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Next Generation Competitiveness Initiative

First Meeting of the Food and Beverages
Processing Expert Group

Paris, March ...
OVERVIEW OF THE FOOD
AND BEVERAGES
PROCESSING SECTOR IN
SOUTH-EAST EUROPE

2
Presentation overview

1

General characteristics of the SEE food and beverages
processing sector

2

Analysis of the food...
Presentation overview

1

General characteristics of the SEE food and beverages
processing sector

2

Analysis of the food...
For discussion:
The food and beverages manufacturing sector is more
• Can food and beverage
evenly distributed across the ...
Food and beverages processing accounts for a
large share of manufacturing employment
Share of FBP in manufacturing employm...
Food and beverages processing contributes more
to total exports in SEE than in the EU
Food and beverages processing export...
Processed goods account for the largest share of
For discussion:
SEE agro-food exports
• Is there potential to increase
ex...
The food and beverages sector’s export performance
is also underlined by its high RCAs
Revealed Comparative Advantage (RCA...
For discussion:
SEE economies have complementary strengths in
• How can complementarities
food and beverages processing be...
Presentation overview

1

General characteristics of the SEE food and beverages
processing sector

2

Analysis of the food...
Analysis of the food and beverages processing
sector – key elements

2

Analysis of the food and beverages processing sect...
Analysis of the food and beverages processing
sector – key elements

2

Analysis of the food and beverages processing sect...
The SEE region has relatively diverse and unpolluted
For discussion:
• How can the SEE economies
natural resources
reap be...
The mild climate in SEE is favourable to agriculture

Climatological station

Average nb of frost-free days

First plantin...
Climate change will affect agriculture and food
For discussion:
production in SEE
• What opportunities and
threats does cl...
For discussion:
• Is food price fluctuation
Food prices are expected to increase and fluctuate
currently an important issu...
Geographical proximity to the
market from SEE economies

For discussion:
EU Are SEE food and beverages
• lowers time-tocom...
Analysis of the food and beverages processing
sector – key elements

2

Analysis of the food and beverages processing sect...
SEE economies have preferential access to the
CEFTA and EU markets
Destination markets for SEE exports
in agricultural pro...
For discussion:
However trade is still constrained by non-tariff barriers, in
• What non tariff barriers does
your firm fa...
SEE food and beverage exports almost doubled
between 2005 and 2011
SEE food and beverage export trends, USD millions
2000
...
However, export growth has been slower than growth
in food and beverage exports from the BRICS
BRICS food and beverage exp...
Analysis of food and beverages processing sector
– key elements

2

Analysis of the food and beverages processing sector
G...
The food and beverages sector has been
characterised by strong growth at the regional and
world levels
Growth in SEE expor...
SEE has gained market shares in key food and beverages
sub-sectors but growth could be further enhanced
Growth in SEE expo...
Consumer demands are
and healthier products
Changing patterns in food
consumption
•

•

In the EU, the market for organic ...
Analysis of food and beverages processing sector
– key elements

2

Analysis of the food and beverages processing sector
G...
Primary production is highly fragmented and food
processing is dominated by small firms

Average turnover by company in fo...
For discussion:
The food retail sector on the other hand is food and
• How can
becoming increasingly concentrated beverage...
For discussion:
The food and beverages sector has attracted FDI but
• Why is FDI performance
further potential could be ex...
Analysis of food and beverages processing sector

2

Analysis of the food and beverages processing sector
Geography and na...
SEE agricultural yields lag behind

For discussion:
• yields
EU What are the main
reasons for lower than
EU-average agricu...
However, yields in SEE have
the EU for many products

For discussion:
increased faster can lead to
• What levers than in
f...
Price competitiveness varies across products but is
particularly high in fruit production
3000

EU average

3000

USD/tonn...
For discussion:
Despite limited research capacities,what areas are innovations
• In the food and
in food and
beverages sec...
Presentation overview

1

General characteristics of the SEE food and beverages
processing sector

2

Analysis of the food...
SWOT-analysis framework
Example output

Strengths

Weaknesses

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Instructions for group work

• Please go to the discussion group you have been assigned to
(Groups 1 to 5).
• Please asses...
SWOT-analysis framework
Example output

Strengths

Weaknesses

•
•
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Overview of the Food and Processing Sector in South East Europe
Overview of the Food and Processing Sector in South East Europe
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Overview of the Food and Processing Sector in South East Europe

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Presented at the 1st Meeting of the Food and Beverages Processing Expert Group, OECD Investment Compact for South East Europe. 4 March 2014, Paris, France.

