Belgian food companies see expenses exploding

While the impact of the corona crisis and the closing down of the catering and tourism industries continues to linger on, many Belgian food companies are now facing steeply increasing costs. At the same time, food companies continue to invest with a perspective of a new start after this double crisis. Fevia, the federation of the Belgian food industry, therefore calls on chain partners to show the necessary flexibility and asks the authorities not to phase out the current support measures just yet.

Raw materials, packaging and transport are becoming more expensive

Food companies have been facing more and more supply problems in recent months. A survey among members of Fevia shows that more than half of the food companies are facing shortages or longer delivery times. This is particularly the case for ingredients such as flavourings, oils, inulin or dextrose, but also for packaging materials made of cardboard, aluminium and plastics. 

In addition, 95% of the food companies see their costs increase significantly, partly due to scarcity. Figures from the FAO, the Food and Agriculture Organisation of the United Nations, show that prices for food ingredients have risen for the twelfth consecutive month. Today, they are no less than 40% higher than in the same period in 2020. The price explosion is caused by reduced global supply, including weather conditions and crop failures, changes in consumption patterns due to the corona crisis and a surge in demand now that the economy is picking up. 

Food companies between the devil and the deep blue sea

About half of the food companies surveyed indicated that they will not be able to pass on this increase in production costs at all in their selling prices, mainly because they are tied to annual contracts with the supermarkets. Moreover, a survey by the National Bank of Belgium shows that the suppliers to food companies themselves will pass on their increased costs to a significant extent. Food companies are already experiencing this in practice: their suppliers are invoking force majeure to justify the price increases. 

The survey launched by ERMG in week 23 on the increased input prices shows that supermarkets have been remarkably less affected by the price increases. For the time being, however, they appear to be less willing to take the companies' cost increases into account. 

The Fevia survey shows that Belgian food companies are fairly pessimistic about the next few months, but at the same time cautiously optimistic about future economic recovery. A quarter of the food companies expect their turnover to decrease further in the next six months compared to today. There is therefore pessimism in the short term, especially because liquidity has sometimes been affected by the corona crisis. Moreover, half of the food companies indicate that their profitability is worse today than it was six months ago and will decline even further in the next six months. This is worrying, especially since the margin on sales has been declining for many years. 

On a positive note, employment in the food industry should remain stable this year at around 96,000 jobs. This means that the food sector remains the largest industrial employer. Moreover, more than 4 out of 5 companies indicate that they want to continue investing, especially in increasing production capacity and production and energy efficiency. For example, investments in the food industry almost reached EUR 425 million in the first quarter of 2021. This is an increase of 7% compared to the same quarter in 2020.

fevia.be