The EU agrofood sector: facts and challenges

IP ErasmusJune 25th 2010

• P 9 à 15 rapport EU• 25 à 57

Agrofood- Agroindustry?…

FARM

INDUSTRY

MOLECULESPharmacy, Hygien,

Cosmetics, Detergents…

MATERIALSConstruction, Paper, Textile,

Plasturgy, Metallurgy, Packaging

ENERGYCarburants, Electricity, Heat

FOODAlimentation, ingredients,

processing aids, neutraceuticals

Agro industryIndustry dealing with the supply, processing and distribution of farm products. (Source: PHC)

Agro Food….. For human food purpose A F I

• Definitions• EU AFI: snapshot• EU Agrofood sector– Impact of CAP

– Evolution and consequences• EU AFI : today , tomorrow … challenges

– What do we observe today?– Strengths & Weaknesses– Threats & Opportunities

• An illustration: the meat & poultry meat area

EU Agrofood sectorSnapshot

EU Food & Drink characteristics

53,52733%

12511115%

519,3435,481%178

134,142%

21316456%

World exports of Agri Food products

Total: 1127,7 mio$

P.prod: 913% intra region PA

WTO 2007

3932%

965

EU Food & DrinkA heavy sector

Largest EU Turnover 965 b € +3,2%

Largest EU employer4,4 million

EU Food & DrinksWhat’s in?

Share of main sectors in the EU Food & Drink exports -2008

EU Agrofood sectorA few « takeaways »

• Value added: 2% EU GDP

• Largest Manufacturing sector in the EU - 13,5% employment

• 12,9% EU Turnover 2008- 965 b € +3,2%

• Fragmented market: 310 000 companies, predominantly SME’s

• Shrinking share in 17,5% global export markets

• Insufficient R&D budget: 0,37%

Now: a period of structural adjustment

EU Agrofood sectorImpact of CAP

Evolution and consequences

– Settled in the 60’s to modernize European agriculture

– Clear objectives:• Modernize agriculture • Allow farmers to be competitive

– Basic principles: • Very high prices comparatively to world prices• Guaranteed by intervention• No quantity limit for sales to intervention

History of CAP

CAP and AgricultureEurope self-sufficient

Quick improvement of productivity of agriculture

Farm restructuring slow many middle-size farms kept

Land occupation Rural exodus slowed down ( 60’s,70’s)

Success for intervention systems, resulting in huge… excess of production… expenses for CAP

and critics: from third countries from consumers and importing countries within the EU

CAP and AFI businesses Predictability of business……As prices kept stable

-Competitiveness: expensive inputs-No need to be competitive Trade barriers Restitutions

Food companies policies

• CAP strategy of volume for many companies• Subsidies “addicts” are:

– Weak in innovation– Not “incented”to create brands and added value, except

multinationals • Easy return• Intra EU trade• Large single protected market- SME

90’s 90’s 0790 07

The changes in the 90’s

• EU begins to reform CAP• Lower farm prices and direct subsidies to farmers are

implemented• Limitation of restitutions

– Changing scope for AFI• From 2000, less access to intervention

Need for many companies to change their strategy

90’s 90’s 0790 07

EU Agrofood vs Production

• Production structures weakened in some areas

• Agricultural activity perceived less attractive

• Many small farm structures – Consequently, “high” prices to be paid to

farmers

90’s 90’s 0790 07

EU AFI companies policies

• Different strategies– Delocalization– Concentration – Outsourcing

• Within a difficult context– Less subsidies– Increased competition from 3rd countries

• Many companies facing difficulties – Too many SMEs – Restructuring has still to go on– Mergers, emergence of large players

90’s 90’s 0790 07

EU AFI companies:challenges90’s 90’s 0790 07

• Find new outlets within EU

• Nutrition challenges in sugar, dairy, meat industry

• Weak competitiveness on world market for commodities

• A strong image of quality products from Europe • Strong network of middle-sized companies with high added value•Emergence of large AFI cies • Strong and competitive retail sector

2007 shock

• Catalysers for price increases– Competition for land ( biofuels)– Speculation on cereals– Climate

• Decoupling had strong effects

Possible consequences?

