1. SOME PROSPECTS FOR FOOD INDUSTRY IN EURO-MEDITERRANEAN COUNTRIES Jean-Louis Rastoin, ENSA.Montpellier/UMR Moisa University of Bologna – AIEA2 – february, 18, 2005 -

2. Overview The food system approach The food system approach World and Mediterranean Food Industry World and Mediterranean Food Industry Markets & Strategies in the EU Med FTA Markets & Strategies in the EU Med FTA Conclusion : Opportunities & Threats for Med Countries Conclusion : Opportunities & Threats for Med Countries

3. The AgroFood System Approach Agrochim Genetics AgricultureFood IndustryCommercializ Consumers Government : competition, norms & knowledge Equipments Logistic and services Source : d’après Feillet (2002)

4. The steps of the AgroFood System Stage Final Price Sharing % Domestic Consumption % Agri.Ind.Serv. Ag Prod Food Ind. Agricultural100009010 Transition7020106040 Agro- Industrial 3040308020 Agro- Tertiary 103555595

5. World & Mediterraean Food Industry The Euro-Mediterranean Free Trade Association Impact

8. Food Industries in Med. 1998 estimation Geographic Area Production(B.$)Employees 11 MPCs 41 668 000 5 UE Coun. 287 1 146 000 Total 16 MCs 328 1 814 000 Source : our estimations from Unido Database, 2001

9. Food Industries Benchmarking Area[1998] Prod ty Y/W(K.$)RatioAV/YScore MC-EU25026%4,43 MPCs6224%1,49 -Bad competitively of MPCs Food Industry due to lake of competition Source : our estimations from Unido Database, 2001

10. LIBERALIZATION IMPACT ON EURO- MEDITERRANEAN AGRI TRADE 2001 – 2015 Source : adapted from Bchir, Ducreux, Fouquin, CEPII Mirage Model CGEM CGEM Scenario 1 : only industrial products Scenario 1 : only industrial products Scenario 2 : ag. & food ind. products included Scenario 2 : ag. & food ind. products included Trade and Welfare effects Trade and Welfare effects

11. LIBERALIZATION IMPACT ON EURO- MEDITERRANEAN AGRI TRADE 2001 – 2015 (1) Source : adapted from Bchir, Ducreux, Fouquin, CEPII Mirage Model Product EU -> Maghreb + Turkey Export 2001 (M.$ 97) Scenario 1 2001-2015 change Scenario 2 2001-2015 change Agri products1 580- 3%66% Food Industry2 920- 4%132% Total Ag & Food4 500- 4%109% Sold X - M5602274 063

12. LIBERALIZATION IMPACT ON EURO- MEDITERRANEAN AGRI TRADE 2001 – 2015 (2) Source : adapted from Bchir, Ducreux, Fouquin, CEPII Mirage Model Product Maghreb + Turkey -> EU Export 2001 (M.$ 97) Scenario 1 2001-2015 change Scenario 2 2001-2015 change Agri products2 5803%23% Food Industry1 3605%59% Total Ag & Food3 9404%35% Sold X - M-560-227- 4 063

13. Markets and Strategies in the Food system 3 markets 3 markets 4 strategies 4 strategies

14. Innovative market Thema : health Product : « Neutraceutics» Value : technology Niche market Thema : culture & event Product : « authentic » Value : geographical origin « terroir » Mass market Thema : day-to-day Product : basic, safe Value : price, segmentation The 3 Food products markets

15. Food products markets France, 2001 Segment Net sales (billions €) Annual growth Standard products 87 (73 %) 0-1 % Innovative products 6 (5 %) 15-25 % « Terroir » products 27 (23 %) 5-10 % Total Food industry (domestic market + export) 120 (100 %) 2-3 %

16. AgroFood Firms Generic Strategies 1 – Domination by costs / Large scale production : (Multinational Firms) 4 – Differentiation / typicity : “ Terroir ” SMEs 2 – Cost cuts / [Big distribution subcontracting] : SMEs - DLP 3 – Differentiation / innovation & mkg segmentation : (Multinational Firms) Price Volumes Adapted from Porter ‘s Model (1985)

17. AgroFood Enterprises Typology in South & East Mediterranean Countries State Enterprises in some sectors (Sugar, Oils, Tobacco) in many PMC State Enterprises in some sectors (Sugar, Oils, Tobacco) in many PMC Private Conglomerates in Algeria (Cevital), Morocco (ONA), Tunisia (Poulina), Egypt (Lakah, Orascom, Ghabbour), Turkey ( Koc, Sabanci Hldg), with MNEs partnerships Private Conglomerates in Algeria (Cevital), Morocco (ONA), Tunisia (Poulina), Egypt (Lakah, Orascom, Ghabbour), Turkey ( Koc, Sabanci Hldg), with MNEs partnerships Emerging SMEs by privatization Emerging SMEs by privatization

18. Towards 2 kinds of actors in the Food Sector ? Oligopoly with fringes : Oligopoly with fringes : –A few large Multinational Firms with integrated local subsidiaries (high level of concentration by M&A) –Numerous independent or subcontracting SMEs (constant number of enterprises and employees)

19. CONCLUSION : Opportunities & Threats

20. FMNs Strategies Interest for emergent mass markets (today : Asia, tomorrow : Med. ?) Interest for emergent mass markets (today : Asia, tomorrow : Med. ?) In search of leadership (market share) In search of leadership (market share) Organization : global firms (investments in technology and communication) Organization : global firms (investments in technology and communication) International management, but national governance International management, but national governance

21. Med. SMEs opportunities Traditional products : the mediterranean diet Traditional products : the mediterranean diet Reconquest of the domestic market Reconquest of the domestic market Capture of the international market Capture of the international market

22. SMEs constraints asymmetric competition with FMNs and with the « new producing countries » asymmetric competition with FMNs and with the « new producing countries » Capture a « territorial rent » (« AOP ») Capture a « territorial rent » (« AOP ») Quality Control Quality Control Agriculture modernization to improve profit and raw materials availability Agriculture modernization to improve profit and raw materials availability Insure Traceability Insure Traceability Consolidate Equity to increase business cycle (Investment) Consolidate Equity to increase business cycle (Investment) => Improve the management level => Improve the management level

23. A « mediterranean new strategy » Strategic alliance based on regional AOP and enterprises network Strategic alliance based on regional AOP and enterprises network

24. Sector Number of firms Average net sales (B.$) Average number of employees Net margin Soft drinks317,680 61615,5% Alcoholic beverages56,122 4439,4% Beer135,427 1857,5% Multiproducts259,655 4736,8% Ingredients63,613 5074,2% Confectionery56,015 3302,8% Cereals1010,141 7372,5% Meat145,724 1661,4% Milk164,713 8780,5% Frozen foods33,816 2540,3% All sectors1007,132 7855,4% Source : Agrodata (2003) Top 100 World Food Industry Performances - 2002 Leading firms by sector