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  • After having seen the work done to improve the competitiveness of the FBP sector in the EU, let’s have a look into the competitive position of this same sector in the SEE region.
  • And I would suggest to do so by providing a high-level overview on the FB market…… and then look into some specific markets characteristics
  • FBP is the largest manufacturing industry in CEFTA, accounting for 27% of manufacturing turnover.Furthermore, we see that the weight of the sector is high in all SEE economies. It lies between 18 and 36 percent of the entire manufacturing industry.(The question arises, and we should discuss this also in the group break-outs later on, can this important position of FBP in the overall economy even be strengthened further? And how can this be achieved?)
  • But there is one fundamental difference between FBP and other manufacturing industries; and this is a positive one.FBP is less concentrated than other economies and therefore creates economic growth and employment across the entire region.Here we see contribution of each sub-region for FBP and automotive production. We see that FBP is much more evenly distributed.(A sector FBP sector strategy should also determine how far this sector can be a mean for rural development)
  • Also on the positive side: FBP is not only value creating: we have seen the share in manufacturing turnover.It is also creating employment.18% of all manufacturing jobs can be found in FBP. The share varies from one economy to the other; but it is high everywhere.
  • The sector also has an important contribution to exports and a positive effect on the commercial balance.FBP is responsible for 10% of the SEE region’s exports; more than the 7% on average in the EU.
  • Processed goods including more value added account for the majority of agro-food exports from the SEE region.However, on average this share is lower than that of the European Union.(In the light of the aim to create more value in the SEE region, the question arises whether the weight of processed goods in the total agro-food exports should be increased.And how this can be done.)
  • The strong export performance of the FBP sector in SEE isalsounderlined by high RCA indices.RCAs, standing for revealed comparative advantage, compare the share of a specific sectorin a country’s total exports on the one hand…… to the share of the sector’s exports in the total world exports on the other.A value greater than one, indicates a specialisation in the sector.This is the case for Croatia, Macedonia, Montenegro and Serbia in FBP. In Albania and BiH we see values close to one.
  • If we go one level deeper and look at agro-food sub-sectors, we see that the SEE economies are quite complementary.For instance, Croatia and Serbia are specialised in animal breeding, Macedonia and Montenegro in meat processing.Bosnia and Herzegoniva, Croatia and Serbia are strong in sugar production; Macedonia, Montenegro especially strong in beverages production.(We should discuss in this Expert groups how we can fully leverage these complementarities).
  • After this general overview of the FBP market in the SEE region, I suggest to go into more detail and look into some specific areas characterising the FBP sector:Geography and natural resourcesAccess to export marketsTrends in customer demandThe supply side including the production structureAnd how all these factors translate into the sector’s productivity and SEE’s competitive position.Let me now hand over to Anne-ChristelleOtt, from the OECD who will start addressing these points.
  • Serbia, where around 20% of the available agricultural land is not in use. (Grozdanic)Large areas of agricultural land not polluted and not intensively cultivated, making conversion faster and easierLimited use of agro-chemicals and mineralfertilizers (IAMAO report, Tina Volk)
  • Note: The first planting date is estimated by an algorithm by R.L. Snyder, et al. (2005),based on the assumption that planting is less risky after the first date with 50 percentor less probability of having a frost event (screen daily minimum temperature of lessthan 0° C). The listed station in each country was selected based on the availability ofcomplete and continuous data on minimum temperature.
