News Insights
Forecast: production growth in food over 3 percent
Credit insurer Atradius expects that the global production of food and beverages will grow by 3.2% in 2024 and by 3.3% the following year. According to Atradius, in the Netherlands, shopping carts are becoming less filled to compensate for the high prices, and consumers are still holding back in restaurants.
The value of sales of food and beverages in the Netherlands is expected to increase by 5.2% this year, according to figures from Oxford Economics cited by Atradius. This is higher than in France (-1%), Germany (-2.6%), Italy (+2%), Spain (+1%), and the UK (+2.2%). For 2025, a growth of 2.3% in sales is expected for the Netherlands, which is also higher than the average. The forecast for sales growth in the EU and the UK is an average of 1.3% this year and 1.5% next year. The higher output for the Netherlands compared to other European countries is partly due to the higher inflation that led to higher prices (output value) in 2023 and partly due to purchasing power recovery (due to increased wages) that ensures consumption remains at a level, Atradius explained when asked.
Unpredictable weather conditions can lead to downward revisions in production growth expectations. Other factors also pose a downside risk. "El Niño, the war in Ukraine, the conflict between Israel and Hamas, and the Houthi attacks on container ships in the Red Sea corridor cloud the outlook," the report stated.
Opportunities in Europe: economic growth, EU legislation, and E-commerce
Atradius identifies three opportunities and three risks specifically for Europe. One opportunity is the (modest) economic growth. As inflation decreases, consumer purchasing power will improve, according to the credit insurer. However, this does not necessarily mean increased consumption in Europe. In the Netherlands, 'to compensate for the high prices, shopping carts are less filled, and consumers are still holding back in restaurants.' Atradius stated that in the Netherlands, 'after years of rising costs, it is questionable whether and to what extent consumer prices will decrease.' In Germany, the number of bankruptcies in the hospitality sector may increase due to a rise in VAT from 7% to 19% as of January 2024. In the United Kingdom, 'the industry is facing another difficult year as persistently high interest rates limit consumer spending.' In France, the export of alcoholic beverages performed poorly last year. Atradius expects consumers there to spend less on food this year. "This is particularly true for meat, fruit, and vegetables, with the organic sector expected to be most affected."
Another opportunity seen by the credit insurer is EU legislation. "With the European Green Deal, there could be a positive development in the 'Farm to Fork' strategy aimed at making food systems fair, environmentally friendly, and healthy." E-commerce is also seen as an opportunity. "Online distribution is a trend that will continue to grow in the coming years through apps and websites. Young consumers prefer to buy their groceries online rather than in supermarkets."
Risks: uneven playing field, food security, and extreme weather
Atradius mentions an uneven playing field as a risk. "Farmers across Europe have protested against the yet-to-be-ratified trade agreement between the EU and Mercosur. The agreement aims to create export opportunities to South America, abolishing most EU export tariffs." However, the agreement could potentially disrupt the EU food market by importing beef and poultry that do not meet strict EU standards and compete with those of European farmers.
Another risk identified is food security. "Given the geopolitical tensions, securing food security for EU members will be a challenge in the coming years for the EU." The final risk is extreme weather and diseases. Climate change remains a structural problem for European countries, as do outbreaks of diseases that can affect livestock and crop yields, according to Atradius.
