Predictions for Europe’s Fresh Produce Sector in 2018?

European Market

This time of the year‭, ‬it is quite common to start making predictions as to what might happen in the next 12‭ ‬months and what the‭ ‬impact might be‭. ‬

At a macro level‭, ‬the so-called‭ ‬“euro area”‭ ‬is on track to grow at its fastest pace in a decade‭. ‬With real GDP growth forecast at 2.2‭ ‬percent for 2017‭, ‬this has surpassed‭ ‬expectations but is forecast to ease slightly in 2018‭.‬

The European economy has performed significantly better than expected this year‭, ‬propelled by resilient private consumption‭, ‬stronger growth around the world and falling unemployment‭. ‬Per the European Commission’s autumn forecast‭, ‬growth is expected to continue in both the euro area and in the rest of the EU at 2.1‭ ‬percent in 2018‭ ‬and at‭ ‬1.9‭ ‬percent in 2019‭. ‬

Unemployment in the euro area this year is averaging 9.1‭ ‬percent‭, ‬its lowest level since 2009‭. ‬It’s predicted in the next two years unemployment will decrease to 8.5‭ ‬percent in 2018‭ ‬and 7.9‭ ‬percent in 2019‭.‬

All of this is good news for those in the fresh produce industry and should result in consumers continuing to spend on a range of fresh produce across the board‭. ‬

With uncertainty in several key political areas‭ ‬‮—‬‭ ‬including the current difficulty facing Angela Merkel in forming a new government in Germany‭, ‬the impact of recent political developments in Spain and the outcome of Brexit negotiations‭ ‬‮—‬‭ ‬there could be damage to economic and political stability across the EU‭. ‬This is far less positive‭, ‬and thus‭, ‬consumers may remain cautious‭.‬

For fruit and vegetable producers and exporters in Europe there are numerous things that will or will not happen regardless that‭ ‬will shape what sort of year they might have to contend with‭. ‬

Promar International‭, ‬a London-based agricultural and agri-food consultancy company‭, ‬and a division of Genus plc‭., ‬has picked its Top Five issues for 2018‭:‬

•The Russian market will remain closed‭.‬‭ ‬A few years ago‭, ‬Russia was seen by many in the EU as the answer to some of the issues brought about by static consumption of fresh produce in the EU‭. ‬This was especially the case for nimble exporters in the Netherlands and growers/exporters in Spain and‭ ‬Poland‭. ‬The ability to deal with Russia has been sealed off since the imposition of trade sanctions in 2014‭, ‬which seem highly unlikely to be lifted‭. ‬Russia has used this opportunity to increase investment in its own domestic agriculture and in some cases‭,‬‭ ‬build new relationships with other suppliers such as Egypt‭, ‬Uzbekistan and Uruguay‭. ‬Some EU produce still enters the Russian market via countries such as Belorussia‭. ‬However‭, ‬even if the Russian market was re-opened would EU exporters rush back to trade on a direct basis‭? ‬

The Russian economy has struggled in the past few years‭, ‬and trading there still seems to represent a considerable commercial risk‭. ‬This is all despite Russia being the third-largest importer of fresh produce in the world‭.‬

•European exporters will still seek out new international markets‭.‬‭ ‬China probably still represents the‭ ‬“jewel in the crown‭,‬”‭ ‬but it is also the most demanding and challenging of all international markets‭. ‬Other markets in Southeast Asia also look interesting‭, ‬such as Thailand‭, ‬Vietnam‭, ‬Indonesia‭, ‬Malaysia and the Philippines‭, ‬but to date‭, ‬direct exports are relatively modest‭. ‬These still often go through entrepot markets‭, ‬such as Hong Kong and Singapore‭, ‬and remain characterized by a lack of transparency in the way they truly operate‭. ‬More work is needed to understand the full opportunity in these markets‭. ‬This is the case too with markets in Africa‭, ‬and to a lesser extent‭, ‬in the Middle East‭.‬

•Sustainability will still be key‭. ‬Moving produce around the world efficiently is now all but a given‭. ‬Growers and exporters will be looking to differentiate themselves‭. ‬This may be by an ability to robustly demonstrate themselves to be sustainable‭. ‬This covers a whole range of social‭, ‬economic and environmental factors‭. ‬It is an issue that is not going to go away and will impact all stages of the supply chain‭. ‬Building genuinely resilient supply chains that are capable of withstanding economic‭, ‬climatic and other shocks remains a major challenge‭. ‬

•Niche markets will continue to grow‭.‬‭ ‬Demand from relatively wealthy consumers in the EU for Fairtrade‭, ‬organic‭, ‬local and speciality produce‭, ‬for example so-called‭ ‬super foods‭, ‬will continue to grow‭. ‬They present opportunities for European farmers‭, ‬along with imports from countries such as Peru‭, ‬Chile and Africa‭. ‬In some cases‭, ‬these niches will continue to move toward the mainstream‭.‬

•Supply chain rationalization will continue‭.‬‭ ‬This will be driven by the need to identify new markets‭, ‬shorten the supply chain to remove distribution costs‭, ‬increase levels‭ ‬of innovation‭, ‬R&D and NPD‭, ‬and ensuring security of supply to major retail customers‭. ‬In the past few weeks alone‭, ‬there have‭ ‬been a series of mergers involving companies in the U.K‭., ‬Holland‭, ‬Germany‭, ‬Austria‭, ‬Switzerland and Italy‭. 

In addition to these issues‭, ‬there are others factors to consider that haven’t been touched on‭, ‬such as the growth of online retailing‭, ‬the use of new technology in the supply chain and the strengthening position of discount retailers in many markets‭. ‬There’s also the future development of convenience-based retail formats in terms of both store locations and how produce is presented‭.‬

In conclusion‭, ‬2018‭ ‬looks to be a year full of opportunity for the EU fresh produce sector‭, ‬but the odd cloud remains‭. ‬Smart companies are looking to see how these key drivers will influence their businesses and how they will respond to what looks to be a‭ ‬further 12‭ ‬months‭, ‬and beyond‭, ‬of ongoing change in the European market‭.   


John Giles is a divisional director with Promar International, the value chain consulting arm of Genus plc. He has worked on fresh produce assignments in more than 50 countries around the world, including the United Kingdom, European Union, United States, Central and Latin America and the Far East. He is the current chair of the Food, Drink & Agriculture Group of the Chartered Institute of Marketing. Giles can be reached at: [email protected].

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