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Italy Food and Drink Report Q3 2009
Business Monitor International, July 2009, Pages: 70
The Italy Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Italy's food and drink industry
Despite the country’s economic downturn and the negative impact this is having on the country’s food and drink sector, leading Italian companies are continuing to pursue expansions through acquisitions, as discussed in this recently published Italy Food & Drink Report for Q309. Although Italy is known for having some of the highest levels of spending on food and drink in Europe, growth has stagnated in recent years, reflecting the high level of market maturity as well as preferences for traditional eating habits. Only adding to the difficulty of local food and drink producers is the current economic downturn. Italy is set to under-perform the eurozone as a whole both this year and over the long-term, as the report forecasts Italy's economy to contract by 3.9% this year, with a 2.5% decline in private consumption growth.
Given this very weak outlook for the local industry, the country’s leading food and drink producers have been looking abroad for growth opportunities. For example, in April Italian drinks major Gruppo Campari announced its acquisition of the Wild Turkey Bourbon brand from French drinks group Pernod Ricard, the largest acquisition in Campari’s history. Campari is known for mopping up brands that become available following major mergers and acquisitions, and this acquisition is a continuation of this strategy. Earlier Campari had announced that it had put aside a fund of EUR600mn (US$787mn) for possible acquisitions during 2009, as it has been looking to diversify its portfolio and win over more young consumers, who represent the strongest long-term growth opportunities.
Then in May, Italian dairy giant Parmalat agreed to buy a band of dairy assets from Kirin-owned Australian company National Foods in a deal worth AUD70mn (US$54.6mn). This is its largest acquisition since the US$18bn accounting scandal which put the it into administration in 2003. National Foods is required to sell the assets due to competition concerns arising from its AUD910mn (US$709.4mn) takeover of Dairy Farmers, and Parmalat who missed out in its bid for the latter looks set to benefit after all. Parmalat will acquire Dairy Farmers' manufacturing facilities in New South Wales and Australian Capital Territory, while it will also secure some licensing and distribution deals in these states as well as in South Australia.
Parlamat and other dairy companies are feeling the pinch from the economic downturn even more than producers in other food and drink categories, as consumers are increasingly turning to private-label dairy products. While Italian consumers have been slower than their counterparts in other European countries to embrace private-label food and drink products and brand name goods still dominate the sector, there are now signs that the combination of rising food prices and stagnant economic growth may be encouraging more Italian consumers to move away from branded products, providing a boost to producers of private labels. This in turn has led many of the country’s leading retailers to put their weight behind their private label products, indicating that this could be a strong growth opportunity in coming years.
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