Declines in production, cancelled orders, closed borders – the food industry has been faced with major logistical problems due to the pandemic. Nevertheless, many companies are planning to expand internationally, according to a study published on 11 August. EURACTIV Germany reports.
European agricultural and food companies do not see their business endangered despite the coronavirus. 90% of companies plan to expand or at least maintain their market presence in the next one to three years.
This is the main finding of the latest study from the German Office for Investment Promotion and Technology Transfer (ITPO) under the UN Programme for Industrial Development. Conducted by the German Institute for Market and Policy Research (dimap), 800 SMEs and large companies with business activities in Africa and Asia were surveyed on their strategies in the context of the corona pandemic.
Only one in five want to concentrate on the domestic market
The result of the study paints a very mixed picture for the food industry. 40% of the companies surveyed report declines in production and order cancellations on the European market and fear that this pattern will be repeated abroad with a time lag. 10% of companies are therefore considering layoffs or the closure of company divisions.
When asked about their long-term strategy, two thirds of firms stated that they wanted to broaden their product, supplier and customer base to be better prepared for future crises, while another third planned to expand their research and development activities. As a short-term measure, 57% of all companies said that they currently want to concentrate more on their core business.
However, despite severely disrupted supply chains, in the meantime, the food industry wants to continue to focus on internationalisation, as only one in five companies believes that concentrating on domestic business makes sense in the longer term.
“Maintaining open markets is crucial to secure the global food supply and to ensure social and economic stability,” ITPO Director Rolf Steltemeier told the German Press Agency.
Worldwide, the food and agricultural sector accounts for around 10% of global GDP and employs an estimated 1.5 billion people. To strengthen food production in Asia and Africa, two-thirds of the companies surveyed believe that investment by local companies helps most. The second most important measure, they say, is targeted government support programs followed by market liberalisation.
Policies demand supply chain stability
At the beginning of the pandemic, the European Commission had launched a series of measures to help agricultural businesses. These included loans or guarantees for operating costs from the Regional Development Fund, and member states were allowed to provide an additional €100,000 for farmers and €800,000 directly to food processing companies. In addition, extensions for CAP applications and reporting were introduced, as well as aid for storing dairy products.
The coronavirus has made the call for structural change in the food industry louder, say Frank Ewert and Annette Piorr of the Leibniz Centre for Agricultural Landscape Research in an interview with dimap.
“With a second wave, it can certainly be assumed that in the short term, the focus of politics in particular will be on the stability of supply chains, particularly on supply security,” said Ewert.
However, there are dangers from focusing too much on regional production.
“Just think of the droughts of 2018 and 2019, when an exclusively regional market would have led to enormous problems in food supply,” said Ewert.
Although regional production of food could save transport costs and resources, not everything could be produced more resource-efficiently in Europe.
Experience from international projects has shown that in the medium-term a good balance between regional and global value creation will be important, adds Piorr. “In concrete terms, this means that regional systems should be developed in such a way that they can use their advantages over the global system as a whole, for example by being more adaptable to local conditions.”
[Edited by Benjamin Fox]