The European fresh produce sector is still one of the largest in the world, and has traditionally been supported by the European Union’s (EU) Common Agricultural Policy (CAP).
In comparison, however, the industry has received less funding from Brussels and its associated agencies than other farming categories, including dairy, beef, cereals and sugar. It is likely that as the CAP goes through the process of gradual reform in the future, production subsidies will be slowly revised downward, although payments to farmers for good environmental practice might actually increase.
Much of the export trade within the EU is still internal in its nature, in that it goes to other European markets; but the Middle East, parts of Africa, Southeast Asia, China and in some cases, the United States, are becoming more important to European fruit and vegetable growers and exporters. The strong internal dimension to the European sector is beginning to change. EU producers will begin to feel the pressure from other growers in the Southern Hemisphere and North America in international markets.
With less market protection in the future highly likely, our insight into the sector suggests that EU horticultural producers will be more exposed than before to international competition. At the same time, they will need to meet the challenges of climate change, building sustainable supply chains and coping with more volatility in world markets. The use of so-called “agri tech” services might be one way this is tackled.
The traditional response to the changing market situation in the EU, where the leading supermarkets dominate the supply chain, has been for growers, importers, exporters and distributors to go through a process of consolidation as they look to ensure security of supply. This process has not finished. While further consolidation can be expected in the future, the European supply chain is now looking increasingly at the use of a range of technologies in order to maintain clear blue water between them and the increasing competition from other parts of the world.
Developments in agri tech can be seen across the supply chain. These are all aimed at developing solutions to the key issues that confront the EU produce sector, including challenges over the availability of labor, the need to address areas such as climate change and food waste, and the opportunity to take advantage of the masses of technical and commercial data that can be generated through the use of e-based systems of commerce and digitalization in the form of “Big Data.”
In some cases, these are not totally new issues to contend with. But the use of agri tech-based solutions to find the answers to them is. The most promising agri tech solutions often come from when the private sector engages with leading EU and international academic-based institutes, and where there is a strong market pull. In some cases, the tacit involvement of a leading customer can also act as a strong driver to make these projects work in an acceptable timeframe.
In most EU countries, the national government is very much behind accelerating the development and uptake of agri tech solutions for farmers and others in the supply chain. This is seen as critical in order to address issues that all link to the use of advanced technology and to produce a step change in agricultural productivity in the face of volatile world markets and other shocks to the supply chain, such as long-term climate change and shorter-term unusual weather patterns.
The EU Commission has its own programme of support called Horizon 2020. This has funding of some €80 billion over a four-year period, with the goal being to ensure Europe produces world-class science and technology, removes barriers to innovation and makes it easier for the public and private sectors to work together in delivering tech-based solutions to the big macro challenges facing society. Some €4 billion of this goes to agriculture and food.
Other areas that benefit from these projects typically include the enhanced resilience and profitability of EU horticulture and supply chain, benefits to the rural economy per se, exports of high-value food and agri technology, environmental protection and enhancement (not least, EU member states need to be able to show they are meeting obligations as set out by the Paris Agreement), cost reductions in supply chain to protect margins at producer level and consumers from worrying inflationary pressures and the development of more skilled employment. In the United Kingdom, for example, the Innovate UK organization has budgets of up to £100 million to be match-funded by the private sector.
Across the EU, a number of countries are developing a genuine reputation for building real expertise in the area of agri tech in the horticultural sector. The Netherlands, which has always had a strong tradition of innovation in the fresh produce supply chain, is a good example. So is the U.K., which has built on the strength of its academic and R&D prowess and the pull exerted in the market for new product development, innovation and truly sustainable supply chain by a small number of very powerful retailers who control more than 80 percent of the food market between them.
Across the EU, there are some great products and great businesses in the horticultural sector. In the coming years more agri tech solutions will be added to maintain the EU’s position of a leading supply source, capable of dealing with the future challenges it faces in terms of building a more resilient supply chain.
John Giles is a divisional director with Promar International, the value chain consulting arm of Genus plc, and has worked on fresh and processed produce assignments in some 60 countries around the world. He can be contacted at [email protected] Giles is also the current president of the Food, Drink & Agricultural Group of the Chartered Institute of Marketing.