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Spain Food and Drink Report Q1 2010
Business Monitor International, Dec 2009, Pages: 69
Spain 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 Spain's food and drink industry.
With Spain forecast to remain in recession on a full year basis until well into 2010, the last quarter saw a number of further gloomy indicators on the state of the economy and commerce. Firstly at the end of October, the National Statistics Institute released figures showing retail sales at constant prices declined 3.4% year-on-year (y-o-y) in September. The decline was attributed to the ongoing economic slowdown which has led to a slump in the property market and the credit crunch which has forced consumers to cut back spending on home improvement, with spending on larger household items declining by 13.4%. However, in calendar-adjusted terms, the drop in September was lower than the declines of 4% y-o-y recorded in August and 9.1% in February 2009, suggesting a recovery in consumer confidence.
Secondly in September Spanish trade body Wine Federation cautioned Spanish wine producers about a potential disaster with the ongoing economic slowdown shrinking domestic demand. The Federation reported that for the first seven months of 2009, wine sales in the country's restaurants and bars declined by 4.6% y-o-y in value and 9% y-o-y in volume terms. This followed the news a month earlier from the trade body Wines from Spain that in the first five months of 2009 exports of Spanish wine fell by 18% in value terms and 22% in volume terms. The country's focus on the value sector means that it faces competitive pressure from 'New World' producers, both in the domestic market and internationally. This positioning leaves the industry exposed to global currency fluctuations, and the relative strength of the euro since the onset of the economic crisis is likely to have made it more difficult for Spanish wine producers to compete with exports from the New World.
At the end of October, Spanish olive oil group SOS Cuetara announced plans to temporarily lay off its entire workforce in the country for up to six months. The company said the move is aimed at reducing excess capacity and costs to achieve long-term stability as it attempts to cut EUR1.1bn (US$1.63bn) of debt. Two months earlier SOS Cuetara had posted a net loss of EUR61.6mn (US$91.3mn) for the six months through to the end of June, principally due to the impact of financial charges.
However, other major domestic players are taking advantage of the downturn to build up and consolidate market presence. For example, at the end of October, Ebro Puleva confirmed it is considering a bid for domestic rival SOS Cuetara's rice division, although no formal talks have taken place. Despite the losses incurred over the last year, SOS has moved to quash rumours that it is looking to sell its rice unit, with a board spokesperson saying that rice and olive oil are strategic business units and the board has not studied a possible sale. Ebro has a strong financial position having recently divested its sugar operations to Associated British Food, even though the division would fit very neatly within its current portfolio. With the sale of its sugar unit Ebro has stepped up its focus on rice and pasta, which have in recent years been the firm's strongest performing units thanks to investment in innovation in the areas of convenience and health – performance that would surely be further fuelled by the addition of SOS's leading rice brands.
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