Italian small food-makers and the export opportunities in 2014

In according to the recent survey by the Economist, the Italian smaller, often family-owned manufacturers that are the backbone of the Italian economy have been hit especially hard by the economic crisis: between 2008 and the first half of 2014, a fifth of them went bankrupt or into administration, or were voluntarily wound up. One of the reasons so many have gone to the wall is that they are too focused on the home market. Italian businesses of all sizes are much less likely to have export customers than German or Spanish ones, according to a recent study by SACE, Italy’s official export-credit agency. 

Italian cuisine is popular all over the world, but Italy’s countless small food producers get only a morsel of this huge global market: exports account for a smaller share of the Italian food industry’s output than in either France or Germany. The small food producers that have survived the long downturn are often those that already had a presence in foreign markets and made strenuous efforts to export more.

Western Europe’s other big economies have a more consolidated grocery business, and each has at least one giant supermarket chain with extensive branch networks outside its home country. Italy, in contrast, does not have a globalised food retailer on the same scale, and its domestic market is fragmented: even those chains with national coverage often stock different products in different regions, chosen by different local purchasing managers.

Italian food Businesses are looking abroad for customers, and for saviours

For Italian food producers, getting into the biggest European supermarket chains is now even harder than it was before the euro-area downturn and some Italian small business has rationalised its range, so that it does not have to support too many product lines.

But some Italian food firms are changing: Barilla has just launched ready-made dishes modified for the Chinese market, where appetite for Italian fare is growing. Italy’s wine exports have risen 42% since 2008, to €3 billion, thanks in part to the growing popularity of its sparkling prosecco. In volume terms, this now outsells France’s champagne worldwide.

Italy has a long tradition of informal co-operation among clusters of companies operating in the same industry, but a law introduced in 2009 has made it easier to formalise this by contract. Since then, according to a study by Intesa Sanpaolo bank, firms which have entered into such agreements have outperformed those which have not, on a number of measures.

Nearly a quarter of microfirms (those with revenues of under €2m) which are part of a rete are exporters, compared with just 12% of those which are not.

As smallish food producers seek new markets beyond Italy’s shores, foreign investors have begun to realise their potential.  In 2014 Ebro, a Spanish food company, bought 52% of Pastificio Lucio Garofalo, a pasta-maker. Over four-fifths of Italian food manufacturers are family-run and with annual revenues of less than €10m. In the opinion of the Economist, with their home market still struggling, a rich foreign backer may be just what they need.

What do you think about this article and the Italian export situation? Are you agree with the Economist landscape? Share your opinion!