Common laws for ingredients bring growth in west for accession ten

Related tags European union

On 1 May an historic moment marked the entry of ten countries and
75 million consumers into the European Union. Churchill's 'Iron
Curtain' has been consigned to the history books, heralding
democracy, stability and prosperity for the eight ex-communist
states. While leaders in the food ingredients sector have already
made investments in the accession states over the past few years,
alignment of common laws for food ingredients and additives will
have a major impact on growth for local food manufacturers,
writes Lindsey Partos.

Buoyed by lower labour costs, regulatory harmonisation and a parity in raw material sources, manufacturers in the east are now armed with the tools to take on western European markets.

"Alignment of the regulatory situation for ingredients and additives will have a major impact because food manufacturers in the new member states can now benefit from the same raw materials and supplies as sold in western food markets,"​ Jan Hansen, a director of Danish ingredients maker Chr. Hansen​ told​.

For Hansen the harmonisation of ingredients regulations is key to opening up new market opportunities for the food makers in the new eastern European member states - Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Hungary, Slovenia - keen to drive into the affluent west. Growth which would have a positive spin off on the old EU15 bloc.

"We think that growth in eastern Europe could be an accelerator for western Europe,"​ he predicted.

Compared with growth of 0.5 per cent recorded in the EU15 bloc last year, the accession states posted more than 3.5 per cent, up from 2.5 per cent in 2002.

According to the CIAA (Confederation of the food and drink industries of the EU) the food and drink industry sector in the new member states represents, on average, 25 per cent of total industrial production and 15 per cent of total industrial jobs - against11 and 12 per cent respectively in the EU15.

While the leading global industry players such as Unilever and Nestle continue to build market positions in the accession states, national manufacturers dominate the food industry.

"The fast growing dairy industry and cheese makers are largely domesticated,"​ says Hansen, at the world's number one supplier of cultures, adding that the meat sector, to which it also supplies ingredients, is relatively national.

Again, common laws on ingredients and additives will provide the local firms with the potential to drive expansion into new markets in the west.

Growth that can take advantage of the low-cost labour in the region and skill levels higher than in most emerging economies, resulting from relatively good education systems.

Chr Hansen, with production facilities in Poland - one of the four largest economies in the accession states together with the Czech Republic, Hungary and Slovakia - for the last six years, has been closely working with customers on the legislation in order to guarantee a smooth passage on 1 May.

"We have to ensure that the safest and best quality ingredients are available,"​ added Hansen.

A global player, key competitors in the new member states for the Danish firm are much the same as on the world stage, notably fellow ingredients giant Danisco.

But after decades behind the 'Iron Curtain' no-one can predict the true impact on the economies and the food industries of the accession states - Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Hungary, Slovenia, Malta and Cyprus, and as Hansen said: "This fantastic event will be beneficial to western and eastern europe over and above our imagination. Even our models and forecasts cannot fully fathom the impact."

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