  • Maps show changes in extreme temperature for two future periods, relative to 1961-1990. Extreme temperatures are represented by the combined number of hot summer (June-August) days (TMAX>35°C) and tropical nights (TMIN>20°C). All projections are the average of 5 Regional Climate Model simulations of the EU-ENSEMBLES project using the IPCC SRES A1B emission scenario for the periods 1961-90, 2021-2050 and 2071-2100 (Fischer and Schär, 2010).The impacts of climate change includethe increased magnitude of floods and droughts and greater resulting damage, aswell as reduction in crop yields. The
  • http://www.fao.org/worldfoodsituation/foodpricesindex/en/Price volatilityafffects consumer- risk averse farmers are lesslikely to invest.According to the FAO, four variables in particular affect foodprices’ volatility: i) petroleumprices, ii) cropyields, iii) food stock levels and iv) exchange rates.+ Increasing usage of land for biofuel productionThe impact of cropyields on volatilityisexpected to increasewith more frequentextremeweatherevents (eg- a drought in Russia in the summer of 2010 significantlyincreasedfoodprices).
  • In 2000, the Western Balkans obtained duty-free exports for almost all products (with the exception of baby beef, wine and sugar). The economies therefore already have access to EU markets to a large extent.
  • Highest score- Involvement in the tradecommunityLowest score- Information and notification for SPSmeasuresAlthough most CEFTA Parties have established enquiry and notification points and are publishing notifications of their legislation and measures on official websites, these enquiry and notification points are not always functioning properly and have capacity limitations.
  • More generally, potential risk of marginalisation of small farmers and producers.
  • While large farms are not necessarilymore efficient, small farms have greater difficulty producing enough to be commercialized,integrating with value chains, and investing in modern production methods.
  • We were only able to highlight some of the characteristics of the food and beverages processing market in the SEE region. You will now have the chance to go more into detail.We would like to build on your sector expertise to understand what are the main challenges for private business in the SEE region.To do so, we have planned to do 2 group breakouts:The first one aims at identifying the strengths, weaknesses, opportunities of the FBP sector in the SEE regionThe second has the objective to reveal what policy barriers are responsible for the weaknesses and threats identified.I would now kindly ask you to break into groups of 5 to 6 people.You find a suggested split of the groups on the walls.If the Ambassadors in this room would like to participate, please join any of these groups.
  • We would ask you to develop a SWOT-analysis for the FBP market in the SEE region. SWOT stands for Strengths, Weaknesses, Opportunities and Threats.Here, you see the according framework for your discussion.The overview of the food and beverages processing sector in the SEE region in the previous OECD presentation has provided you with some information which you can include into your SWOT-analysis.However, please go beyond what has been shown and include strengths, weaknesses, opportunities and threats from your own experience in the sector.Please document your results on the flip chart and decide on a person to present your results. Let’s reconvene at 12 o’clock.We will build on the identified weaknesses and threats in a following group work to identify the underlying constraints to sector development.
  • At end of presentation of results: Thank you very much for presenting your SWOT-analysis results. The points you mentioned are very interesting and highly relevant for the further analysis.We will build on the identified weaknesses and threats in the next break-out to identify the underlying constraints to sector development.Let us now break for lunch and reconvene at 2pm in this room. Thank you very much.
  • Transcript of "Overview of the Food and Processing Sector in South East Europe"

