Platform for the food and beverage industry
Despite the great resilience of our businesses, the vast majority are still struggling. That's according to the latest survey commissioned by the Economic Risk Management Group (ERMG) in mid-January and coordinated by the National Bank.
The food companies surveyed signaled a 18% decline in their turnover in January, compared to a normal situation. This represents a decline of 9 percentage points from the previous survey in December. The explanation for this larger negative impact may be due to the prolonged closure of the hospitality and events sector, which are only getting no clear prospect of reopening. The impact of the Brexit also plays a role in the worsened situation.
We find that the food industry is the fifth most affected sector. Just behind the event and recreational sector, hospitality, aviation and road passenger transport. On the other side is retail, which remains virtually unaffected. It is just here that the misconception arises that the food industry is doing well. On the one hand, most food companies - which sold their products mainly through supermarkets - registered an increase in their business, which usually led to additional hiring. On the other hand, companies in the hospitality, events, tourism and export sectors saw their distribution channels shrink and even completely crash. In the National Bank's monthly business cycle≤survey, for example, 72% of respondents said there was a problem on the demand side. This figure has not been recorded since April 2009. It is important to note here that only 12% of firms indicated no difficulties in production. This is almost half the average over the past decade.
The lack of outlets combined with late payments from customers is leading to liquidity problems for 32% of food companies (SMR survey). This is in line with the results of a study conducted by Graydon in collaboration with the FEB: in the food industry, 23% of companies that were healthy until March 12, 2020, despite support measures, are now said to be in a particularly difficult financial situation. These firms represent no less than 10% of food industry employment.One cause for concern is the risk of bankruptcies. On the one hand directly because the share of food companies declaring that bankruptcy is (very) likely remains relatively stable at around 8%. Indirectly, there is also cause for concern. As a supplier to the hospitality and events sector, the estimated bankruptcy rate is around 30% and 25%, respectively! We therefore expect a snowball effect in the coming months.
No wonder, then, that we see investments being postponed or canceled. On average, food companies expect their investments to be 22% below normal levels. That points to a further decline since the previous survey, where a drop in 2020 investment was 19%. For the fifth month in a row, business leaders in the food industry are less confident than those in manufacturing. After the brief rebound that followed the sharp drop in April-May, the food industry business survey index ("confidence index" based mainly on real economic developments such as orders, demand, etc.) fell back in September and has not improved since then either. This highlights the prevailing feeling of gloom in our industry.
The Belgian food industry is a resilient sector that has nevertheless been hit hard. We still have the ambition to turn the curve around. The corona crisis is taking a heavy toll on our food companies. At the same time, it also offers opportunities to reinvent your business, whether in terms of work organization, business strategy, social impact or other themes. And if not for tomorrow, then for the day after tomorrow!
