Global and Regional Food Industry Outlook 2024

Essential need for food partly insulates the sector

Our basic need to eat helps protect the food and beverage industry from some of the difficulties faced by sectors trading in non-essential goods. However, the sector is not immune to challenges. Recent economic and supply chain challenges have impacted the industry, squeezing margins for producers in many areas.

Disinflation is helping to reduce costs for producers and is supporting spending growth among consumers, especially for less essential and luxury food items. However, geopolitical risks and extreme weather events threaten to slow industry growth in certain regions.

Does the food and beverage industry pose a credit risk?

Many farming and food producing businesses across the Americas are operating with higher credit risks. Many of these are smaller or younger companies that have seen interest rates on loans surge, leaving them with tighter cashflows each month as they work to service the debt.

While large companies in Europe tend to have easy access to credit, SMEs who often present fragile financial standings and have a higher risk of default.

Asia-Pacific presents a mixed picture with food and beverage industries in Japan, South Korea and Taiwan generally presenting favourably with a low credit risk. The risk is a little higher in China, which is experiencing an economic downturn and in India where competition is high and margins are tight.

Tighter margins for North American food retailers

Until recently US inflation has remained stubbornly high, despite the interventions of the Federal Reserve. The resulting effect is higher food prices for longer, with tight margins for retailers as they increasingly rely on promotions as they compete for customers.

Selma Rossato, Team Leader Risk Services at Atradius CyC, in Sao Paulo, Brazil, says: “After nearly four years of significant economic disruption led by the COVID-19 pandemic and followed by supply chain challenges, labour shortages and a period of severe inflation, there are signs the North American food and beverage market may be returning to a more stable environment.”

Emerging economies drive food and beverages growth in the Asia-Pacific

Shane Tan, Associate Senior Underwriter at Atradius Singapore, says that the growth of the middle-class in markets such as China and India are supporting industry growth as increasing numbers of people are spending more on food and drink.

However, he says: “I don't expect food and beverage spending to decrease, but rather we are seeing consumers reprioritise their shopping baskets, focusing on at-home solutions that meet their needs in terms of nutrition, health, and sustainability, without compromising on taste.”

The food sector faces political and environmental challenges in Europe

Our industry specialist for Europe, Yoann Gublin, says: “The EU should witness a slight economic rebound in 2024 thanks to a general slowdown in price increases, increasing wages, the solidity of the employment market and lower interest rates.”

However, VAT increases in Germany, additional post-Brexit red tape at the UK’s borders and the potential for adverse weather events across the continent all pose challenges for the food industry.

Read more in the white paper on the Food and Beverages sector.