    1. 1. Next Generation Competitiveness Initiative First Meeting of the Food and Beverages Processing Expert Group Paris, March 4th 2014 With the financial assistance of the European Union
    2. 2. OVERVIEW OF THE FOOD AND BEVERAGES PROCESSING SECTOR IN SOUTH-EAST EUROPE 2
    3. 3. Presentation overview 1 General characteristics of the SEE food and beverages processing sector 2 Analysis of the food and beverages processing sector 3 Break-out group discussion 3
    4. 4. Presentation overview 1 General characteristics of the SEE food and beverages processing sector 2 Analysis of the food and beverages processing sector 3 Break-out group discussion 4
    5. 5. For discussion: The food and beverages manufacturing sector is more • Can food and beverage evenly distributed across the region than other sectors processing be considered a Concentration of food and beverages manufacturing in CEFTA* (2008-10) priority vehicle for regional and rural development? Concentration of motor vehicles manufacturing in CEFTA* (2008-10) The map shows the share of sector turnover in each sub-national region of SEE. The shares do not add up to 100% because Moldova (not shown on this map) is included in the total. Source: OECD (2013), “Industry Concentration and Country Specialisation in CEFTA”, CEFTA Issues Paper 5 Nb: CEFTA includes Moldova as well as the Western Balkan economies. 6
    6. 6. Food and beverages processing accounts for a large share of manufacturing employment Share of FBP in manufacturing employment (average 2008-2010) 30% 25% 20% 15% 10% 5% 0% KOS SRB MNE HRV BIH Employment in food and beverage processing (share of total) ALB MKD SEE 7 Source: OECD (2013), “Industry Concentration and Country Specialisation in CEFTA”, CEFTA Issues Paper 5
    7. 7. Food and beverages processing contributes more to total exports in SEE than in the EU Food and beverages processing exports as % of total exports (2011) 16% 14% 12% 10% 8% 6% 4% 2% 0% SRB MNE MKD HRV Food Products, Beverages and Tobacco BIH SEE ALB EU 8 Source: OECD (2013), STAN Database – No data available for Kosovo
    8. 8. Processed goods account for the largest share of For discussion: SEE agro-food exports • Is there potential to increase exports of processed goods? Raw and processed exports as % of total agro-food exports (2011) 100% 80% 60% 40% 20% 0% MNE EU BIH HRV Agriculture, Hunting, Forestry and Fishing SRB MKD ALB Food products, Beverages and Tobacco 9 Source: OECD (2013), STAN Database – No data available for Kosovo
    9. 9. The food and beverages sector’s export performance is also underlined by its high RCAs Revealed Comparative Advantage (RCA) indices in manufacturing sectors (2009) SEE (+ Moldova) Wood and Cork Textiles, Leather and Footwear Other Non-Metallic Mineral Products Food, Beverages and Tobacco Fabricated Metal Products Basic Metals Electrical Machinery and Apparatus n.e.c Rubber and Plastics Products Pulp, Paper, Printing and Publishing Coke, Petroleum Products Other Transport Equipment Machinery and Equipment, n.e.c Chemicals and Chemical Products Motor Vehicles, Trailers and Semi-Trailers Pharmaceuticals Medical, Precision and Optical Instruments Radio, TV and Communication Equipment ICT Office, Accounting and Computing Machinery 3.91 2.29 2.25 1.92 1.68 1.61 1.23 1.16 1.09 1.06 0.92 0.67 0.50 0.29 0.23 0.21 0.20 0.19 0.15 ALB 1.32 8.75 2.33 0.80 2.09 0.93 0.63 0.37 1.00 0.27 0.02 0.11 0.06 0.04 0.05 0.04 0.07 0.07 0.10 BIH 7.50 2.09 1.47 0.97 2.69 1.89 0.56 0.73 1.17 0.92 0.20 0.61 0.40 0.51 0.04 0.10 0.02 0.04 0.02 HRV 5.07 1.45 3.31 1.51 1.71 0.48 1.71 0.63 1.07 2.02 1.96 0.86 0.63 0.27 0.21 0.28 0.34 0.28 0.16 MKD 0.51 5.00 2.24 2.02 0.99 3.77 0.48 0.84 0.32 0.20 0.08 0.30 0.46 0.10 1.34 0.16 0.03 0.06 0.05 MNE 5.54 0.12 0.25 2.08 0.75 8.71 0.07 0.08 0.64 0.42 0.23 0.82 0.09 0.12 0.03 0.03 0.04 0.04 0.04 SRB 2.38 1.66 1.33 2.61 1.48 2.22 1.19 2.33 1.45 0.43 0.45 0.67 0.52 0.32 0.06 0.20 0.20 0.22 0.27 RCA indices compare the share of a sector’s exports in a country’s total exports with the share of the same sector’s exports in total 10 world exports. Here, total exports refer to total manufacturing exports. A RCA > 1 indicates a specialisation in a sector. Source: Based on OECD STAN Bilateral trade database by industry and end-use category – No data available for Kosovo