90’s 90’s 0790 07

A few questions for the future

• Localisation of production will still change• In these conditions, where to process ?• Prices will remain high • Added value is more than ever a priority • Strong domestic market is still strong and vast, with

high purchase power consumers

90’s 90’s 0790 07

Takeaways

• Weak competitiveness in terms of raw material• EU has to improve its performances in terms of

structure and price • But holds assets, among which:

– Added value, even if has to be further pushed– Image– Consumers

EU A.F. I.Today… and tomorrow

Challenges

EU A.F.I.Today… and tomorrow

Challenges

What can we observe today?

EU Food & Drink industry ranks low

Competitiveness of the EU Food industry- 2007 -LEI

EU Food & Drink industry ranks (usually low)

by sectors

Competitiveness of the EU Food industry- 2007 -LEI

Open to the World MarketEU: a major exporter – Intra EU share is hig

0

20

40

60

80

100

120

0 20 40 60 80 100% export-intra zone

Agric. Products – export moi$ 2007

% processed products vs agric prod

AsiaEurLatam

AME

NA

0

2

4

6

8

10

12

14

16

18

20

1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007

Etats-Unis

Pays-Bas

Allemagne

France

Brésil

Canada

UEBL

Espagne

Chine

Italie

Shrinking share in world trade TOP 10 exporting countries – Food products

1967 – 2007

18,1%

31,3%

Emergence of Brazil and China in Food&Drinks exports

Trade balance still positive but….. Trade balance of Food & Drinks industries

1999: base 100

To be even more accurate..EU Food & Drink trade balance

2000-2008 (b€)

E 52b€ E 58,2b€

I 48,2b€ I 57,1b€

30

35

40

45

50

55

60

65

70

75

80

1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007

France

Allemagne

Italie

Benelux

9 autres UE15

12 autres UE27

Importance of Intra EU tradeShare of EU in Food imports by EU member states – 1967/2007

Selective evolution per sectorEU Food & Drink sector’s balance

2005-2008 – b €

Is « in »… open competitionWorld AgriFood companies- Top 30 by Food & Drink sales WW

Eur Sales 08-09 – 189 b€

ABF-UK

Unilever NL/UKInBev/ An-BE

Danone -FR

Heineken-NL

Diageo-UK

Friesland NL

Lactalis-FR

Vion-NL

Nestle CH

US Asia EU

WW Sales 08- 09– 557,5 b€

34%

TOP 30 WW AFI companies

Top 30 European AFI companies by european Food & Drink sales

EU Agrofood Today… and tomorrow

Challenges

What can we see today?Why?

Indice base 100 -2000- Growth of value added/ employee - CIAA 2008

VA/ emp -

€ -2006

USCanadaJaponAustraliaUE25BrasilChina

92,375,365,359,258

25,512;8

Value-added is medium, but still growing

Weak in labour productivity( worldwide comparison)

1000€/ employee – 2008

0 50 100 150 200 250 300

US

Australia

New Zealand

Canada

EU

Mexico

Brazil

China

2005, Eurostat, SBS

Weak in Labour productivity compared with other industries

1000€/ employee

0 20 40 60 80 100 120

Food & Drink

Manufacturing

Automobiles

Basic metals

Chemicals

Textiles

2005, Eurostat, SBS

Labour productivity growth

2007-2008(%)

-1,5%

+0,1%

Insufficient R&D expenditures

CIAA Report 2009

EU Food &Drinks low in economies of scale

• Highly fragmented market– 99, 1% companies are SME employing <

250pp

But…. high in economies of scope• Cultural differences between• Specialized SMEs• Consumer preference for differentiated and healthy products

