Additional levers needed for sustainable food system

Our country's food companies are sounding the alarm. The explosion in costs - in terms of energy, raw materials, wages, transport and packaging - is causing many companies to blink. The excessive power of the supermarket chains means that these costs can hardly be passed on fairly. Bart Buysse, CEO of Fevia, pleads for fair(er) trade relations and extra levers for better protection of Belgian food companies.

37,000 farmers and 7,500 food companies that sell their products to 5 million families, representing 11 million consumers, through thirteen chain stores - united in five purchasing centers. This is what the food product supply chain looks like in our country today. "This hourglass model ensures that supermarkets occupy an enormous dominant position in price negotiations," Buysse points out. "That situation is not conducive to fair trade relations anyway, but especially today we see the consequences for our food companies. Our sector consists mainly of SMEs, which have limited bargaining power. But even our larger companies do not escape the pressure of the supermarkets and can only pass on part of their costs with great difficulty. From Fevia, we ask retailers not to be blind to the economic reality and to pass on their price increases in the prices they pay to the food companies."

Resilient sector under pressure

After the corona pandemic, Belgian food companies picked themselves up quickly. And Buysse is very proud of that: "In 2021, our companies presented beautiful growth figures. With a turnover of 61.4 billion euros, 1.9 billion in investments, 30 billion euros in exports and 98,000 jobs, the companies proved how resilient they are in times of crisis. Yet there is one element that continues to worry us, and that is profitability. That profitability has fallen to an all-time low of 2.8%. If our industry cannot pass on the sharply increased costs in a fair way, that profitability will take further hits. Fevia recently had a study conducted by the research firm Graydon. This showed that 87% of Belgian food companies had healthy financial figures before the corona pandemic struck. Today we see that at 65% several flashing lights are on, and that 4 out of 10 companies are no longer shockproof. The slightest economic shock during the coming months could become pernicious to them."

Cost explosion

One of the culprits in this story is obviously the exploding costs that companies have been facing for several years. "Already during the pandemic, Belgian agri-food companies were faced with raw material shortages, and consequently rising costs," Buysse confirms. "Since the outbreak of the war in Ukraine, for example, the price of wheat rose by more than 50%. Some of our companies are seeing the amount on their energy bills increase sixfold! And with rising indices, employers are also facing higher labor costs for their staff. If these cost increases cannot be passed on, a lot of companies risk getting into trouble, even resulting in production cuts or shutdowns and temporary unemployment. And that doesn't benefit anyone ..."

Additional support measures

Buysse regrets that large supermarket chains hold their leg stiff 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 the economic reality and to pass on their price increases in the prices they pay to the food companies. Affordable food must go hand in hand with a viable economic framework for all links in the food chain. Fair trade relations are and will remain the foundation for a sustainable food system. This is why I advocate for additional levers that provide maximum protection for our agribusiness and food companies: through consultation if possible, legal if necessary."

"From Fevia we have been lobbying our policy makers for a long time for extra support for our companies. This has since come, both from the regional governments and the federal government. The waiver of NSSO contributions for employers on wage indexation for the first two quarters 2023 and the postponement for the last two quarters 2023 are certainly a step in the right direction. But the question is if those measures will be enough." 

"Moreover, with the announced additional taxes on packaging and food products, the government is threatening to make those same food companies less competitive again. The fiscal lasagna that Fevia has been warning about for a long time thus only threatens to get bigger and further encourage phenomena such as border purchases. It is important that we work with governments to see how we do not further jeopardize the competitiveness of our companies!"