The way forward for the Hungarian food industry: grow, be big and brave
Efficiency improvement, integrated production, continuous improvement, digitalisation, robotisation, export capability – this is the path the Hungarian food industry should follow if it wants to produce new success stories. This is how the main messages of the food industry section of the Agricultural Sector 2023 Conference can be summarised. The main market players gave their views in presentations and in a round table discussion.
Opportunities for the Hungarian food industry
Ákos Varga, Chairman of the Board of Directors of UBM Group, gave a presentation at the Agricultural Sector 2023 Conference on “Serious challenges and great opportunities in the Hungarian food industry”. In his opinion, everyone wants to target the well-paying European market in the agricultural sector, and it is no coincidence that foreign import products are becoming more and more common, especially in the case of poultry products.
He expects intensive animal farming in Europe to shift eastwards. In Europe, Poland has taken over production in the poultry industry, but the market is becoming saturated there too, with production increasingly shifting to Ukraine, he said.
Meanwhile, on the supply side, this is the trend: The population of Western Europe is growing, the population of Eastern and Southern Europe is declining, so the Western European market must not be neglected. He also spoke about the expectations European consumers towards food: quality and price at the same time, production conditions, climate and environmental protection, animal welfare, sustainability, ESG compliance. It is difficult to meet all these requirements at the same time, and in fact it is impossible to meet them all together,” said Ákos Varga, who also outlined several breakthrough points for the food industry:
- concentrated, integrated production to improve efficiency
- supporting the development of internationally competitive processing plant sizes
- State involvement and support are essential to catch up with the traditional competitiveness of the leading European food industry
- use of high-tech, reducing the need for human labour
- bringing food industry players into competition
He concluded his presentation with his main message: the Hungarian agriculture and food industry can become a dominant centre in Central and Eastern Europe, but this requires courage, state involvement, support and strong players. He believes that miracles can be done in a few years, building on this knowledge and raw material. We need to think regionally, not just in Hungary,” he added.
Lessons learned: plant scale, integration
The Hungarian food industry’s breakthrough opportunities: development directions, support programmes – In a roundtable discussion on “Worrying consumption decline and market loss, trade expectations”, experts looked at the potential of the Hungarian food industry.
Tamás Éder, President of the Association of Responsible Food Producers, said that it was a bit surprising to see and hear the consensus opinion that emerged at the conference that urgent food industry development is needed. Describing the current market situation, he also pointed out that the Hungarian food industry has seen a 15% decline in volume in the first half of the year on a year-on-year basis in both domestic and export sales. The situation has improved in the second half of the year, with an 8% year-on-year volume decline expected this year. Regardless of this, the value of sales could increase or decrease to a lesser extent, and this is linked to price increases.
Dávid Hollósi, Managing Director of MBH Bank’s Agri-Food Business Unit, said that large food companies are needed in Hungary, this is the future. We need to talk about agriculture and the food industry at the same time, together they make up the agribusiness.
According to Márton Nobilis, State Secretary of the Ministry of Agriculture, the country’s sovereignty also justifies a strong domestic food industry. He said that the government had managed to achieve a change of direction, so not only small and medium-sized companies would receive support in this sector, but also large ones, which is why the national champion programme was created. If we talk about competitiveness, the key to success is to have big food companies.
János Ruck, CEO of Gallicoop Zrt., said that supporting large companies is also important because they can pull the whole sector. He said that the downturn this year is really painful for sales to export markets, there is a much bigger struggle to sell the same volume this year.
Miklós Szabó, founder of the Tranzit Group, recalled that last year it was possible to raise prices because consumers accepted higher prices, and this was due to the impact of the helicopter, also known as free money. This is also why the food industry has been able to integrate more or less the increase in raw material prices into prices and pass it on. Competitive prices can only be achieved with the right quality of production, which requires continuous investment and improved plant size. There are prerequisites for this: financing, resources, support, integration and human labour. The latter is the biggest challenge now, according to Miklós Szabó.
He believes that there is a consumption crisis, not only because people are spending less money at home, but also because they are saving and getting higher interest rates on their investments.
According to Ádám Nagy, managing director of Nádudvari Élelmiszer Kft, the prices of raw materials for pork have almost tripled and it has been difficult to pass this on to sales prices. In response to a question later, he also explained that 80% of the flavoured yoghurt products available in Hungary is imported. However, he mentioned that with the current high logistical costs, it is now possible to apply a price as a Hungarian producer that makes the Hungarian product competitive. According to him, the key to competitiveness is robotisation and digitalisation.
Márton Nobilis agreed and stressed that there is still an infrastructural disadvantage, and therefore modernisation and digitalisation developments are needed and should be supported.
Dávid Hollósi noted that the reason why we talk so much at a conference like this about the need for larger agricultural companies is that they are able to extract the efficiency and plant size to be able to negotiate with European multinationals. He reminded that the European food market is the most developed food market in the world. The recognition of these trends by the stakeholders in Hungary has brought us to ground zero, and now we are in a decision situation to select a few product areas where we can build success stories, he said. The risk, he said, is whether there is sufficient funding and risk appetite from financiers for these projects.
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