Food and drink industry sales slipped by 2.68% in 2012, to 86.298 billion euros. Excluding the contribution from exports, that decline was even greater: sales in Spain dipped to levels last seen in 2006 and the sector registered a loss of 6 billion euros in five years. Lower production is attributable to the negative impact of the lengthy economic crisis and the second recession on consumption.
This data was presented today at an event organized by the Spanish Food and Drink Industry Federation (FIAB) to present its 2012 Economic Report. Participants included Isabel García Tejerina, General Secretary of Agriculture and Food at the Ministry of Agriculture, Food and Environment; Horacio González Alemán, Managing Director of FIAB; Simón Sosvilla, Professor of Economic Analysis at the Complutense University of Madrid; and Josep Fernández, Agricultural Sector Director at la Caixa. The Economic Report was drafted in cooperation with MAGRAMA and was sponsored by la Caixa.
Another example of the sector's weakness is the decline in the Industrial Production Index, with food tumbling by 14.9% and drinks by 10.8%, according to data from the National Statistics Institute (INE).
Josep Fernández highlighted that exports expanded by 9.4% in 2012, to 22.078 billion euros, providing for a positive trade balance of 3.026 billion euros, "reflecting growth that is almost three times higher than total Spanish exports. That figure reflects the competitiveness of our companies and reinforces the importance of our activities abroad, which have reduced the negative economic impact".
The food and drink industry comprises 29,196 companies, of which 96.2% are SMEs and just 59 have a workforce of over 500. According to FIAB, a progressive merger process in the sector would increase competitiveness. The sector employed 439,675 people on average in 2012, i.e. down 1.7% with respect to 2011. The unemployment rate is less than half of Spain's total rate, and 20% of all industrial jobs are in the food and drink sector. Moreover, the sector's labor productivity is twice that of industry as a whole.
Food and drink is more innovative than the national economy overall, but less than other industrial sectors. In 2011 (latest available data), innovative companies accounted for 10.1%, with an investment totaling 655 million euros.
Food and drink consumption
Household consumption increased by 0.66% in 2012, amounting to 30.482 billion kilograms/liters/units. Food and drink expenditure expanded by 0.17%, to 67.634 billion euros. Per capita food expenditure totaled 1,468 euros on average. According to Simón Sosvilla, "discounting for inflation, household food expenditure fell by 3%, which shows the extent to which the ongoing decline in families' purchasing power has led to a reduction in spending, even on food".
The impact of the crisis on out-of-home consumption was especially notable: spending declined by 4.1%, to 33.044 billion euros, and by 7.3% after discounting for inflation.
The crisis continued to change consumption patterns, with demand shifting towards more basic store-brand products, which have increased their market share to 41.2%, the greatest annual increase since 2002. That figure contrasts with the European Union average, where store-brand products have a market share of 35.6%.
Assessments and measures to revive the sector
According to Horacio González Alemán, "Although the food and drink industry has proven more resilient than other sectors to the sudden change in economic cycle, 2012 was a complicated year for the industry, as the crisis made it difficult to maintain stable figures. Industrial production has declined and consumers have reduced spending in all areas, including food (in terms of both household and out-of-home consumption)".
However, he also noted that "there were positive results in 2012. The food and drink industry employed around 440,000 people and growth in exports was almost triple that of the Spanish economy as a whole, though this was not able to curb the decline in consumption in Spain".
As for measures to revive the sector, FIAB proposes "eliminating all tax hikes, including by Spain's regional governments; boosting consumer confidence; improving funding conditions; promoting market unity by reducing administrative overlaps and red tape; encouraging internationalization and innovation; and reforming the training model to enhance talent and competitiveness of the industry".