To sum up….Strengths & Weaknesses

Small size companies Small size companies

Economies of scope Economies of scale

Attractiveness: labour, € Labour productivity

Value added Too low RD expenditures

Trade driven Exports & Trade balance down

In open market- large cies in competition

EU Agrofood Today… and tomorrow

Challenges

Opportunities & threats

Population: a low « growth »EU 25 population -1980-2050

Eurostat

Population: less spendings in HH expenditures

1995 -2008

Impact of retailers in EU

Increasing scale of the retail chainSales evolution in food retail and food processing 2001/2008

USDA

0

200

400

600

800

1000

1200

2001 2008

Food retailFood processing

Increasing scale of the retail chainSeen from another angle

Ex: price evolution along the food chain( monthly price indices)

Sce: Datastream

A threat?Comparative trends in retailing sector and AFI

( Paris stock exchange-01/91: index 100)

« Cost »  of raw materials

?

Alimentation – Self sufficiency

Alimenta tion – exportationFirst non food markets

Energy -Carburants

1950 2000 2050

Detergents- Clothing.. …

• Competition from other uses

• Competition from other countries for food uses

• Trade « weapon »• GMO issue ACCESSIBILITY

HIGH PRICES

PRICE VOLATILITY

Administrative « burden »• Regulatory processes in EU: cost, timeframe• Difficulties for companies to deal with

A way to differentiate• Response to ( some class) of customer expectations

– Food safety/ confidence: biosafety, traceability, clean products,image, transparency..– Ethics: animal welfare…Provided the chain can afford it

EU Food regulationEntry ticket

Labelling

Compulsory nutrition labelling

NOVEL Food

GMO – Zero Tolérance

Cost

From 323€ to 6155€/ label

From 4,8mio€ to 35mio€

GM rice: 3,55 / 7,5 moi€Traçeability non listed soya GMs: 1-2,8 b€

To sum up….Opportunities & Threats

• Fragmented market• Cultural differences• Societal issues

– Health & lifestyles– Sustainability– Animal welfare

• Increasing income• Central & Eastern

Europe: new growth poles

• Ict supply management

• Low population growth• Mature market showing

signs of saturation• Bargaining power of

retailers getting stronger• Pressure on SMEs• Restriction to RM

availability – CAP, WTO…– Non food demand

• Volatility of markets• EU Food law procedures

Retailer concentration & internationalisation

Retail driven supplychain

rationalisation

Hard Discount& Retail Branding Developped markets

Low consumption growth- matureSafety-health

Rising feed, labour, fuelaggravated by currency

Political & pressures: CAP Reform…

Horizontal & verticalconsolidation

"Zero risk“- LawRising regulatory costs

Higher volatility in feed ingredients and exchange rates

conditions

Emerging marketsOutsideInside EU

AFI companies

Long term demand potential

WTO-Rising importsLiberalization of trade

MarketingSegmentation

NPD

Safety

Cost reduction

Risk management

Trade weapons

Social expectationsEthics

Challenges in a new globalized environment

Shifts in population structures & lifestyles

Consumer preferences are

changing

Change in policiesLiberalization of trade

Consumer concerns about price, food safety and health

Social expectations/ ethics

Low levels of labour productivity

INsufficient levels of RD investment

Ongoing consolidation of the food supply chain in

favour of retailers

Growing populations in emerging countries

Financial crisisPrice volatility

ICTBiotechnologies

AFI companies Profitability/ sector

Driverfor Profitability …….Position in chain

NestleUnileverConagra

KraftHeinz

Danone…

A few keywords

Consumer choice

Collaboration

Competitiveness

Clustering

AgroLogistics

Social responsibility

Moving society

Sustainability

Innovation

• Pressuire on SMEs which have persistent lack of resoitce: fnancial K, workforce and time, little RD cap of tyheir own

Population & GDP growth

Sce IMF-UN

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

Union européenne à 27Amérique du Nord

Asie de l'Est et du Sud-Est

CEI et Autres Europe

J apon Océanie et Autres Asie

Moyen-orient,Maghreb

Afrique sub-saharienne

Amérique du Sud

Evolution main areas in GWPparité de pouvoir d’achat 2005*

1960 – 2008(% GWP)

Evolution des PIB réels* par habitant1960 – 2007 – US base 100

Major concerns for the future• Globalisation

– Cheap transport– Cheap information transport– LOw transactioncosts

• Structural change– Mass production– Economies of scale

• Change in trade patterns– EU decrease in shares of the world market:

emerging economies, barriers, custom p^roceduires

• ACess to good quality/ competituvely prived RM

Competitoveness?

