The Slovenia Times

Operating in a Complex Business Environment



A comparison with international trends in the sector shows that productivity rates are slowing, there has been little increase in value-added and R&D investment is falling. Despite a continuing trend towards consolidation, the sector is still highly fragmented with numerous small and very small concerns that tend to be less profitable than medium sized or large companies. The EU food and drink industry operates within a complex business environment. It is part of a value chain subject to pressure from a highly concentrated retail sector and is facing numerous challenges. Considering that the European market is mature, growth opportunities will come from either enhanced value added goods or from increased exports to rapidly growing non-EU markets. But the sector could lose out on world and EU markets unless appropriate measures are taken. These measures must be taken simultaneously on various fronts. The industry has a responsibility to make appropriate business decisions and politicians and legislators must ensure that the business environment is conducive to their development. Research, knowledge diffusion and technology transfers are among the biggest challenges, because of the large amount of SME's in the sector and because of the increased focus on value-added. Building on longstanding food traditions and the quality of EU food production, the European food and drink industry must step up investment in strategic areas and gain new markets by placing emphasis on value-added up-market products, product development and innovation. This requires greater private and public R&D investments and the use of synergies between EU and national research programmes. It further calls for a business environment that does not hamper innovation through the cumulative effect of numerous regulatory constraints and lengthy procedures. Due to their limited capacities, SME's deserve specific attention designed to allow easier involvement in development activity and the take up of innovative concepts. The report identifies agricultural raw material prices as another factor of uncertainty for the industry's competitiveness, given their significant influence on the overall cost of production. Access to competitive inputs will continue to be essential to the industry's performance in both its internal and external markets. Trade policy must be designed to support the food and drink industry's ambitions in supplying rapidly expanding non-EU markets. Multilateral and bilateral approaches need to be pursued not only in tackling tariffs but also in effectively addressing the increasingly constraining non-tariff barriers. Margins for specific cost reductions have been identified in a CIAA survey focused on the administrative burden derived from EU regulation. The European Commission initiative aimed at improving existing legislation by cutting red tape and ensuring that new laws are responding to the basic criteria of clarity, enforceability, science-base and proportionality, is welcome and should lead to the effective improvement of a number of legislative texts. The food and drink industry, as the largest manufacturing sector in Europe, has the potential to maintain and expand its role in increasingly global markets. These companies are determined to live up to the challenges they face and need the support of legislators to facilitate and support the process wherever possible.


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