The EU food and drink industry stands at a competitiveness crossroads. A new report from Wageningen University & Research shows food and drink production as the driving force behind the agri-food chain but highlights major challenges threatening its long-term competitiveness. The EU food and drink industry calls on the European Commission to develop a dedicated sector plan.

The EU food and drink industry employs 4.7 million people and buys some 70% of all EU farm produce. With SMEs making up 99% of the sector, the industry supports local economies and drives prosperity across Europe.

However, EU food and drink makers lag behind the US and China, particularly in innovation and productivity. The US invests twice as much in R&D, China five times more. Labour productivity in the US is €130,000 per worker—more than double the EU’s €54,000. From 2010 to 2021, EU value added grew 50%; the US grew 71%. Without urgent reform, Europe risks losing its global edge.

The findings confirm what FoodDrinkEurope’s CEO survey already revealed in February: business confidence is slipping, the regulatory burden is growing, and urgent action is needed to strengthen Europe’s largest manufacturing sector. This newest Wageningen study reveals 5 key areas of concern for Europe’s food and drink industry with impacts for the wider food chain:

1. Productivity lagging: Productivity lags 30% behind the EU manufacturing average, despite a 59% rise in value-added since 2008, with R&D investment still lower than global competitors;
2. Hyper-consolidation of retailers: In 2023, the four largest retailers held 60% of the market share in all EU Member States bar one – this high level of consolidation strengthens their bargaining power over farmers and food and drink makers;
3. Global leadership at risk: The EU may be the world’s top agri-food exporter but its global share is slipping, down from 21% to 19%, while China’s food exports soared 83% from 2008-2019.
4. Mounting input cost pressures: High input costs continue to squeeze food and drink makers threatening future investments in the food chain. In addition, energy prices remain above pre-COVID19 levels.
5. Middle of the food chain is under pressure: Food and drink makers support 3.5 million farm jobs and account for 26.7% of the total agri-food chain value added but they face pressures, squeezed in the middle of the chain, with lower profit margins in 2022.
6. Shoppers are cutting back: From 2021-2023, the amount of food and drink bought by consumers fell 7% and 5% respectively, underlining the need to support consumer purchasing power, restore economic confidence, and boost the Single Market.

FoodDrinkEurope’s Director General, Dirk Jacobs said: “Policymakers can see the warning signs from the Wageningen study, they must not sleepwalk into letting the food and drink industry decline. Europe’s food and drink sector is vital and if the EU is serious about food security, sustainability, and prosperity, it must work with the industry to build a competitive and resilient agri-food chain.

FoodDrinkEurope urges the European Commission to develop a sector plan for the EU food and drink industry. Plans are already expected for other important industries, such as steel, chemicals, and automotives; meanwhile Europe’s largest manufacturing industry, food and drink, remains without one. We ask our political leaders to put the food and drink sector at the heart of the EU’s industrial strategy with a dedicated sector plan, supporting competitiveness, innovation, and a fairer and more sustainable food supply chain for all.”

www.fooddrinkeurope.eu