Change in consumer preferencesDiversified? High quality,

ffordazbleSustanability etcics

Biotechnologies

PUSH PULL

Producteurs Ingrédients Transformateurs Distributeurs

AgroFood chain: specificities

-4,0 -2,0 0,0 2,0 4,0 6,0 8,0 10,0

Arabie saouditeMoyen-orient, Maghreb

Union sud-africaineNigériaRussieBrésil

MexiqueAllemagne

FranceItalie

Autres Europe Canada

Australie/Nelle-ZélandeEtats-Unis

JaponRoyaume-Uni

9 autres UE15 12 autres UE27

Asie et Océanie ndaEgypteTurquieASEAN

IndeTaiwan

Corée du SudChine

2008/1980

1980/1960

Taux de croissance du PIB par tête en parité de pouvoir d’achat

2005*(en %)

World exports by product category1990-2007 -- Mio $

Sce: WTO

0

500000

1000000

1500000

2000000

2500000

1990 2000 2005 2006 2007

FoodprodAgricultural prod.

Power of retailingValue in Agro-Food (EU)

World exports by region2007 -- Mio $

Sce: WTO

0

100000

200000

300000

400000

500000

600000

700000

800000

UE intra

UE extra

Argen

tina

Brazil

Canad

aUSA

China

FoodprodAgricultural prod.

82

CComposition des échanges agro-alimentaires mondiauxomposition des échanges agro-alimentaires mondiaux

46,17

13,88

4149,56

65,59

38,01

85,04

147,28

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

150

160

Commodités Horticoles Semi-transf. Transformés

1985-892000-04

Milliards de dollars courants

* Hors échanges internes à l’Union Européenne. Source: FAO-OCDE.

Specialisation de la FranceChelem-CEPII

Position de l’UE 15 dans le commerce agro-alimentairePosition de l’UE 15 dans le commerce agro-alimentaire

-20

-15

-10

-5

0

5

10

15

20

25

30

35

40

45

Bulk Horticoles Semi-transf. Transfor.

ExportationsImportationsSolde

Milliards de dollars, moyennes 2000-2004

85

Composition du commerce agro-alimentaire mondialComposition du commerce agro-alimentaire mondial

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Fruits et légumes

Céréales et prép.

Produits laitiers+œufs

Café, thé, cacao, épices

Autres boissons

Graisses végétales

Aliments divers

Tabacs

Oléagineux

Sucres et miels

Viande bovine

Vins, vermouths

Viande de porcs

Fibres textiles

Viande de volailles

Tourteaux d'oléag.

Cuirs et peaux

Prép. de viandes

Caoutchouc nat.

20031980

Em % da la valeur desexportations tous produits agricoles.

Part des principaux produits agroalimentaires exportésPart des principaux produits agroalimentaires exportés en pourcentage de la production mondialeen pourcentage de la production mondiale

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80

Café

Cacao

Farines oléagineux

Matières grasses

Thé

Coton

Sucre

Bananes

Blé

Viande ovine

Viande bovine

Produits laitiers

Viande volailles

Céréales sec.

Viande porc

Riz

Moyennes des années 1995-1998Moyennes des années 1995-1998en %. Source : FAOen %. Source : FAO

Dynamique de différenciation des produits

Nouvelles exigencesNouvelles exigencesdes consommateursdes consommateurs

(qualité intrinséque et(qualité intrinséque etextrinsèque)extrinsèque)

Certification Certification Intégration deIntégration defilièrefilière

InternationalisationInternationalisationde la distributionde la distribution

Rôle croissant dans l’organisationRôle croissant dans l’organisationdu commerce mondial de produitsdu commerce mondial de produits

agroalimentaires.agroalimentaires.

