This issue was the topic of discussion at a recent meat and cheese industry get-together at Cryovac's Packforum facility in France.
With 25 countries, the EU's population has grown by 20 per cent to 454 million, a consumer market larger than the USA and Japan together, thus becoming the world's largest internal market. There remains, however, a significant wealth gap between Western and Eastern members. Within the EU, new members account for 16.4 per cent of population but only 4.4 per cent of GDP, a gap that will take several decades to close.
Delegates from 26 companies and 15 companies attended the Cryovac seminar to discuss the implications of enlargement.
Overview of the Meat and Cheese Industries
The seminar looked firstly at the state of Europe's meat and cheese industries. Over the past 10 years, Polish pork prices have fluctuated between -30% and +20% relative to EU prices. For quality pork carcasses they are now consistently above EU levels.
In Hungary, pork prices were on the average 13 per cent below EU levels, but above if taking into account the quality difference. The same applies to the Czech Republic.
"The new members may still have some competitive advantage, but the trend is toward rising costs and prices," said Andrew Cookson, chief executive of GIRA, a French consultancy involved in market research.
"As in Spain, the survival of a healthy meat sector will depend on well-organised, low-cost local production, efficient slaughtering and further processing."
Regarding the cheese industry, many Central European countries are net exporters of dairy products. Most are based on a self-sufficiency model with minimal imports. But income and cheese consumption growth will wipe out most surpluses.
Lithuania will have an exportable dairy surplus as big as that of Poland. The richest new member countries (Hungary, Czech Republic, Slovenia) are developing demand for Western type cheeses, whether locally produced or imported.
"The main driving force for 'Eurocheeses' is the fast modernising super/hypermarket sector, largely in the hands of Western retail chains. The Western cheese model, based on convenience, logistics, own label, packaging, etc, is also the future in the new member states," said Cookson.
Economic trends and major assets
Looking at Poland, the largest of the new members, Bohdan Buczko, prime secretary at the Economic and Commercial Department of the Polish Embassy in Paris, showed how the country has been achieving sustained economic growth in the past years, in GNP, trade, as well as foreign investment.
He argued that the agrifood business in Poland is an important pillar of the economy, one of the most promising segments for the future. All forms of organised retail operate in Poland, with an increasing presence of foreign retailers, mostly from Germany, France and the UK.
This stable economy is growing fast, offering qualified and relatively low cost labour and an attractive, low risk market for investors given the harmonisation of the Polish legislation.The Czech Republic also offers good country ratings for prospective investors, as explained by Bretislav Kalusek, Economic and Commercial Counselor to the Czech Republic Embassy in Paris. The country boasts the second highest per capita GDP among the new EU members.
According to the European Commission, Lithuania will probably be the fastest growing economy in the enlarged EU in the coming few years. The country has been widely regarded as a rising regional star in terms of economic growth. The food industry is well developed and already meets EU standards.
"Lithuania is the cheapest location of the 10 new EU member states in which to conduct business," said Raimonda Sadauskiene, director of the investment department of the Lithuanian Development Agency. "And it offers a highly qualified labour force."
Major new Member State manufacturers
Prime Food, a major Polish meat producer exports about 15 per cent of its annual production of frozen, processed or fresh meat products, the company handles one of the largest pig breeding farms in the country, plus a slaughterhouse and processing plant. The company sells its products in either MAP or vacuum packaging.
UAB Bioleva is a Lithuanian meat processor offering a wide range of high quality products to a growing number of clients. The company recently began exporting to the EU and plans to increase this activity in the future.
"We feel well positioned to seize the numerous opportunities offered by the enlarged EU market, particularly increased European trade and close cooperation with EU retail networks," said Raimondas Andrulionis, export manager.
Rokiskio Suris is one of the leading dairy companies in Lithuania (28 per cent local market share), producing high quality and well-known cheese and butter. The company exports 60 per cent of its production, including large quantities to the USA. Its plant is equipped to Best Practice modern standards and has earned EU quality certification.
"Lithuania joined the EU giving us no trade restrictions, just new opportunities," said export manager Laura Norkute. "Our main focus now is to extend our current share of the EU cheese market, responding rapidly to market and customer driven innovation in products and services."
But in order to take advantage of these opportunities, many companies will have to reorientate their business focus. For example, Hungarian meat company the Carnex Group believes that in order to increase future competitiveness, both domestically and within the EU, it will need to focus on specialty products such as fresh, added-value or elaborated products such as duck or goose liver.
In his conclusion, Fabrice Roy, executive director marketing Europe for Sealed Air Cryovac, stressed that the years to come will be crucial to create win-win partnerships between industry and retail players, not only to cope with the rapidly growing consumption in new member states, but also to enhance food speciality sharing within all parts of the new Europe.