Italian good news: The economic and productive role of the agri-food industry in the face of the Covid-19 challenge
- WTI Magazine #129 Jul 19, 2020
The Coronavirus has caused the re-emergence of the strategic nature of the agri-food sector: food and drink consumption has been and continues to be among the few that have marked positive variations, proving to be anti-cyclical compared to other supply chains. While sales of non-food goods went down (-22% in value in the first four months of 2019 and even -52% in April alone), food sales increased by +5% in the first four months of 2019 and +6% in April, respectively.
In particular, in the hottest period of the emergency, i.e. between February 17 and May 24, food sales in large-scale distribution grew by 13%, driven by basic products of the Made in Italy food supply chain: purchases of flour, yeast, milk and eggs, during quarantine, rose by 42% compared to the same period in 2019 and after -0.8% last year. Pasta (+17%), fruit and vegetables (+15%) and wine (+11%) are the other products that have gained important annual growth.
This study describes the values behind the food&beverage purchase choices, identifies influential factors and outlines possible scenarios. The result is an Italian citizen emerging from the pandemic crisis who is more attentive to Made in Italy (26%), environmental protection (22%), typical local products (16%), health (15%) and convenience (14%). Looking ahead, from now until the next 30 years, an older Italian population will lead to a decrease in consumption close to 10%. To survive the drop in domestic demand, we will need export expertise and new company structures for production that is really more consumer-oriented.
The lockdown and, therefore, the blocking of movements in Italy and abroad, together with the stop of non-essential activities, decided by the government to contain the spread of the virus, has consolidated some values at the basis of purchases of Italian food products that can guarantee and reassure the consumer because of their safety and quality. At the same time, the rediscovery of neighborhood shops and the desire to support national and local production, has led families to focus attention on Made in Italy products and purchases in agricultural markets. 22% increased purchases in these two categories. A part of consumers based their choices of food products to put on the table, precisely on the principle of sustainability, preferring food produced with low environmental impact methods (20% of Italians). 49%, on the other hand, chose the products to put in the shopping cart on the basis of the benefits they bring to well-being and health.
In particular, the fear of contacts and gatherings, combined with the need to go out and move around as little as possible, has led Italians to favor, more than before, neighborhood stores, which saw an increase in sales of +5% from May 4 to June 21, compared to the same period in 2019. With the end of the emergency, however, the moment of glory of this format seems to be "fading". The data from 15 to 21 June, show a 5% drop in sales in value terms.
Online sales have seen an unprecedented growth: +120% from January to June 21 and +160% only in the post lockdown (from May 4 to June 21). But the e-commerce boom failed to compensate for the closure of HoReCa (hotels, restaurants, cafés).
The stop imposed on "outside the home" (bars, restaurants, hotels and holiday farms) has also had a negative impact on the national agri-food industry with losses of at least 2 billion. In addition, the closure of the HoReCa channel, in Italy and worldwide, has certainly played a leading role in determining the drop in exports (-1% in April) and industrial production in the food sector (-8.1%). In Italy, about one third of food consumption is made outside the home, on average with EU values (34%), but lower than those of some important markets such as Spain (49%), the United States (45%), the United Kingdom (45%) and China (40%).
With the lockdown, the search for territoriality and local products has become central in Italians' shopping: for about 6 consumers out of 10, in fact, it is important that the food products to put in the trolley are zero km. For 62% it is equally crucial that a food product is "typical/attached to a specific area" and for 58% that it is "made by small local companies". During the quarantine, it has acquired value for 47% of consumers to shop "solidarity shopping (linked to charitable initiatives)" and for 36% to be able to take advantage of "home delivery".
In a context where the e-commerce of food products is destined to grow (95% of Italians believe that the web purchase of food products will increase in the coming years), the online channel will play a central role in the development of the typical/local market. 92% of Italians believe that this is, in fact, the most useful way to buy food products from small producers, especially when talking about small realities located in inland areas and difficult to reach, such as the Apennine areas.