Nouveaux produitsNouveaux produits(biotechnologies)(biotechnologies)

Impératif deImpératif detraçabilité ettraçabilité etsegrégation segrégation

Intégration deIntégration defilièrefilière

Stakes for Agrifood companies

New consumer

s

Product quality

Norms/ Regulation - EU

Ageing population

Traceability/ segregation

Transparency

Health

Rising expectatio

ns

RetailersWeight &

Internationalisation

New products

GMNanotech

Safety

Emerging countries Product volumes

Certifications ( intl – private)

Reassurance

New consumers

from emerging countries Product quality

Norms/ Regulation – Ex: EU

Traceability/ segregation

TransparencyHealth

Retailers

Food Safety

Acess to food

Certifications ( intl – private)

Reassurance

Ageing population

in developped countries

Choice

Internationalisation

Differenciation

Concentration

Products

Brand management

AFI Processing companies

International

markets

Energy/ biofuels

Speculation

Production

Social network

Nouveau fonctionnement des filières

Hier Hier

Aujourd’hui Aujourd’hui

IndustriesIndustriesd’intrantsd’intrants

AgriculteursAgriculteursEleveursEleveurs

CollecteCollecteStockageStockage

Industries deIndustries detransformationtransformation DistributionDistribution

Relations traditionnelles de marché entre les opérateurs fondéesRelations traditionnelles de marché entre les opérateurs fondéesSur l’optimisation des coûts et de la logistique Sur l’optimisation des coûts et de la logistique

IndustriesIndustriesd’intrantsd’intrants

AgriculteursAgriculteursEleveursEleveurs

CollecteCollecteStockageStockage

Industries deIndustries detransformationtransformation DistributionDistribution

Coopération, coordination entre agents, decisions communes,Coopération, coordination entre agents, decisions communes,Intégration de filière. Intégration de filière.

NormesNormesdede

qualitéqualité

ProcèsProcèsdede

productionproductionSecuritéSecurité

alimentairealimentaire TransparenceTransparencetotaletotale

Certification

BiotechnologieBiotechnologie

Coordination desfilières

Filières intégrées (producteurs agricoles,

collecteurs, transformateurs,distributeurs), agents

travaillant en concertationpour assurer la traçabilité et

organiser le processos de pro-duction em fonction d’um

cahier des charges élaboré parle distributeur.

Internationalisation

Création de mécanismes deCertification internationaleAlliances entre groupes de

la distribution

Altération en profondeur du fonctionnement desAltération en profondeur du fonctionnement desFilières internationales.Filières internationales.

Rôle clé des entreprises de la distribution

Turnover of food processing ind

020406080

100120140160180

1er trim. 2e trim. 3e trim. 4e trim.

NordOuestEst

Conditions d’accès au marché de l’Union européenne

Normes légales de production dans l’UENormes légales de production dans l’UEObligation de respecter :Obligation de respecter :

- Législation sur la production agricole et l’élevage.- Législation sur la production agricole et l’élevage.- Interdiction de l’usage de certains intrants - Interdiction de l’usage de certains intrants (hormônes)(hormônes)-Lois sur la protection de l’environnement et le bien-Lois sur la protection de l’environnement et le bien-êtreêtredes animaux.des animaux.- Obligation de traçabilité.- Obligation de traçabilité.

Regime de importaçãoRegime de importação- Normes techniques de l’Union européenne,- Normes techniques de l’Union européenne,- Inspections vétérinaires et sanitaires,Inspections vétérinaires et sanitaires,- Barrières tarifaires. Barrières tarifaires.

