Shockwave too much lurks around the corner at 4 in 10 food companies

For more than two years, the food industry has had crisis after crisis on its plate. For quite a few companies, therefore, the next crisis threatens to be the shock wave too many. So says an interview by Trends with umbrella federation Fevia.

From crisis to crisis

2019 was a very good year for food companies, but then the contrast became quite stark. The corona pandemic, the energy crisis, the explosion of raw material prices, increasing delivery times, inflation, successive wage indexations, the Russian invasion of Ukraine... All of these caused food companies to see their accumulated reserves melt away at a rapid pace. According to Bart Buysse, managing director of Fevia, today the alarm goes off at two food companies out of three, for four food companies out of ten, another shock wave threatens to make even the setback too much.

Producing at a loss

More expensive raw materials, higher energy costs and wage indexation are creating an unseen spiral of costs today. And food companies are not getting these. Anthony Botelberge, chairman of Fevia's board of directors, notices it at first hand at Frigilunch, the Veurn-based producer of ready meals of which he is co-owner. "This year alone, our costs have risen by 32 per cent, not counting wage indexation. We used to catch that with an annual price increase of 2 or 3 per cent, but passing on the current cost increases in full is not an option. As a result, the profitability of a lot of food companies has plummeted over the past period, with many producing at a loss."

Strained relations with retail chains

In an ideal world, when raw material suppliers sell their products at a much higher price, food companies can pass this on to their end customers, especially retail chains. That, however, is where the shoe pinches. If the supermarket chains are willing to negotiate at all, the price increase is nowhere near the price hike faced by the food sector. "We should share the impact of the crisis fairly throughout the food chain, but the retail chains are not listening to this and are exercising their supremacy over our companies," says Bart Buysse.

Limit of savings reached

Save money, then? That too is only possible up to a point. Moreover, in the current stormy weather, there is little margin left to invest, especially knowing that 97 per cent of all food companies are SMEs. Moreover, sky-high energy bills and higher wages weigh extra heavily in an energy- and labour-intensive sector like the food industry. Where possible (and affordable) savings are currently being accelerated, but this cannot be done indefinitely either. Just moving away from fossil fuels, for instance, is simply impossible for many food companies.

The sector's current cry for help is therefore a real and more than justified cry for help, says Fevia.