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Italy Food and Drink Report Q4 2008
Business Monitor International, Nov 2008, Pages: 69
Italy Food Drink Report provides independent forecasts and competitive intelligence on Italy's food and drink industry.
The rising price of Italian staple foods, including pasta and bread, continues to be a source of concern for many consumers. On September 18 consumer groups urged shoppers to boycott bread for 24 hours in protest at the price increases; official figures indicate that the price of bread rose by 12.2% in the year to August, while the price of pasta increased by 25.6% over the same period. These price rises are not only damaging consumer confidence but also mean that financially stretched consumers are looking to save money buy purchasing fewer luxury goods and trading down to private label and mass-market products where possible.
The bread boycott follows a similar campaign targeted at pasta in September last year. The pasta boycott was held partly responsible for a reduction in pasta sales over the year and convinced more consumers to pay greater attention to the price they pay for pasta products. A similar campaign targeted at bread could have a similar effect, and sales could therefore take a knock over the coming months
With the price rises largely attributable to the global increase in the price of commodities, there is little that producers are likely to be able to do in response to the ongoing consumer campaign. Although consumer groups accuse producers of profiteering, the profits being reported by bread and pasta producers suggest this is far from the case. For example, one of Italy’s major food firms, Barilla, which supplies around 40% of the Italian pasta market, reported that its earnings before interest, tax, depreciation and amortisation fell by 7% in 2007, coming in at EUR448mn compared with 480mn the year before. This fall in profits came despite a 3.4% increase in revenues, suggesting that the firm is having its margins eroded by the current spike in commodity prices.
Meanwhile, the switch to private label products has been noted by several manufacturers, including dairy giant Parmalat. In March, Parmalat revealed that its fresh milk products have struggled to compete against retailer’s cheaper, private label brands, which have been marketed aggressively at a time when consumers are feeling the pinch of rising food prices. Private label producers in other sectors, including bread and pasta, are also likely to benefit as consumers becoming increasingly price conscious. Falling consumer confidence is also having an effect on retail sales. In August 2008, Italy’s national statistic office, ISTAT, reported that retail sales in June 2008 fell by their fastest rate for more than three years. Year-on-year sales came in 3.3% lower, with food sales dropping by 2.3% and non-food sales dropping by 4.1%.
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