new scientific information, which adds costs to food production.
High energy and labour costs are impacting the Belgian food industry, with labour costing 20 per cent more than in France, Germany and The Netherlands. This reduces profit margins for Belgian companies, though the market is still profitable. This is largely due to the high quality of food products produced in the country, as well as its strong export performance to markets outside of the EU. The sector is set to grow by 1.8 per cent in 2017, ahead of the anticipated 1.3 per cent growth in the country’s GDP.
The food sector is Germany’s third-largest industry, employing more than 570,000 people. Domestic market conditions have seen annual turnover figures either level off or decrease, mainly due to a shrinking population and increasing price pressure. A number of high-profile fraud cases have added more pressure, while the fiercely-competitive market has led to a major squeeze on prices for suppliers.
Netherlands: As one of the largest exporters of agricultural and food products in the world, the Netherlands’s food product exports totaling EUR 60 billion in 2015. Small and mid-sized retailers are being squeezed and are expected to lose further market share. Profit margins overall are tipped to remain stable, with the market expected to grow by 1.1 percent in 2017, below the expected GDP of 1.5 percent.
Worth EUR 170 billion in 2015, the French food sector is expected to grow by 1.6 percent in 2017. Many domestic food producers’ margins have been negatively impacted by price competition in the French food retail market. The level of non-payment notifications and insolvencies is low in the sector compared to other industries.
The export-driven food sector remains Ireland’s most important, employing around 50,000 people directly with a further 180,000 related jobs in farming and support industries. It is highly-dependent on the UK market, which accounts for 40 percent of its exports, so the shrinking margins and volatility caused by the Brexit decision has had a negative impact on this market.
The Polish food sector, which accounts for 6 percent of GDP and 13 percent of exports, is fairly buoyant at present and, in 2017, the sector is expected to grow by at least 3 percent. Given its current fragmentation, a further concentration and consolidation process in the Polish food sector is highly probable.
Denmark: Denmark’s exports in recent years have been driven by emerging markets, but the sector contracted by 0.3 percent in 2015 and is expected to level off in 2017 due to strong domestic and international competition and low sales prices. As profit margins are generally low, smaller players are susceptible to sudden market shocks.
The food and beverages sector is a very important part of the Hungarian economy, as the second-largest employer and the third-largest producer in the manufacturing industry. It is expected to experience growth of around 2.4 percent in 2017, driven mainly by exports. Primary exports are fruits and vegetables, meat, and dairy products. That high export exposure does make it susceptible to global volatility.
Italy’s food sector employs around 385,000 people and generated a total turnover of EUR 135 billion in 2015, with exports accounting for EUR 36.9 billion. Italy is also the world’s biggest exporter of wine. The short term outlook for Italian food exports remains positive, and the industry as a whole is expected to grow by 1.2 percent in 2017.
The Portuguese food sector is expected to grow by 1.8 percent in 2017, up from the expected 0.3 percent growth in 2016, which was affected by a decline in two of Portugal’s biggest export markets: Brazil and Angola. The Russian import ban has also negatively affected produce prices, particularly meat.
The agri-food sector is one of Spain’s most important, employing 2.4 million people and accounting for nine percent of the national economy. Food exports, which account for 15 percent of all Spanish exports, increased by 7.5 percent in 2015 to EUR 44 billion. The sector is expected to grow by 1.8 percent in 2017. The external financing requirement of food businesses is high, and the intense price war in the food retail segment has left some players in a difficult situation.
Mark Hoppe, managing director, Atradius ANZ, said, “In general, the food sector continues to perform reasonably well, with a stable credit risk situation in many countries. It helps that, compared to other industries, food is rather resilient to business cycle downturns.
“That said, in most markets, food producing and processing businesses remain under pressure, as a consequence of fierce competitive environments putting pressure on retailers to discount produce, which in turn drives down prices for suppliers, whose margins are becoming stuck at low levels or even shrinking.
“Australian food exporters should be aware of these conditions in our trading partners and take steps to ensure they are managing risk appropriately.”
Please see below a link to the full report.
