The food industry in Italy to the test of Covid-19

da | Set 29, 2020 | Quality

The performance of companies to the test of Covid-19

It is now clear that the current crisis is destined to inflict far greater impacts than those triggered by the financial crisis of autumn 2008. On the table, in fact, on fundamental fronts such as GDP, exports and industrial production, there are decidedly worse data than those that emerged about 10 years ago. The current crisis is of an extra-economic nature. For this reason it cannot be excluded that the rebound and the exit from it could be faster, at least from the commercial and production point of view.

It is now clear that the current crisis is destined to inflict far greater impacts than those triggered by the financial crisis of autumn 2008. On the table, in fact, on fundamental fronts such as GDP, exports and industrial production, there are decidedly worse data than those that emerged about 10 years ago. The current crisis is of an extra-economic nature. For this reason it cannot be excluded that the rebound and the exit from it could be faster, at least from the commercial and production point of view.

In the last three years, the food sector has distinguished itself as a highly dynamic sector, both with respect to the overall economy and with respect to the manufacturing sector as a whole; also in 2019, compared to the previous year, the growth in value added was 2%, compared to -0.5% of manufacturing and + 0.3% of GDP. This dynamism has not been transmitted with equal force on employment which, although it has grown in the last five years both in the primary sector (+ 3.3%) and in the food industry (+ 2.4%), it has done so with lower percentages the average of the national economy as a whole (+ 3.9%). However, as a partial consolation, the combination of these elements has meant that the labor productivity of the sector has had a particularly brilliant trend (+ 14.2%), placing food in second place, after the chemical industry, by increase. of labor productivity between 2014 and 2019.

The analysis of industrial production confirms the image of agri-food as a solid sector. Although the slowdown in world trade has negatively affected the production levels of Italian and non-Italian industry, the index of the production of the food industry in recent years, with the sole exception of 2017, has positioned itself at an ever higher level than manufacturing. all in all; on the contrary, the good performance of food industry production in 2019 was mainly derived from foreign demand and the performance of some of the items of Made in Italy. The same American duties, which started in October 2019, with increases of 25% on a ceiling of 500 million of Italian food exports divided into liqueurs and aperitifs, dairy products and prepared meats, have not been able to curb its success. Just as the Russian embargo itself failed to do so on its own market. Even the emergency generated by Covid-19, although clearly perceived by the food industry which showed a cyclical downturn during the crisis, did not prevent the production levels of Food & Beverage in the first three months of the year as a whole from remaining below above those of the same period of 2019, with an increase of 0.8%, against a decrease of 11.7% in the manufacturing total.

In terms of obstacles and problems affecting the agri-food sector, the distribution of value along the supply chain certainly remains one of the most relevant. The elaboration of the ISMEA value chain highlights a system of value creation characterized by a structural dependence on foreign countries for different production factors, by an excessive number of operators along the supply chain, asymmetries due to the different bargaining power of actors involved and a general low competitiveness.

If the agricultural sector, further away from final demand, suffers from the inefficiencies of the system, as now also widely recognized by the EU CAP, the elaborations of the value chain in recent years show that the food industry also suffers from structural problems and weakness. contractual in supply chain relationships, affected by fluctuations and competition on the markets. The empirical observation seems to indicate that in the last few years this prevalence of the most downstream phase of the supply chain has embarked on a downsizing process; the fact is that the latest data, even if referring to a few years ago, confirm that relationships in the supply chain are still a critical issue to be tackled with determination. On the other hand, the analysis of the entire supply chain highlights structural limits that affect – albeit to different intensities – each of its components, starting with an excessive number of micro and small enterprises.

The comparison of the average added value generated for each individual company of the different stages of the supply chain in Italy and in the EU average, shows that only the agricultural component has a much more relevant figure than the EU average (+ 50%), while in all other components of the food industry (-45%), distribution (-44%) and catering (-30%) the Italian average figure is decidedly lower than the European average. As far as the production composition is concerned, 88% of the turnover and 83% of the added value of the food and beverage industry is generated by 17 sectors involving 46% of the overall companies and 67% of the employees.

The most important sectors are two: dairy, in first place both in terms of number of employees, and in terms of product turnover and added value, and fruit and vegetable processing, in second place for all three of the aforementioned variables. Following are the other well-known sectors of Made in Italy food (pasta, processed meat and slaughtering, oil, wine, etc.).

The good performances with which the agri-food sector has distinguished itself in recent years are largely attributable to the ability to expand on foreign markets. Indeed, the national demand for food and drink has stagnated for over a decade. Between 2007 and 2019, household household spending fell in real terms by almost € 16 billion despite a recovery in the last five years. But on the domestic market it is the extra-domestic demand that has shown a particularly favorable trend, so much so that in the decade there has been an increase of about 5 billion euros, reaching a share of 34% of the total of over 250 billion euros of expenditure for food and drink of Italians. These are dynamics which, while suggesting some positive elements, alone would not have been able to support a sector that, on the other hand, has found the fuel in foreign markets that has allowed its consolidation as a leading sector in the field of national economy. Italy’s exports of agri-food products have grown progressively over the last five years, marking a + 30% in 2019 compared to 2014 and reaching 44.6 billion euros. The data relating to the first quarter of 2020 for the food sector also confirm a robust and constantly consolidating trend. In fact, there are many outlets that have shown quarterly double-digit growth: Germany (+ 12%), France (+ 12%), United States (+ 12.5%), Russia (+ 25%), Spain (+ 17%), Poland (+ 17%), Belgium (+ 12%), Austria (+ 12%), Czech Republic (+ 16%), Turkey (+ 23%). These data are extremely positive, but for this very reason they increase the regret for the shock suffered by export flows following the pandemic. Indeed, it has drastically reduced the great growth prospects of our presence on world markets, interrupting a very important qualitative leap that the national food industry, despite many obstacles, was consolidating.

