Platform for the food and beverage industry
After the corona crisis, food companies in our country today face new spirited challenges. On the one hand, costs for energy, raw materials and packaging are skyrocketing, on the other hand, the conflict between Russia and Ukraine is acting as an accelerator. A recent survey among 700 Fevia members shows that many companies are experiencing the necessary production and/or logistics problems. How does Bart Buysse, CEO of Fevia, view these issues?
In 2020, the corona pandemic chopped firmly into the food industry. Thanks in part to our recovery plan and government support measures, the industry recovered in 2021. "Our food companies were able to present nice growth figures last year. With a turnover of 61.4 billion euros, 1.9 billion investments, 30 billion euros of exports and 98,000 jobs, the companies proved how resilient they are in times of crisis," confirmed Buysse. "Yet there is one figure that unfortunately stands out negatively, and that is profitability."
Already during the pandemic, Belgian food companies were faced with raw material shortages and consequently rising costs. The costs of energy, packaging and transport also rose sharply. In recent months, skyrocketing energy bills and the war in Ukraine have caused a lot of additional stress in the food sector. Buysse explains, "The profitability of our companies has fallen to a historic low of 2.8%. If they cannot pass on the sharply increased costs, that profitability will take further hits. In April 2022, we organized a new survey among Fevia members to map this out clearly."
"That survey shows that four in ten food companies will reduce or even have to stop production altogether in the coming weeks," Buysse signals. "One in ten companies has already adjusted production downward. Moreover, half of them have experienced supply disruptions and as many as seven in ten companies will have to adjust the composition of products." According to the Food and Agriculture Organization of the United Nations, global supply chain disruption and poor harvests caused commodities to become more expensive on a year-and-a-half 43%. "The war in Ukraine makes markets even more nervous," Buysse said. "For example, the price of wheat rose by more than 50% since the war broke out. Shortages of several other raw materials are also looming. If you know that European vegetable oil refineries get 35% to 45% of their sunflower oil from Ukraine, it is currently all hands on deck to find full-fledged and affordable alternatives. In fact, Belgian food producers are also facing serious shortages for linseed oil, honey and egg products."
There is another factor at play throughout this issue that makes things extra difficult for food companies. Buysse explains: "Many companies in our sector cannot pass on their rising expenses to their customers. Large supermarket chains in particular put their foot down when our companies bring up the nevertheless inevitable price increases as a topic of discussion. From Fevia, we ask them not to be blind to economic reality and to pass on their price increases in the prices they pay to food companies." Buysse calls for a clear regulatory framework to guarantee that contracts and prices can be adjusted more quickly in times of crisis or in the event of unforeseen and large cost increases. "Half of the food companies saw their electricity bills at least double in one year. 37% even saw its gas bill triple. From Fevia, we call on the authorities to take not only structural now but also quick temporary measures to temper the energy bills of Belgian food companies, and above all not to create any additional burdens or obligations now."
Despite all the problems and challenges, Buysse wants to send a hopeful message: "During the past corona pandemic, the food sector was an essential player that helped support our economy. At the same time, our members showed how resilient they are. Today, our food companies will continue to do everything in their power to ensure our country's food supply. Provided the necessary support and flexibility from all partners - from governments to customers - this should certainly succeed!"