Législation nationale Législation nationale et européenneet européenne

LégislationLégislationeuropéenneeuropéenne

NormesNormes complémentaires complémentaires

crées par les crées par les distributeursdistributeurs

et les alliances globaleset les alliances globalesde distributeursde distributeurs

Exigences imposées aux fournisseursExigences imposées aux fournisseursEuropéens et non-européensEuropéens et non-européens

Première phase :Première phase :Normes de qualité intrinsèque, HACCP,Normes de qualité intrinsèque, HACCP,

traçabilité, etc...traçabilité, etc...

Nouvelles exigences imposées aux Nouvelles exigences imposées aux fournisseurs européens et non-européens.fournisseurs européens et non-européens.

(Préservation de l’environnement et de la (Préservation de l’environnement et de la biodiversité, bien- être des animaux, responsabilité biodiversité, bien- être des animaux, responsabilité sociale, absence d’OGM, commerce “juste” ou “sociale, absence d’OGM, commerce “juste” ou “fair fair

trade”trade”).).

Stratégies de différenciation des produits Stratégies de différenciation des produits agricoles.agricoles.

Première option : diversification de l’offre de dérivés (ex : biodiesel).

Troisième option : valorisation des qualités extrinsèques du produit (impactsur l’environnement, gestion de la biodiversité, responsabilité sociale, bienêtre des animaux, etc..).

Quatrième option : Utiliser les apports des biotechnologies (qualité des aliments,alicaments, aliments-vaccins, qualité des fibres, etc...).

Seconde option : valorisation des qualités intrinsèques du produit (tendreté,saveur, valeur diététique, éléments organoleptiques) et relier à la régiond’origine.

Cinquième option : stratégie de marquesCinquième option : stratégie de marques

0

50

100

150

200

250

300

1995 2005 2015

0

200

400

600

800

1000

1200

1400

1600

1995 2005 2015

Millions de ménages urbainsMillions de dollars de 2000

Ménages pauvres (revenu annuel inférieur à 3000 US$).Classe moyenne inférieure (revenu annuel entre 3001 et 4800 US$).Classe moyenne supérieure (revenu annuel entre 4801 et 12000 US$).

Essor des classes moyennes urbaines en Chine

Idfa 2009

French Agro-Food Industry

M.Pourrias, Gödöllo, June 2010

Meat sector

0

0,05

0,1

0,15

0,2

0,25

0,3

0,35

10 15 20 25 30 35 40 45Added value/ annual sales exc VAT-%

Annual sales/ employee-m€annual sales exc VAT-m €

Beverages

Grain

Meat

Dairy

F&V

F&V

Fish

EU-25

Sugar

Dairy

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

10 15 20 25 30 35 40Added value/ annual sales exc VAT-%

Annual sales/ employee-m€annual sales exc VAT-m €

Meat

0

0,05

0,1

0,15

0,2

0,25

0,3

10 15 20 25 30 35 40Added value/ annual sales exc VAT-%

Annual sales/ employee-m€annual sales exc VAT-m €

F&V

0

0,05

0,1

0,15

0,2

0,25

0,3

0,35

0,4

10 20 30 40 50 60 70Added value/ annual sales exc VAT-%

Annual sales/ employee-m€

Beverages

Top players in the agri food industry

11 european companies among top 30 world• 2nd- Nestle• 6th – Unilever• 11th – Anheuser Busch-InBev• 12th- Groupe Danone• 14th- Heineken NV

Competitiveness of the EU Food industry

EU food industrySWOT

• Weak in economies of scale• WXeak in labour ptroductivity

Sources

• Competitiveness study• CIAA 2009

Meat

Added value/ annual sales exc VAT-%

Direct export/ annual sales exc VAT-%annual sales exc VAT-m €

Beverages

Grain

Oth Food

Meat

Dairy F&VFeed

Fish

European Agri Food Sales 2008- 965 b €

TON of food ind1999 -2°03

Comparison Zones

Production value 2003moi €

0 50000 100000 150000 200000 250000 300000 350000

Fish

Meat

F&V

Dairy

Grain based

Beverages

Sugar

EU 25 US Australia Canada Brasil New Zealand

France

0 50000 100000 150000 200000 250000 300000 350000

Fish

Meat

F&V

Dairy

Grain based

Beverages

Sugar

France EU 25 US Australia Canada Brasil New Zealand

138871 sur 785244 soit 17,7%

France

European Food Industry

020406080

100Threat of entry

Degre of rivalry betweenexisting competitors

Bargaining power ofclients

Threat of substitutes

Bargaining power ofsuppliers

State & regulation

Eu Main issues ksf

• Grow labour productivity• Develop economies of scope• Encourage product innovation ( eu food

law)