    10. 10. For discussion: SEE economies have complementary strengths in • How can complementarities food and beverages processing between SEE economies in food and beverages processing be leveraged more? RCA indices in agro-food sub-sectors (2012) Live animals chiefly for food Meat and preparations Dairy products and birds' eggs Fish, crustacean and molluscs, and preparations Cereals and cereal preparations Vegetables and fruit Sugar, sugar preparations and honey Coffee, tea, cocoa, spices, and manufactures Feeding stuff for animals Beverages Oil seeds and oleaginous fruit Crude animal and vegetable materials, nes Animal oils and fats Fixed vegetable oils and fats Animal and vegetable oils and fats and waxes Fertilizers, manufactured Animals, live, nes ALB 0.0 0.3 0.6 3.1 0.2 1.0 0.1 0.1 0.4 0.3 0.0 5.7 0.0 0.3 0.1 0.0 9.2 BIH 0.6 0.8 2.5 0.4 0.7 0.9 3.9 0.7 0.5 0.9 0.0 0.4 0.0 1.7 0.1 0.5 0.9 HRV 4.2 1.0 1.2 2.1 2.0 0.6 5.4 1.1 1.0 2.1 1.2 0.6 0.8 0.2 0.7 7.4 0.4 MKD 0.8 1.2 0.5 0.3 1.3 3.8 0.9 0.7 0.1 4.2 0.2 0.8 0.0 0.7 0.4 0.1 0.8 MNE 0.0 2.4 0.1 0.0 1.4 1.8 0.0 2.3 0.0 11.7 0.0 0.3 5.1 1.2 1.5 0.0 0.1 SRB 4.5 0.7 1.5 0.1 6.7 4.0 5.6 1.5 2.6 3.4 1.0 1.1 0.4 3.1 1.1 1.4 0.7 RCA indices compare the share of a sector’s exports in a country’s total exports with the share of the same sector’s exports in world exports. For this table, total exports refers to total commodity exports. Source: Based on UN Comtrade – No data available for Kosovo 11
    11. 11. Presentation overview 1 General characteristics of the SEE food and beverages processing sector 2 Analysis of the food and beverages processing sector 3 Break-out group discussion 12
    12. 12. Analysis of the food and beverages processing sector – key elements 2 Analysis of the food and beverages processing sector Geography and natural resources Market access to foreign economies Demand trends Food and beverages production structure Productivity and competitive position 13
    13. 13. Analysis of the food and beverages processing sector – key elements 2 Analysis of the food and beverages processing sector Geography and natural resources Market access to foreign economies Demand trends Food and beverages production structure Productivity and competitive position 14
    14. 14. The SEE region has relatively diverse and unpolluted For discussion: • How can the SEE economies natural resources reap benefits from their natural resources? • Large areas of unpolluted or not intensively cultivated land • Adriatic coastline (Croatia, Montenegro, Bosnia and Herzegovina) • Mountainous areas less favourable to agriculture but potentially favourable to expansion in niche markets (agro-tourism) • Diverse natural resources Large shares of arable land (Serbia, Croatia) Diversity in climate, soils and agricultural practices leads to diversified offer in food and beverages processed goods • Limited use of agro-chemicals and mineral fertilizers • Extensive protected natural areas (e.g. national parks, natural reserves) • Favourable pre-conditions for organic production and eco-tourism • Growth in organic production Production and retail structure in SEE with good fit to organic market (e.g. small-scale production, direct selling) • Some economies with targets for organic production: Croatia aiming to increase share of organic agricultural land to 8% by 2016; FYR Macedonia to 2% 15
    15. 15. The mild climate in SEE is favourable to agriculture Climatological station Average nb of frost-free days First planting date* Sarajevo, BIH 269 April 12 Tirana, ALB 339 February 9 Skopje, MKD 281 April 8 Belgrade, SRB 307 March 28 Zagreb, HRV 276 April 10 Bucharest, ROM 252 April 16 Sofia, BGR 252 April 10 Ljubljana, SVN 257 April 14 Source: World Bank (2010), Agricultural Sector Policy Notes for Bosnia and Herzegovina * The first planting date is estimated by an algorithm by R.L. Snyder, et al. (2005), based on the assumption that planting is less risky after the first date with 50 percent or less probability of having a frost event 16
    16. 16. Climate change will affect agriculture and food For discussion: production in SEE • What opportunities and threats does climate change bring? Projections of extreme temperatures in Europe (1961 – 2011) Maps show changes in extreme temperature for two future periods, relative to 1961-1990. Extreme temperatures are represented by the combined number of hot summer (June-August) days (TMAX>35°C) and tropical nights (TMIN>20°C). 17 Source: European Environment Agency
