THE ITALIAN WAY: THE FUTURE OF THE AGRI-FOOD INDUSTRY
Monday 20 July 2020
The third event in The Italian Way programme event, organised by UniCredit in collaboration with Coldiretti Sicilia, looked at how companies in the agri-food industry can emerge stronger from the crisis
The agri-food sector contributes 4.2% of Italy’s GDP. It’s a countercyclical sector that has been more resilient over the past twelve years by changing its business model. Exporting has become the growth engine, with sales to Germany, the USA, France and the United Kingdom representing 48% of total exports.
In order to restart after the Covid-19 crisis, short- and medium-term strategies will need to focus on supporting supply chains and its geographical proximity, diversification and innovation.
The third The Italian Way event, dedicated to agri-food was held on 9 July in Palermo in partnership with Coldiretti Sicilia, the Sicilian branch of Italy’s agriculture association.
Joining the discussion on how to restart the sector were Salvatore Malandrino, Regional Manager Sicily UniCredit, Francesco Ferreri, President Coldiretti Sicily, Costantino Vaia, General Manager Consorzio Casalasco del Pomodoro, Giuseppe Condorelli, Sole Administrator Industria Dolciaria Belpasso, Maria Cristina Busi Ferruzzi, President Sibeg Coca-Cola, Giuseppe Di Martino, Managing Director Pastificio Di Martino Gaetano & F.lli, Sebastiano Alba, Sole Administrator Oranfrizer, Lucio Izzi, Head of Corporate Sales & Marketing UniCredit and Luigia Mirella Campagna, Industry Expert UniCredit.
1 F&B is the countercyclical sector par excellence
The agri-food sector is one of the sectors least hit by the pandemic. However, it will not remain totally immune to the crisis. We expect the impact on agriculture and food & beverage to be modest, although some segments of F&B will suffer more than others.
F&B is a countercyclical sector where, over the past 12 years, we have noticed a resilience thanks a big change in its business model. Foreign exports now represent 25% of total production, up from 15% in 2007.
2 Covid impact on the sector: uncertainty and transmission channels
To analyse how the Covid-19 is impacting the sector we must consider two important themes. The first is uncertainty, a factor that will dominate future scenarios and will last until we go back to normal. The second is the transmission channels which will determine the impact on the different production lines that make up the F&B sector.
There are 3 main channels: families’ food & beverage shopping expenses, resident and non-resident expenses in restaurants and tourism and lastly exports. The current overall revenue of the sector is worth €145 billion. The first channel accounts for 54%, Hospitality accounts for more than 20% and conveys high-value products of medium to high ranges, exports make up 25% of the overall sector revenue.
3 National market and international sales
The national market is expected to decline due to hospitality being badly hit. Q1 turnover dropped 24% with little improvement over the following months as the decrease in family incomes affected spending priorities.
Foreign sales remain disappointing: the first quarter of 2020 saw an increase in exports compared to last year but a sales drop is expected from the second quarter onwards.
The characteristic of this crisis is that it is asymmetric: the pandemic has hit most of our major markets in an undifferentiated way. In conclusion, if we assume we will go back to a normal scenario by the end of the year, the expectations are that the sector could lose 3–6% of its total revenue, worse than what was recorded during the 2007/2008 crisis, where the sector lost less than 2% in two years.
4 The pillars to restart: supply chains and valuable proximity chains
How can the sector come out stronger from this crisis? It is essential that the whole supply chain survive, from farmers to the hospitality sub-sector.
It is important to guarantee timely supplier payments but also to put specific initiatives in place to support the weakest parts of the supply chain. This is where valuable proximity chains come into place. This pandemic has clearly shown that “global value chains” are critical and has increased awareness of the importance of proximity with the supply chains.
5 The pillars to restart:diversification and innovation
Diversifying markets and sale channels are essential for every company in the sector in these difficult times. Lastly, innovation has always been a strategic topic for the sector but in this context, it is even more so. Innovation is key to improvements in efficiency but also in sustainability and food security, which are both extremely important for this sector.