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Italy Food and Drink Report Q2 2010
Business Monitor International, April 2010, Pages: 71
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.
Italy's Institute of Studies and Economic Analysis (ISAE) reported that the country's consumer confidence index increased to 113.7 in December 2009, it's highest level since July 2002 and up from 112.8 in November. The rise was attributed to improving expectations for 2010 and positive views on personal finances. This uptick in consumer sentiment is regarded as a positive indication towards recovery in demand in the short term, but BMI remains more pessimistic about Italy’s long-term growth potential. The Italian economy appears to be making a tentative recovery from the downturn, with all expenditure components of GDP, bar a slight fall in government spending growth, showing signs of improvement during recent quarters. However, while we expect positive growth in 2010, this will result largely from statistical base effects and inventory restocking rather than a fundamental improvement in demand conditions. Moreover, we believe Italy's relatively poor record on raising productivity, widespread corruption and an inefficient labour market will impede growth.
This lack of long-term growth is reflected in our forecasts for the food market and explains why Italy has fallen to bottom place in BMI’s Food & Drink Business Environment Ratings for Western Europe. These ratings assess a market’s attractiveness to industry investors in comparison to its regional peers in Western Europe. Although Italians generally spend a large proportion of their income on food and drink, the overall level of consumption has stagnated for several years. Many food and drink sectors have reached maturity, placing a limit on consumption growth and meaning that the potential returns from any investment are judged to be only moderate.
In addition, Italian consumers are becoming increasingly price-conscious and gradually starting to embrace private label products. During the quarter this was reflected in the 2009 results posted by Italian dairy producer Parmalat with the company's Italian revenues falling by 7% on a like-for-like basis. The firm previously reported that in its domestic market it has come under pressure from cheaper, private label options and this is likely to be the principle reason behind the sharp fall in revenues. However, Parmalat also indicated that during the second half of the year there were signs that this trend had started to abate, which would be in line with the improvement in consumer confidence recorded in December and be grounds for cautious optimism for growth in the food and drink sector in 2010.
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