    17. 17. For discussion: • Is food price fluctuation Food prices are expected to increase and fluctuate currently an important issue to with more frequent extreme weather companies? events SEE • Which instruments are FAO Food Price Index currently used to control the risk of price fluctuations? The FAO Food Price Index is a measure of the monthly change in international prices of a basket of food commodities. 180 160 140 General trend: Biofuel production, diminishing food stocks, growing demand in Asia, oil prices, etc. 120 100 80 60 40 20 Drought in Russia (summer 2010) Unfavourable weather conditions in major producing regions, (e.g. drought in Australia) 0 Deflated Price Index Sources: FAO (2014), « FAO Food Price Index », FAO 18
    18. 18. Geographical proximity to the market from SEE economies For discussion: EU Are SEE food and beverages • lowers time-tocompanies using their time-tomarket advantage by targeting Central and Western European economies? Road transport to Frankfurt, time in hours (2014) 25 20 15 10 5 0 19 Source: Google Maps
    19. 19. Analysis of the food and beverages processing sector – key elements 2 Analysis of the food and beverages processing sector Geography and natural resources Market access to foreign economies Demand trends Food and beverages production structure Productivity and competitive position 20
    20. 20. SEE economies have preferential access to the CEFTA and EU markets Destination markets for SEE exports in agricultural products (2011)* Destination markets for SEE exports in Food and Beverages Processing (2011)* World, 7.3 % World, 17.0 % CEFTA, 34. 7% EU, 48.3% • • EU, 43.0% CEFTA, 49. 6% Trade with CEFTA • Almost all tariffs for agricultural products were removed in CEFTA • Nb- As of its entry in the European Union, Croatia is no longer a member of CEFTA. Trade with the EU • In 2000, the Western Balkans obtained duty-free access for almost all products • SEE economies are gradually reducing their tariffs on imports from the EU Source: European Commission (2013), « Bilateral agricultural trade relations », EC. OECD (2013) Statistics * Calculated as percentage of total export sales. Croatia was part of CEFTA in 2011 and is therefore included in the exports to CEFTA.
    21. 21. For discussion: However trade is still constrained by non-tariff barriers, in • What non tariff barriers does your firm face when trying to particular sanitary and phytosanitary measures export food and beverage products? The boxes represent different indicators of the OECD Multilateral Monitoring Framework for non-trade barriers. The boxes in orange represent the dimensions on which the score for CEFTA Which3export procedures are • is below out of 5. most time consuming? Sanitary and Technical Barriers to Trade 1. Transposition of EU legislation 2. Implementation of EU legislation 3. Participation in EU standardisation Phytosanitary Measures 1. SPS institutional framework 3. Framework for SPS legislation 4. Transposition of European SPS measures 5. Information and notification mechanisms 5. Information and notification 1. Customs website 2. Enquiry points 3. Involvement of the trade community 4. Advance rulings 5. Appeals procedures 2. Co-operation among SPS agencies 4. Institutional framework for accreditation Source: OECD (2014- upcoming) Administrative Barriers to Trade 6. Fees and charges 7. Documentation automation and single window 8. Risk management and post control audit 9. Customs procedures and processes 11. Cross-border agency co-operation 10. Domestic agency co-operation 22
    22. 22. SEE food and beverage exports almost doubled between 2005 and 2011 SEE food and beverage export trends, USD millions 2000 AAGR SRB: 15.8% 1800 1600 1400 1200 HRV: 4.3% 1000 800 600 MKD: 13.2% BIH: 15.9% 400 200 MNE: 8.3% ALB: 13.2% 0 2005 2006 2007 2008 ALB BIH HRV MKD 2009 MNE 2010 SRB 2011 23 Source: OECD STAN Bilateral Trade Database – No data for Kosovo available
    23. 23. However, export growth has been slower than growth in food and beverage exports from the BRICS BRICS food and beverage exports, USD billions 50 AAGR Brazil: 14.5% 45 40 China: 15% 35 30 25 India: 21.7% 20 15 10 Russia: 18.2% 5 0 South Africa: 7% 2005 Brazil 2006 China 2007 India 2008 2009 Russian Federation 2010 2011 South Africa 24 Source: OECD STAN Bilateral Trade Database