Rainmaking + ESG Launch Supply Chain Resilience Accelerator
Rainmaking, one of the world’s leading corporate innovation and venture development firms that create, accelerate and scale new business, has partnered with Enterprise Singapore (ESG), a government agency that champions enterprise development, to launch Singapore’s first ‘Supply Chain Resilience Accelerator’.
The new programme will unite startups and enterprises to boost scalable technology solutions that help fuel supply chain resilience by addressing pain points in transport and logistics.
Over the last 13 years, Rainmaking has launched 30 ventures totalling US$2bn, including Startupbootcamp. Having invested in over 900 startups that have raised more than US$1bn, Startupbootcamp is one of the world’s most active global investors and accelerators.
The new programme looks to help build more resilient supply chains for Singapore’s burgeoning network of startups by leveraging its advantageous position as a global trade and connectivity hub. As part of the Supply Chain Resilience Accelerator programme, no less than 20 startups with high-growth potential will have the opportunity to become a part of Singapore’s vibrant ecosystem of startups.
Calling Supply Chain Solution Startups!
The programme will kick off with an open call for startups who specialise in supply chain solutions for end-to-end visibility, analytics, automation and sustainability.
Applicants will then be shortlisted and receive nurturing from Rainmaking, fostering valuable engagements with corporates to drive scalable pilots with the aim to stimulate investment opportunities.
“Covid-19 exposed the fragility of global trade, and the Supply Chain Resilience Accelerator is our opportunity to spot weak links and build back better. Piloting outside tech can be an incredibly efficient way to test viable solutions to big problems, provided you de-risk and design for scale. Our programme does precisely this by helping corporate decision-makers and startups to work on compelling business opportunities, anticipate operational risks, and ultimately co-create solutions fit for wider industry adoption,” said Angela Noronha, Director for Open Innovation at Rainmaking.
Pilots will run from Singapore, with the objective that relevant organisations may adopt successful solutions globally. To that end, Rainmaking is currently engaging with enterprises specialising in varying industry verticals and have expressed interest in partnering.
“Even as we continue to work with startups and corporations all over the globe, we are so pleased to be anchoring this program out of Singapore. With a perfect storm of tech talent, corporate innovators, and robust institutional support, it’s the ideal launchpad for testing new solutions that have the potential to change entire industries. We look forward to driving the transformation with the ecosystem,” added Angela Noronha.
One of the first selected corporate partners is Cargill, a leader in innovating and decarbonising food supply chains.
"Cargill is constantly exploring ways to improve the way we work and service our customers. Sustainability, smart manufacturing and supply chain optimisation are key areas of focus for us; exploring these from Singapore, where so many key players are already innovating, will help us form valuable partnerships from day one. We look forward to joining Rainmaking and ESG on this journey to work with, support, and grow the startup community by keeping them connected to industry needs,” said Dirk Robers, Cargill Digital Labs.
In order to raise awareness on the importance of building resilience and how technology can be leveraged to mitigate risks of disruption, industry outreach efforts will include fireside chats, discussions and demo days.
In July, Rainmaking will host a virtual insight sharing event for innovation partners as well as a ‘Deal Friday’ session that connects businesses, investors, and selected startups with investment and partnership opportunities.
Programme events will also benefit Institutes of Higher Learning by offering exposure to how advanced practitioners leverage new technologies to transform traditional supply chain management and share real-world case studies and lessons learned, better equipping next-gen supply chain leaders.
“As an advocate of market-oriented open innovation, we welcome programmes like the Supply Chain Resilience Accelerator, which aims to help companies resolve operational pain points, strengthen supply chain resilience and spur growth in a post-pandemic world. With a strong track record in driving open innovation initiatives for the transport and supply chain industry, we believe that Rainmaking’s in-depth knowledge of the ecosystem and network of global partners can complement Singapore’s efforts in accelerating our business community’s adoption of tech-enabled tools, to better manage future disruptions and capture opportunities arising from shifts in global supply chains. This will in turn help to strengthen our local ecosystem and Singapore’s status as a global hub for trade and connectivity,” said Law Chung Ming, Executive Director for Transport and Logistics, Enterprise Singapore.