IERiGZ expects demand for foodstuffs to go down in 2010

2010-02-17

The demand for foodstuffs in Poland will decline in 2010 in comparison to 2009, according to the Institute of Agricultural and Food Economics (IERiGZ). In 2010, the incomes of Polish households are expected to remain at the same level as in the previous year; moreover, the unemployment rate will grow and therefore consumption of such goods as, among others, dairy products, fish and sugar will decline. The demand for vegetable oils, pork and poultry may increase due to lower consumption of butter and beef, however.
As a result, the foodstuffs producers in Poland will have to work on reducing their costs, broadening the offers and searching for new markets.
Edmund Borawski, a chairman of Mlekpol dairy, quoted by Puls Biznesu, expects milk production to remain at the same level in 2010 as in 2009. Moreover, the company envisages consumption of milk products to grow as Poland is still far from the saturation point in comparison to Western European nations.
Also Seko, the fish processing company, expects demand for fish to gradually increase in Poland, as healthy products are gaining more popularity among Polish customers.
Aleksandra Paulska, a spokeswoman of Krajowa Spolka Cukrowa sugar producer, also quoted by the newspaper, urges that while demand for sugar in packs is lowering year by year in Poland, the consumption of sugar included in ready products is growing and overall the production of sugar remains at the same level. Also Makarony Polskie, the pasta producer, explains that while demand for white bread and flour is lowering in Poland, consumption of pastas is growing. In 2010, the latter producer expect to increase its production by up to 5%.

Food products are characterised by a very low income elasticity of demand. This means that a possible stagnation of incomes should not have a significant effect on the level of consumption of so-called basic-basket staples (meat, milk, bread, etc.), but it will drive further expansion of private-label and discount offerings. Moreover, as retailers compete for increasingly cash-strapped consumers, they will demand further price cuts from suppliers, which could exert a major adverse impact on the financial condition of food producers and processing firms, and might spark a fresh bout of consolidation in such fragmented sectors as meat and milk. Nevertheless, the financial performance of the food sector in 2010 should not be worse than it was in 2009.

Andrzej Gantner,
Director general of the Polish Federation of Food Industry Union of Employers