    24. 24. Analysis of food and beverages processing sector – key elements 2 Analysis of the food and beverages processing sector Geography and natural resources Market access to foreign economies Demand trends Food and beverages production structure Productivity and competitive position 25
    25. 25. The food and beverages sector has been characterised by strong growth at the regional and world levels Growth in SEE exports and world demand (2006-2012) High growth Road vehicles Low growth Average annual growth in SEE exports 25% 20% Chemicals Coke and petroleum 15% Paper products Electric machinery 10% Wood products Office machines, 5% data processing equipment Textiles and apparel 0% -5% -10% Machinery and equipment Basic metals Non-metallic mineral mfg 0% -2% Furniture Mfg of metals Food and beverages Rubbers 4% and plastics 2% 6% 8% 10% Other transport equipment Average annual growth in world imports Source: based on UNComtrade – NB: The size of the bubbles represents the size of the sectors as measured by total world exports in 2012. 27
    26. 26. SEE has gained market shares in key food and beverages sub-sectors but growth could be further enhanced Growth in SEE exports and world demand (2006-2012) 35% Animal oils and fats Vegetable oils and fats Average annual growth in SEE exports 30% Feeding stuff for animals 25% How to move up? 20% 15% Oil seeds and oleaginous fruit Fertilizers, manufactur ed Cereals Dairies Vegetables and fruits Beverages Meats 10% 5% Fish products Miscellaneous edible Sugars products 0% 0% -5% 5% 10% 15% 20% 25% Coffee, tea, cocoa and spices -10% Average annual growth in world imports Source: based on UNComtrade – NB: The size of the bubbles represents the size of the sectors as measured by total world exports in 2012. 28
    27. 27. Consumer demands are and healthier products Changing patterns in food consumption • • In the EU, the market for organic food almost doubled between 2004 (10 bn EUR) and 2011 (19.7 bn EUR). The largest markets for organic products in 2011 were Germany (6.6 bn EUR), France (3.7 bn EUR) and the UK (1.9 bn EUR) In SEE, the market for organic food has been expanding but at a slower pace due to weaker purchasing power and more limited awareness of the benefits of organic products (Grozdanic, 2013) For discussion: switching towards safer • Has the food and beverages processing sector in the SEE region a suitable profile to meet demand changes? Motives for food choices in SEE 0 1 2 3 4 5 Sensory appeal Price Health Natural content Convenience Mood Familiarity • Currently, the demand for organic and healthy products has been met mostly through imports from the EU (Grozdanic, 2013) Weight control Ethical concern 29 Source: Willer et al., 2013 and Grozdanic, 2013 Source: Focus-Balkans Project, 2011
    28. 28. Analysis of food and beverages processing sector – key elements 2 Analysis of the food and beverages processing sector Geography and natural resources Market access to foreign economies Demand trends Food and beverages production structure Productivity and competitive position 30
    29. 29. Primary production is highly fragmented and food processing is dominated by small firms Average turnover by company in food and beverages manufacturing, thousand EUR (2009) Average farm size, ha/farm (2008) 14 2500 12 2000 10 1500 8 6 1000 4 500 2 0 0 EU27 SRB BIH MNE HRV MKD KOS ALB Source: Volk, Tina (2010), “Agriculture in the Western Balkans Countries”, IAMO FRA SRB ROM HRV BGR MKD Sources: FAO country briefs, Eurostat and OECD (2012) MNE ALB 31
    30. 30. For discussion: The food retail sector on the other hand is food and • How can becoming increasingly concentrated beverages suppliers increase their bargaining Selected trends power? Shift in retailing from small shops and grocery stores to supermarkets Retailers in food and beverages processing characterised by increasing levels of concentration and foreign investment In Croatia, Konzum (Agrokor) accounted for 30% of the food retailing market in 2011 In Serbia, predominance of DELTA Maxi (now Delhaize Group) in food retailing with a market share of about 22% in 2011 • • Large retailers take increasing control over production by introducing private labels • Increasing introduction of “private labels” (e.g. Premia/Delta) Implications on domestic producers • • • Large retailers prefer to consolidate supplier base Small domestic producers have limited bargaining power Products in supermarkets are often imported 32
