We believe you need reliable insights to make the correct strategic decisions. That is why we analyzed the financial data of around 400 European fruit and vegetable companies. They are in four chain links: breeding, cultivation, trading, and processing. We analyzed for 2016-2019, while including an indication for 2020, and mapped out the most important developments within the sector. Read some of the noteworthy conclusions in our blog and download the trendreport for the full analysis.
Seed breeders and traders outperform in 2020
Based on preliminary market data, the growth in the European fruit and vegetable industry continues in 2020 (+5.7%), in line with the development in previous years. However, strong differences are visible between the value chain links: suppliers (seed breeders) and traders are benefiting from the COVID-19 pandemic, while growers and processors are suffering from it.
The growth of suppliers can largely be explained by hoarding behavior. Just as consumers hoarded products like toilet paper and painkillers, the pandemic has scared the industry of seed shortages, prompting them to buy large amounts and store them for later use.
Traders, on the other hand, make use of their flexibility, managing to adapt well to the developments in the market. Furthermore, traders seem to profit most from tapping into the growth categories exotics and soft fruits, as these are typical import-export segments.
Exotics and soft fruit are the strongest growth segments
Companies with a focus on exotics (7.5% growth) and soft fruit (7.1% growth) display the strongest sales increases in the period. Market analysis indicates that is driven by a rising disposable income in Western Europe, which allows more people to buy fresh, high-quality products. In addition, companies grow by adding smart process steps, such as the ripening of avocados and mangoes. Remarkably, also greenhouse vegetables (6.5%) display an above-average growth, partly driven by new concepts with extra added value, such as pre-packed boxes with fresh meal ingredients.
Increasing complexity and compliance costs hit margins
All value chain links in this part of agri food sector endure pressured margins, the impact is biggest for producers, traders and processors. Market data shows that this can be linked to increasing complexity and compliance costs, evident in growing % staff costs. Especially retailers become increasingly demanding on their suppliers in terms of certifications, packaging, and labelling. Add to this the government regulations on sustainability, such as limiting the use of pesticides on fruits and vegetables and avoiding contaminants - and it becomes clear why the costs of increasing complexity is impacting profit levels of producers, traders and processors in fruit and vegetables.
Download our Trendreport of the European Fruit & Vegetable Industry for free via the button below. The trendreport delves further into:
- Whether it is more profitable to focus on wholesale or on retail?
- Which part of the sector demonstrates most growth: fresh, frozen or preserved?
- Why processors should watch their returns closely?