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October 22, 2008

SIAL: Comment – Optimism in the air at SIAL

The leading lights of the food industry have spent the last few days in Paris at this year's SIAL exhibition and the mood of those who in convened in the French capital was one of determined optimism. Dean Best was there to read the smoke signals.

By Dean Best

The leading lights of the food industry have spent the last few days in Paris at this year’s SIAL exhibition and the mood of those who convened in the French capital was one of determined optimism. Dean Best was there to read the smoke signals.

The French are renowned for their love of lighting up and, on stepping off the Eurostar at the Gare du Nord in Paris on Monday (20 October), the whiff of cigarette smoke was pervasive.

Just-food headed to the French capital earlier this week for SIAL, one of the key dates in this year’s industry calender. The biennial exhibition takes place in the intervening years between Anuga, Europe’s other big food industry event, and both shows attract the great and good of the sector.

This year’s SIAL instalment was no different but visitors and exhibitors no doubt made the trip to Paris with some trepidation as the food industry braces itself for imminent recession in many parts of the world.

However, the smoke signals from Paris suggested a mood of determination on the part of many attendees. Yes, the argument went, conditions are tough – but we can ride out this storm.

AB World Foods, the ethnic cuisine unit of UK conglomerate Associated British Foods, was one company upbeat about its prospects. The company was set up in March following ABF’s acquisition of Indian cuisine business Patak’s. Its brands, which also include Blue Dragon, are on sale in over 40 markets and the company is keen to boost its overseas presence still further despite the economic downturn.

The rising popularity of private label as consumers tighten their belts also held no fears for AB World Foods. “Retailers are open to keeping a brand alongside private label,” AB World Foods international marketing manager tells just-food. “If consumers start to scale back on takeaways, then they will buy into a brand, rather than really scaling back to private label. We’ll ride it through.”

AB World Foods was one of 70 exhibitors from the UK who had travelled to Paris with promotional body Food From Britain. The organisation is set to close next March following the loss of UK government funding but the FFB says its network of international offices will continue to support the UK’s up-and-coming food firms.

According to the FFB’s latest figures, UK food and drink exports rose by 12.5% during the first three months of 2008. The FFB says it expects export receipts to break the GBP13bn (US$21.09bn) barrier this year, up from GBP11.5bn last year as international buyers look to the UK for products tapping into global trends like convenience and healthy eating.

Wyke Farms, the UK cheese maker, is one such company looking for further overseas growth. The company has a growing export business and sells into markets including north Africa, the Middle East, Australia and across Europe but is looking to further build on its recent entry into the US with the launch of products including Leskol half-fat cheddar.

As at Anuga last year, the dairy hall at SIAL was a central focus of the event. Lactalis, the world’s second-largest dairy manufacturer, was in attendance and, judging by the packed tables playing host to intense negotiations at the company’s stand, it seemed like business as usual at the French group despite the volatile conditions in the dairy sector and ongoing concerns over the global economy.

Lactalis remains keen to boost its presence overseas and Luc Morelon, the company’s communications director, highlights markets from the US to Russia as central to the group’s plans. “The policy at Lactalis is to develop our main brands,” Morelon says, pointing to the success of flagship products Galbani and President.

International expansion is also a top priority at Nordmilch, another of the world’s leading dairy groups. Overseas markets account for over 16% of the German group’s turnover and the company has enjoyed success with its Oldenburger range of dairy products, which accounts for half the revenue from its international division.

Martin Ehrhardt, the head of Nordmilch’s international division, says the company has enjoyed strong growth in regions including southern Europe in recent years and he expects to continue to see growth in markets like Russia. However, he admits that the global financial crisis and economic downturn has made it difficult to forecast Nordmilch’s performance overseas in the year ahead.

One such company less cautious about its prospects is European frozen foods group Pinguin. The Belgium-based group, which is one of the continent’s leading vegetable processors, tells just-food that it would benefit from any economic downturn.

“Frozen food is a cheaper alternative to other food and, if the economy moves down, it will be of benefit to us,” Pinguin CFO Steven D’haene says.

As the global economy experiences stormy waters, there will be winners and losers. A few months ago, the consensus in the food industry seemed to be that the sector would largely be able to withstand the downturn., However, there will be winners and losers. Those operating in more value-oriented parts of the food industry, like Pinguin, look most likely to thrive as consumers rein in their spending.

Nevertheless, the mood as SIAL was one of determined optimism. Food companies remain ready to invest in their business and ready to spend on boosting the presence of their brands in international markets. Companies the size of Lactalis will have the clout to invest but the likes of Wyke Farms and AB World Foods, businesses looking to build on fledgling positions in overseas markets, also seem to believe that if they box clever, they can withstand in the current challenging economic conditions and emerge with budding, but lucrative, businesses.

The proof of the pudding, as they say, is in the eating.

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