    31. 31. For discussion: The food and beverages sector has attracted FDI but • Why is FDI performance further potential could be exploited in the food and beverage Manufacturing turnover by industry (2009) Food and beverages 28% Food and beverages Chemicals and chemical products Textiles, apparel and leather Other processing sector rather poor? Manufacturing FDI by industry (2010) Food and beverages 15% The food and beverages processing sector is underrepresented in foreign direct investment compared to its share in total manufacturing turnover Basic and fabricated metals Coke and refined petroleum products Non-metallic mineral products 33 Sources: wiiw and OECD
    32. 32. Analysis of food and beverages processing sector 2 Analysis of the food and beverages processing sector Geography and natural resources Market access to foreign economies Demand trends Food and beverages production structure Productivity and competitive position 34
    33. 33. SEE agricultural yields lag behind For discussion: • yields EU What are the main reasons for lower than EU-average agricultural yields in the SEE region? Average yields as % of EU27 average (2008) 100% 80% 60% 40% 20% 0% ALB BIH HRV wheat (t/ha) KSV MKD MNE cow milk (kg/cow) SRB 35 Source: Volk, Tina (2010), “Agriculture in the Western Balkans Countries”, IAMO
    34. 34. However, yields in SEE have the EU for many products For discussion: increased faster can lead to • What levers than in further productivity gains? Average growth in yields (2006-2011) 7% 6% 5% 4% 3% 2% 1% 0% Plums and sloes Apples -1% Cherries Wine Wheat Butter, cow milk Milk, skimmed cowchicken Meat, Meat, pig Maize -2% South-East Europe EU 36 Source: FAO statistics (2013)
    35. 35. Price competitiveness varies across products but is particularly high in fruit production 3000 EU average 3000 USD/tonne USD/tonne 3500 Producer prices: Pork Producer prices: Strawberries 2500 2000 1500 2500 2000 1500 1000 1000 500 500 0 0 MKD SRB Ukraine HRV Ukraine Spain Producer prices: Maize HRV SRB MKD Russia ALB Producer prices: Whole milk USD/tonne USD/tonne 400 BiH 350 300 250 200 600 500 400 300 150 200 100 100 50 0 0 Ukraine Russia HRV SRB BIH MKD ALB Source: FAO Statistics, 2013 – Figures based on data for 2011 Ukraine SRB BIH MKD Russia HRV ALB 37
    36. 36. For discussion: Despite limited research capacities,what areas are innovations • In the food and in food and beverages sector has innovation potential beverages processing most important? • How can the innovative Limited research in agro-food: capacity in Serbia Example fromfood and beverages • Very low overall R&D expenditures processing be strengthened? % Enterprises in the agro-food sector • Fragmented public research and often obsolete infrastructure • Sometimes limited relevance of research for businesses and weak industry-science linkages But innovation potential: • Several companies have managed to distinguish themselves through innovation • Examples: Omega-3 enriched egg in BiH; wine sub-sector which introduced branding and marketing innovations (e.g. Plantaze in Montenegro) 50 that have introduced innovations 40 30 20 10 0 38 Source: Grozdanic, 2013 Source: Survey by the Serbian statistical office
    37. 37. Presentation overview 1 General characteristics of the SEE food and beverages processing sector 2 Analysis of the food and beverages processing sector 3 Break-out group discussion 39
    38. 38. SWOT-analysis framework Example output Strengths Weaknesses • • • • …. … … … • • • • …. … … … • • • • …. … … … • • • • …. … … … Opportunities Threats 40
    39. 39. Instructions for group work • Please go to the discussion group you have been assigned to (Groups 1 to 5). • Please assess the strengths, weaknesses, opportunities and threats that characterise the food and beverages processing sector in SEE. • The results of the discussion should be document on a flip chart. • Please designate a rapporteur who will be responsible for summarising the results of the discussion. • You have 40 minutes. 41
    40. 40. SWOT-analysis framework Example output Strengths Weaknesses • • • • …. … … … • • • • …. … … … • • • • …. … … … • • • • …. … … … Opportunities Threats 42
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