• FRANCE

France

• A strong sector – 12% of the value-added of the french industry

• Among top 3 Europe players

• Companies – 10500 415000 people- 130 b € and 26b€ value added

• Performances of SME in AFI are deteriorating, but offset by a handful of large multinationals

• Profiyability of french afi in line with everage for main developed countries,whereas profitabilityof french sm atypical as witnessed by profit ratio and market capitalisations

• More advantageous positions for largset suppliers ( high mS, product diuifrentiation, sophisticated advertising and brand management strategies)and ones occupyng prpoduct niches

France Agri FoodMain characteristics

France

0

1000

2000

3000

4000

5000

6000

7000

0 5000 10000 15000 20000 25000 30000 35000 40000

Export sales m€

Annual sales exc VAT m€

Meat

Oth Food

Beverages

Dairy

Feed

Grain

F&V

Fish

Number of companies

FRance

0

10

20

30

40

50

60

10 15 20 25 30Added value/ annual sales exc VAT-%

Direct export/ annual sales exc VAT-%annual sales exc VAT-m €

Beverages

Grain

Oth Food

Meat

Dairy F&VFeed

Fish

0 10000 20000 30000 40000 50000

Meat

Fish

F & V

Fats & Oils

Dairy

Grain

Feed

Other

Bev

Ann sales exc VATAdded valueExport sales

per employee of the french food industry

0 0,2 0,4 0,6 0,8 1 1,2

Meat

Fish

F & V

Fats & Oils

Dairy

Grain

Feed

Other

Bev

whole

added valueAnn sales exc VAT

Fra,ce rank

• Among the top 100 agrifood companies WW– Danone, Lactalis, Pernof Ricard, Terrena, In

Vivo

2009- Fortune ex °+ modifRevenues B$

Profits b$ Profits %

FCPFCPFCPFCPFPFPBevFCPFPFPBevFCPBevBevBev

CargillNestleUnileverPepsicoKraft FoodsArcher Daniel MidlandsBungeCoca ColaMarsWilmar InternationalTyson FoodsAnheuser busch InBevGroupe DanoneCoca Cola EnterprisesHeineken HlgKirin hlgs

116600101565 59313 43251 42867 69816 52574 31944

29145 28130 23568 22277 21807 21005 18604

333316670 7358 5142 2910 1802 1064 5807

1531 86 1885 1922 -4394 154 776

2,916,412,411,8 6,8 2,6 218,2

5,2 0,3 8 8,6

0,7 4,2

Intra EU Competitiveness of the meat processing industry. I

• Raw materials.– Pigmeat, poultry

&beef– Volatile markets

(animal health situation)– Concentration of the

slaughter industry.– Imports limited

• Labour productivity.– Traditional processes.– Small production runs

• Sales– A few EU/world wide

appreciated products.– Most national/regional

products. – Very limited number of

customers. (Retail concentration)

• Low return on investment.

