Food sector shrinks, only recovery after 2021

The Dutch food sector is shrinking by 4% this year as a result of the corona crisis. This is not only due to a drop in demand from the catering industry, but also due to the loss of exports. Food companies that supply supermarkets and online stores, on the other hand, are experiencing significant growth. A full recovery of the food sector is not expected until after 2021.

The bank expects a 2% recovery for the food sector next year, the organization reports in a sector analysis today (Friday). According to Nadia Menkveld, food sector economist at ABN Amro, the impact of the corona crisis on the food sector has two faces. Companies that supply to (online) supermarkets are growing strongly, while companies that supply to the catering industry have to take a heavy blow. 

Exports offered no way out in the first months of the corona crisis, because the export countries faced the same problems as the Dutch market. "The declining exports as a result of the shutdown of important markets has had the greatest impact on the food sector as a whole," Menkveld said in a statement. "There is also less travel in the countries around us, people work less often in the office and the catering industry is limited."

Fresh produce grows thanks to supermarkets
As a result, demand from restaurants, fast food chains and cafes in major export countries fell and exports took a hit. "Fortunately, the export was a lot more positive in June, but the sales of food products abroad will remain under pressure for the time being," says Menkveld.

According to the bank, the parties that supply the Dutch supermarkets can have the wind behind them at least until 2021. This includes the potato, fruit and vegetable sector (Fruit & Vegetables), which can grow by 1% this year and by 2021% in 2. Because consumers are more at home, more convenience products such as fresh packages and meal boxes are sold in supermarkets. On the other hand, sales of ready meals, which are mainly consumed on the road, fell.

Dairy works and does not run
The sales of dairy products, such as yogurt, milk and desserts, have also increased sharply in supermarkets. For example, 8% more yogurt was sold and 6% more milk. Dairy specialties as desserts rose the fastest with 12%. However, this did not make up for the decline in dairy exports. The lockdown in major export countries, plus a lack of refrigerated containers in major ports in China, has hit the export value of dairy products. For example, the export of milk powder to China fell sharply.

The fact that dairy is mainly sold in supermarkets has ensured that the production of dairy products has remained somewhat stable. Dairy production remained stable in the first 6 months of 2020, but started to decline in June. ABN Amro expects volumes for dairy products to fall by 2020% in 2 and to rise again by 2021% in 2 due to higher demand in China, among others. 

The disappearance of the catering industry hits meat firmly
The crisis has had a major impact on the purchase of meat products (-5%). Because the catering industry was badly hit and the number of tourists also fell sharply, an important sales market was lost. Fast food chains, major buyers of poultry meat and beef, have also suffered from the crisis and, according to the bank, are also increasingly offering vegetarian products. Although consumer spending at many restaurants still lagged after the lockdown, spending at fast food chains has now recovered strongly.

A large part of the meat production is also destined for export. Because the demand for meat in export countries also fell due to the closure of the catering industry, exports fell by no less than 17% in April and May compared to a year ago. ABN Amro expects this sector to grow again in 2021 (+3%). 

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