More innovation is needed in the Dutch food industry if it is to successfully navigate current market challenges, Rabobank has said.
Rabobank's Sebastiaan Schreijen and Martijn Rol noted in an op-ed, entitled Food: market developments force innovation, that the Dutch food sector is facing its "fair share of challenges", with high costs, margins under pressure and a tight labour market.
However at the same time, Dutch consumers are "cautiously spending more", they note, presenting potential opportunities.
Economic Growth
Modest economic growth is expected in the Netherlands in 2024 (0.6%) with an improvement projected in 2025 (1.4%), Rabobank note. High inflation, too, is persisting.
"According to Statistics Netherlands (CBS), we paid more than 5% more for groceries last summer than a year earlier," the authors note. "A large part of this inflation is due to government measures, such as the increase in excise duties on tobacco as of 1 April. In addition, the consumption tax on non-alcoholic beverages and the excise duties on alcoholic beverages were increased at the beginning of this year. Food also continues to become more expensive, partly due to higher raw material prices."
Elsewhere, a tight labour market remains a critical issue for the food industry. Despite slight improvements, labour shortages are hindering growth, especially as the food industry faces challenges with an ageing workforce and physically demanding jobs.
Labour Productivity
Companies are focusing on boosting labour productivity and employee retention, particularly as labour supply is expected to stagnate and shrink by 2030.
"The combination of a tight labour market and the physical nature of the work forces entrepreneurs in food to think about their strategy," the authors state.
"On the one hand, labour productivity must increase, so that the same work can be done with fewer people. On the other hand, it is important to invest in the sustainable employability of employees and the prevention of absenteeism."
As a result, food businesses are increasing their investment in automation, mechanisation, and robotisation as they seek to improve productivity, flexibility, and sustainability, Rabobank note.
"Better working conditions on the factory floor and the shortage of qualified personnel are cited as the most important reasons for robotisation by the twenty or so different Dutch food producers that RaboResearch recently interviewed," the authors state.
"In addition, lower production costs, more flexibility in business operations and sustainability are cited as reasons to invest in robots in the coming years."
Increased Innovation
In closing, Rabobank note that in order to survive in this competitive landscape, food companies are ramping up innovation in three key areas – resource management (including water management and precision farming), more efficient production (including circularity and food safety enhancements), and diversification of ingredients (reformulation of products and recipes, and improving biodiversity in production).
The full article can be found here.
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