A recipe for the survival of an industry

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Series Details 31.01.08
Publication Date 31/01/2008
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The European food industry must work harder to maintain its competitiveness, writes Jennifer Rankin.

Bras and shoes, TVs and widgets are now cheaper to make in Asia, but most casual observers would assume that Europe still has plenty to be proud of in its food and drink industry.

From Parma ham to pork pies, fine wines and flavoured vodkas, Europe offers a rich array of produce. The continent also has a number of sizeable multinational food companies, including Unilever and Danone. This is big business: the industry has a turnover of €800 billion a year and employs four million people. But although it sounds like a recipe for success, the state of the industry leaves some onlookers a little queasy.

In December 2006, Günter Verheugen, the European commissioner for enterprise and industry, said that "the competitiveness of this sector is now a matter of concern". Verheugen was responding to a gloomy 300-page report commissioned by his enterprise directorate-general from researchers at Wageningen University in the Netherlands. They concluded that Europe’s food industry was less competitive than those of the US, Canada and Brazil. The study found that Europe’s food industry was hampered by trade barriers, quotas under the Common Agricultural Policy (CAP), low productivity, a fragmented market and onerous administrative burdens for pre-market approval of new products and additives. Lower productivity and higher labour costs also make European foods less competitive. In the cereals sector, labour costs make up 25% of the final cost of the product in the US, 40% in Canada and 65% in the EU.

The Commission has promised a "targeted initiative" in 2008 to help the industry. This will be focused on making the single market work better, trimming red tape and helping small- and medium-sized enterprises (SMEs), improving industry’s access to non-EU markets and supporting innovation. Earlier this month (14 January), the health and consumer protection directorate-general (DG Sanco), proposed new rules to speed up the authorisation of ‘novel foods’, products that have not traditionally been sold in the EU but have in other parts of the world been shown to be safe to eat.

The mix of policies, touching trade, agriculture, health and industry are a reminder of how complex the food industry is. From farm to fork, the industry has a long line of players involved - "a complex value chain" in the words of economists - and is also highly diverse. In Europe, there are about310,000 firms, a boon for the diversity of produce, but a disadvantage for getting economies of scale. In addition to worrying about competitiveness, the industry must also contend with rising commodity prices, CAP reform, public health problems and complex scientific - and highly emotional - debates over genetically modified foods and cloning.

EU food and drink in figures

The European food manufacturing industry had a turnover of €800 billion in 2006, having increased by 2.5% on 2005, and employs more than 4 million people. The sector includes 309,700 companies, 99% of which are small- or medium-sized enterprises. France, Germany, Italy, the UK and Spain are the EU’s largest food and drink producers.

Europe is the world’s largest exporter of food products. The US is Europe’s number one customer, absorbing 22% of EU exports in 2006. Russia is also a top export destination, with shipments there up 24% to just below €5bn in 2006. China, which is among the EU’s top ten clients, snapped up €1bn worth of exports last year.

Europe’s share of the global market, however, has been shrinking over the past ten years, from 24.2% to 20.8%. Market share has been lost to economies such as China and Brazil.

The European food industry must work harder to maintain its competitiveness, writes Jennifer Rankin.

Source Link http://www.europeanvoice.com