Ultimately, according to the estimates made by the ISMEA, on the domestic front, the Covid-19 crisis will impact the agri-food sector through a decrease in non-domestic consumption by about 39%, for an amount that would therefore be around 34. billion euros. This figure does not take into account other factors of uncertainty linked to the economic recession that could affect household demand, nor the effects of the support measures adopted by the government. On the other hand, the good trend in household food consumption in 2020 can offset, albeit only partially, the reduction in consumption outside the home by limiting the negative impact on the food sector and agriculture. In any case, the overall result will be differentiated for the different products and the different components of the agri-food chains.

Overall, for the year 2020, taking as a reference the value of 2019 consumption (165 billion euros for consumption of food and beverage products, excluding tobacco), a possible increase in domestic consumption of approximately 5.6% is considered. The overall impact on the total domestic and non-domestic agri-food expenditure of the hypothesized changes (-39% outside the home; -4% fresh and defrosted fish products; + 6% other domestic foodstuffs) could be around -10% by 2020 , equal to a value of approximately 24 billion euros. The facts, therefore, confirm the positive data of an agri-food sector that in recent years has established itself as one of the most robust and resilient sectors, even with respect to the financial crises of recent years, at the same time outlining a scenario with hazy borders resulting from a crisis completely original, non-financial, whose impacts will unfold along lines that are still largely unpredictable for a time horizon that could vary from a few months to several years. In this scenario, analyzing today the performance and the economic-financial structure of food companies risked becoming a sterile exercise unless trying to orient it towards an assessment of the ability to face the future uncertainties of one of the most important sectors of the structure. economy of the country.

In this spirit, the financial statements of 6,400 food companies were analyzed, adding to the industrial companies also those which, according to the ATECO code, fall within the field of agriculture, but which in terms of economic size, structure and production processes do not differ substantially from others industrial realities. This is the case, for example, of wineries or social dairies, as well as companies that first process fruit and vegetables.

Furthermore, only active companies with financial statements filed for the entire period from 2014 to 2018 were considered. If on the one hand this excludes younger companies, on the other it guarantees a considerable solidity of the sample and a comparability of data over time. In total, the companies analyzed recorded a total turnover of just over 93.4 billion euros and an added value of 16.3 billion euros. The number of employees is approximately 231.4 thousand units. This means that the sample concerns a very important and representative share of the Italian agri-food industry as a whole. Within the sample, the sectors that weigh the most are dairy, which accounts for 15% in numerical terms and as much as 23.3% in terms of turnover, and that of wine which comprises 21.7% of companies and accounts for 10% of turnover.

As far as location is concerned, 67% of the companies in the sample are located in the Center-North, and the remaining 33% in the southern regions. The companies analyzed show clear differences in production specializations, which also reflect their territorial location. In the Center-North a quarter of the total turnover of the sample comes from the dairy industry, just under 10% from the wine sector and almost 16% overall from red meat and meat processing. In Southern Italy, the most relevant specializations in terms of turnover are those of fruit and vegetables, which account for 25% of the southern sample, dairy (13.7%), pasta (11.6%) and wine (11 ,2%).

From a structural point of view, the average size of enterprises is 36.2 employees, but over 42% of the sample is made up of micro-enterprises with less than 9 employees, while another 39% is represented by medium-small companies ( 10-50 employees). Overall, the employees employed in micro and small enterprises amount to 64.2 thousand units, equal to 27.8% of the total. Average size with more than 50 employees characterize the dairy sector.

The analysis conducted on the financial statements of companies confirms the positive trend of the Italian agri-food sector in the five-year period, with the turnover of the sample which went from 81.2 billion to 93.4 billion euros (+ 15%) at current values. The territorial comparison shows a differentiated growth in turnover, in the five-year period, favorable to the companies of the South (+ 17.1%) compared to those of the Center-North (+ 14.7%) although during the period of time considered there is a succession of overtaking and counter-overtaking between the two districts in the various years considered. The added value also increased significantly in the period considered (+ 15.9%), but this is a trend that has gradually diminished, up to canceling itself out in the last year. Unlike the turnover, the added value of the companies located in the South grew more than that of the companies located in the Center-North in all the years analyzed.

The sectors of gastronomy and ready meals (+ 32%), wines (+ 29.8%) and vegetable oils other than olive oil (+27, 5%). Growth percentages higher than the average also characterized coffee and tea, red meats, fish, dairy products and pasta. An interesting mix of tradition and innovation that probably continues to be the strong point of the national sector.

More modest but still significant increases in turnover were recorded for olive oil (+ 11.4%), meat products (+ 12.3%), fruit and vegetables (+ 13.7%), chocolate (+5) %). In the context of general growth, the companies that showed signs of weakness and recorded decreases in turnover were 1,849.

On the basis of the profitability indicators (ROI and ROE), solvency (liquidity index and availability index) and financial solidity (degree of independence from third parties and global coverage index of fixed assets), a synthetic indicator was calculated which allowed to classify the companies in the sample in eight groups attributable, in turn, to three macro-groups characterized by a different level of performance and different problems. Since from one year to the next the performance of companies can present substantial variations in terms of profitability, while the key factors of capital strength and liquidity are more stable over time, the methodology was applied to the average data for the period analyzed. The evidence emerged is relatively comforting.

To conclude, an encouraging sign is the fact that at the territorial level there are no major differences in the estimate of the degree of resistance to crises; on the contrary, it should be emphasized that in the South the area of the most robust enterprises is even wider, albeit slightly, including 45% of enterprises compared to 42% in the Center-North.

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