The way forward for the Hungarian food industry: grow, grow big, grow bold!

Portfolio
Efficiency improvements, integrated production, continuous improvement, digitalisation, robotisation, export capability - this is the path the Hungarian food industry should follow if it wants to become a success story. This is how the main messages of the food section of the Agricultural Conference 2023 can be summarised. The biggest players in the market expressed their views in a series of presentations and round-table discussions.
élelmiszeripar konferencia

Opportunities for the Hungarian food sector

Ákos Varga, Chairman of the Board of UBM Group, gave a presentation entitled "Serious challenges and great opportunities in the Hungarian food industry" at the Agricultural Conference 2023. In his opinion, everyone wants to target the well-paying European market in the agricultural sector, and it is no coincidence that foreign imports are becoming more and more common, especially in the case of poultry products.

He expects intensive livestock production 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, the trend is that the population of Western Europe is growing, the population of Eastern and Southern Europe is shrinking, so the Western European market should not be neglected. He also spoke about the expectations European consumers have of food: quality and price at the same time, production conditions, climate and environmental protection, animal welfare, sustainability aspects, ESG compliance. "It is difficult to meet all these requirements at the same time, and in fact they are impossible to meet all together," said Ákos Varga, who also outlined several possible break-out 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 key to catching up with the traditional competitiveness of the vanguard European food industry;
  • the use of high-tech, reducing the need for live labour; and
  • bringing food industry players into competition.

At the end of his presentation, he formulated 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 in a few years, building on this knowledge and raw material, miracles can be done. "We need to think regionally, not just in terms of Hungary," he added.

varga ákos ubm
Photograph: Márton Mónus/Portfolio

Lessons learned: plant size, integration really matter

Break out opportunities for the domestic food industry: development trends, support programmes – Worrying decline in consumption and market loss, trade expectations - a round table discussion explored 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 developments are 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: we need large food companies in Hungary, this is the future. We need to talk about agriculture and the food industry at the same time, because together they are 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 that 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 Ltd., said that supporting large enterprises is also important because they can pull the whole sector with them. He said that the downturn this year is really painful for sales to export markets, and the struggle to sell the same volume this year is much greater.

Miklós Szabó, founder of the Tranzit Group, recalled that last year it was possible to raise prices because the consumer accepted higher prices, which was due to the impact of the "helicopter", also known as "cash for free". This is also why the food industry has been able to track more or less the increase in raw materials into prices and pass it on. Competitive prices can only be achieved with adequate levels of production, which requires continuous investment in improving plant size. There are prerequisites for this: financing, resources, support, integration and live labour. According to Miklós Szabó, the latter is the biggest challenge now.

In his view, there is currently a consumption crisis, not only because people are spending less money at home, but also because they are saving less and getting higher interest rates on their investments.

Ádám Nagy, CEO of Nádudvari Élelmiszer Ltd., said that the raw material prices for pork nearly tripled, which was difficult to reflect in the sales prices. In response to a question later, he also explained that 80% of the flavoured yoghurt 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.

agrarszektor élelmiszeripar közönség
Photograph: Márton Mónus/Portfolio

Márton Nobilis agreed that there is still an infrastructural disadvantage and therefore modernisation and digitalisation improvements are needed and should be supported.

Dávid Hollósi noted that the reason why there is so much talk about the need for larger agribusinesses at a conference like this is because they are able to extract the efficiency and the 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. By recognising these trends in Hungary, we have reached ground zero, and now we have the decision situation to select a few product areas where we can build success stories. The risk, he said, is whether there is sufficient funding and risk appetite from financiers for these projects.

Portfolio_Agrárszektor_1 nap-15884
Photograph: Márton Mónus/Portfolio

Cover photo: Portfolio

 

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