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The Italian Way: The future of the agri-food industry

Monday 20 Jul 2020

The third event in The Italian Way programme event, organised by UniCredit in collaboration with Coldiretti Sicilia, looked at how companies in the agri-food industry can emerge stronger from the crisis

The agri-food sector contributes 4.2% of Italy’s GDP. It’s a countercyclical sector that has been more resilient over the past twelve years by changing its business model.  Exporting has become the growth engine, with sales to Germany, the USA, France and the United Kingdom representing 48% of total exports.

In order to restart after the Covid-19 crisis, short- and medium-term strategies will need to focus on supporting supply chains and its geographical proximity, diversification and innovation.

The third The Italian Way event, dedicated to agri-food was held on 9 July in Palermo in partnership with Coldiretti Sicilia, the Sicilian branch of Italy’s agriculture association.

Joining the discussion on how to restart the sector were Salvatore Malandrino, Regional Manager Sicily UniCredit, Francesco Ferreri, President Coldiretti Sicily, Costantino Vaia, General Manager Consorzio Casalasco del Pomodoro, Giuseppe Condorelli, Sole Administrator Industria Dolciaria Belpasso, Maria Cristina Busi Ferruzzi, President Sibeg Coca-Cola, Giuseppe Di Martino, Managing Director Pastificio Di Martino Gaetano & F.lli, Sebastiano Alba, Sole Administrator Oranfrizer, Lucio Izzi, Head of Corporate Sales & Marketing UniCredit and Luigia Mirella Campagna, Industry Expert UniCredit.

UniCredit Sector report

1

F&B is the countercyclical sector par excellence

The agri-food sector is one of the sectors least hit by the pandemic. However, it will not remain totally immune to the crisis. We expect the impact on agriculture and food & beverage to be modest, although some segments of F&B will suffer more than others.   

F&B is countercyclical sector where, over the past 12 years, we have noticed a resilience thanks a big change in its business model. Foreign exports now represent 25% of total production, up from 15% in 2007.

2

Covid impact on the sector: uncertainty and transmission channels  

To analyse how the Covid-19 is impacting the sector we must consider two important themes. The first is uncertainty, a factor that will dominate future scenarios and will last until we go back to normal. The second is the transmission channels which will determine the impact on the different production lines that make up the F&B sector. 

There are 3 main channels: families’ food & beverage shopping expenses, resident and non-resident expenses in restaurants and tourism and lastly exports. The current overall revenue of the sector is worth 145 billion. The first channel accounts for 54%, Hospitality accounts for more than 20% and conveys high-value products of medium to high ranges, exports make up 25% of the overall sector revenue.

3

National market and international sales

The national market is expected to decline due to hospitality  being badly hit. Q1 turnover  dropped 24% with little improvement over the following months as the decrease in family incomes affected spending priorities. 

Foreign sales remain disappointing: the first quarter of 2020 saw an increase in exports compared to last year but a sales drop is expected from the second quarter onwards. 

The characteristic of this crisis is that it is asymmetric: the pandemic has hit most of our major markets in an undifferentiated way. In conclusion, if we assume we will go back to a normal scenario by the end of the year, the expectations are that the sector could lose 36% of its total revenue, worse than what was recorded during the 2007/2008 crisis, where the sector lost less than 2% in two years. 

4

The pillars to restart: supply chains and valuable proximity chains 

How can the sector come out stronger from this crisis? It is essential that the whole supply chain survive, from farmers to the hospitality sub-sector. 

It is important to guarantee timely supplier payments but also to put specific initiatives in place to support the weakest parts of the supply chain. This is where valuable proximity chains come into place. This pandemic has clearly shown that “global value chains” are critical and has increased awareness of the importance of proximity with the supply chains. 

5

The pillars to restart:diversification and innovation 

Diversifying markets and sale channels are essential for every company in the sector in these difficult times. Lastly, innovation has always been a strategic topic for the sector but in this context, it is even more so. Innovation is key to improvements in efficiency but also in sustainability and food security, which are both extremely important for this sector. 

Speaker quotes

Francesco Ferreri, President, Coldiretti Sicily

“A strong communication campaign abroad will help the sector restart and enhance Made in Italy’s reputation for excellence and high quality agri-food products”

Costantino Vaia, General Manager, Consorzio Casalasco del Pomodoro

“In these difficult times, focusing on an integrated supply chain has been a winning strategy, both in terms of procurement and activity continuity and in terms of end client needs”

Giuseppe Condorelli, Sole Administrator, Industria Dolciaria Belpasso

“During the lockdown having an e-commerce platform was clearly a great competitive advantage for us. To increase our client-base we must continue to invest in this channel, reaching all geographical borders”

Maria Cristina Busi Ferruzzi, President, Sibeg Coca-Cola

“We studied commercial actions like balancing the impact on large-scale distribution and hospitality channels and strengthening our online channel, but also taking actions to preserve our clients and staff, guaranteeing our business continuity in complete safety"

Giuseppe Di Martino, Managing Director Pastificio Di Martino Gaetano & F.lli

“During the pandemic, we saw high and unexpected demand for pasta. Thanks to UniCredit, we secured a €10 million loan under the SACE guarantee scheme, which allowed us to procure more raw materials and prevent delays in client payments”

Sebastiano Alba, Sole Administrator Oranfrizer

“This experience has taught us that our employees, our supply chain and our commercial partners make a difference in critical moments. The logistics and transport sectors played a key role in the delivery of Sicilian red oranges, a product that recorded a 40% increase in consumption during the pandemic”

Lucio Izzi, Head of Corporate Sales & Marketing, UniCredit

“To help the agri-food sector, we believe it is essential to support supply-chains, growth and innovation. UniCredit reiterates its willingness to help families and companies during the emergency caused by the Covid-19 pandemic”

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