Beyond the impacts generated by the lockdown and the changes that will result in a structural way, we must not forget some factors that in the long and very long term, will be inevitable, with significant repercussions on the Italian food system. These include, in fact, the ageing of the Italian population which, measured on the total of the adult population (over 18 years of age) will increase from a current 26% to 38% in 2050. In order to understand in particular the effects of aging and by going on to investigate eating habits by age group, both at the current and forecast level, asking them for a very long term forecast in terms of their perception of their consumption patterns and preferences, Nomisma has carried out an original survey for Cia-Agricoltori Italiani on a sample of around 1,500 Italian consumers, stratified by age, gender and location. From this point of view, Italian consumers expect consumption of vegetables (49%), fruit (47%) and extra virgin olive oil (6%) to increase in 10 years' time, while consumption of pasta (-23%), meat (-32%) and cold cuts (-45%) will decrease. In 2050, Italian consumers themselves expect to further increase the consumption of organic products (44%), rich-in (34%), white meat (19%) and even Parmigiano Reggiano cheese (8%), while the balance between those who say that consumption of wine and red meat will increase/decrease appears negative (-22% and -45% respectively).
In addition to the evolution of the population by age group, there are many variables that will contribute to define the future consumption model, and among these we would like to point out three factors. The first is the presence of foreigners (increased in the last decade by about 30%) and which, today, represents 9% of the entire resident population in Italy. The second is the changes that occur in the eating habits of Italians, as a result of lifestyles and working conditions. In this regard, think of what happened with the pandemic and the new ways of working, implemented to reduce the contagion (the number of workers in smartworking/work has increased from 300 thousand to 1.2 million in the first half of this year). The third is the evolution of incomes and the related differences in the approach to purchase/consumption. If in the cart of consumers with high incomes there is no lack of dried fruit and wine (respectively 56% and 55% buy them regularly vs. 48% and 47% of those with low-medium incomes), the low-medium incomes seek, above all, eggs and ingredients such as flour or butter (respectively 82% and 77% buy them regularly vs. 79% and 74% of high incomes). Differences not only in the products, but also in the attributes sought: consumers with high incomes are more attentive than others to Made in Italy, the industrial brand, organic certification and light foods.
Taking into account the indications that emerged, the current mode and quantity of consumption of Italians by main product category and age group, and applying them to the structure of the Italian population in 2050, an impact model has been created thanks to which three possible scenarios of evolution of food consumption have been identified. These scenarios highlight how, especially for some consumer goods, in the next thirty years an older Italian population will consume lower volumes of food products overall. For example, in the worst case scenario, for milk, wine, meat and cold cuts, a decrease in consumption - linked to ageing - of close to 10% is expected. Understanding how phenomena of this type can influence demand and, therefore, the business of agricultural enterprises, is fundamental to prepare for and anticipate change. As has already happened in the past, in the face of a drop in domestic demand, the survival of companies passes from the ability to turn to the foreign market, to change the company structure towards crops closer to the consumer, to develop product niches able to meet the demand of specific segments of consumption.
The Coronavirus - among other things - has brought attention to the strategic importance of the food industry for our country, has accelerated the spread of the use of digital technology and has consolidated consumption trends oriented towards Made in Italy, local, sustainability and health. These changes are part of a long-term evolution (demographic, socio-economic, climate, etc.) that will change the productive structures of our agriculture and that must be monitored carefully in order to understand and anticipate the changes. These changes will not, in fact, lead to a single "model" of Italian agriculture, but in order to ensure economic sustainability also for companies located in marginal areas, infrastructural (especially digital) and organizational (networks of companies and systems) interventions are needed to seize market opportunities that would otherwise be lost (think of exports or tourism) and that can be identified even in a "crisis" and constantly evolving scenario such as the current one. In fact, it is not a question of supporting "marginal" companies, but of guaranteeing the maintenance and safeguarding of entire territories of the Country, through the only activity, the agricultural one, which can still do so, guaranteeing upstream equal competitive conditions.