EuropeanRevenues B$

Profits b$ Profits %

Meat Fish Fresh & processed FV

OIls & fats Dairy( Rabobank 2009)

Tyson foodsCargillNippon Meat PackersSmithfieldDanish CrownVion gpSwift & CoPilgrim’s prideSara Lee foodsHormel foodsGrampian-13Glanbia-15LDC-21

Marine HarvestIcelandicUnileverYoung’s BluecrestThai union fpPescanovaTrident seafoodsCermaqThe Bolton groupAlfesca

DoleChiquitaFresh Del MonteNestleUnileverPomonaBocchi gp/ UnivBocavorBonduelleMc CainFrans ZentisRauch Fuchsafte

UnileverMontedison SpaNisshin oils mealsBunge int ltdRaisio gpConAgra incAjinomoto coCargill inc

NestleDanoneLactalisFriesland/ CampînaFonterraDean foodsDairy Farmers of AArlaKraftUnileverParmalatSaputoBongrainMeijiMorinagaLand o LakesNordmilch

Grain & flour Starch Beer Spirits WineADMCargillConAgraBogarasiSouffletNisshinVK MuhlenMenebaIntermill ParisCereal F PGeneral millsBaystateBungeRank Hovis

ADMCargill-CerestarRoquetteAvebeTale & LyleCorn productsNational StarchSyral –T&LAgrana

In Bev / Anheuser BuschHeinekenSab MillerCarslberg/ Scottish & NewcastleMolson CoorsModeloTsintaoKirin

DiageoPernod RicartUB GroupBearn Glob S &WBacardiSuntoryConstellation brdVandsBrown FormanGruppo Campari

Constellation brdE & J GalloFosters gpThe Wine gpPernod RicartCastel freresBacardi-MartiniConcha y ToroUCCOARHenkel Soenhlein

SugarSudzuckerDaniscoTereosRoyal cosunNordzuckerBritish sugarAzucereraPfeifer & LangenPolski CukierCo Pro B

sources• Key issues for the agrifood sector 2008- Ministry of Agriculture & Fisheries• Agri Food industry margins in France – Tresor-economics -No 53 March

2009

The disadvantages of CAP• The intervention systems have been successful and

efficient • …but so much efficient that they have brought out

huge excess of production• …and consequently huge expenses for CAP• …and critics from third countries due to distorted

competition• …and critics from consumers and importing

countries within the EU

Was it good or bad for food industry ?

The successes of CAP

• Europe has become rapidly self-sufficient • The productivity of agriculture has been

rapidly improved• The farm restructuring has been slow,

allowing to maintain many middle-size farms– Responding to the necessities of land occupation – Slowing the rural exodus during the 60’s and 70’s

Politically, it was a success

R&D - % of industry output for Food & Drink industries

EU food & Drink sector’s balance2005-2008 ( b€)

Share by sector of international trade ( excl. energy) 1967 – 2007

Main household expenditures in EU

Balance AgriFood chain 1967-2006

% of agrifood products trade – Constant price and exchange rate

•Sce- CEPII-Chelem

Share of the house hold expenditure on Food & Drinks

12,9% EU Turnover 965 b € +3,2%

Turnover of food processing ind

0

20000

40000

60000

80000

100000

120000m

eat

USCanadaBrazilAustraliaOther EU 25SpainItalyUKFranceGermany

Share of the top 3 retailers

CAP and Agri Food businesses

•Volume strategy•Trade between EU members

How to compete? Added value

Concentration Delocalisation

90’sCAP starts to be reformedDirect subsidies to farmersLower farm pricesRestitutions are limited

2007Biofuels- Competition for landRM prices boomingConsequences of decoupling

Again How to compete?

New outlets within EU

Challenges in nutritionCompetitiveness weak on world

markets

Shares of the major Food & Drink exporters

Private label share of retailers

Meat consumption per head/ meat type

Sce: FAOstat data

Competitiveness of the EU food industry – A, economic and legal assess – European communities 2007

EU decreasing competitiveness

Europen Food industry

Competitiveness of the EU food industry – A, economic and legal assess – European communities 2007

10 most innovative sectors in Europe2007-2008

World AgriFood companiesTop 30 by Food & Drink sales WW

US Asia EU

WW Sales 08- 09– 557,5 b€

Eur Sales 08-09 – 189 b€

ABF-UK

Unilever NL/UKInBev/ An-BE

Danone -FR

Heineken-NL

Diageo-UK

Friesland NL

Lactalis-FR

Vion-NL

Nestle CH

34%