Hungary's canners paying price for accession?

Related tags European union

The Hungarian canned food sector is a vital part of the food
industry in that country. But with the sector coming under renewed
pressures following accession to the European Union, many small- to
medium-sized players are coming under increasing threat of closures
as government subsidies dry up.

The canned food industry in Hungary is estimated to be valued in excess of HUF120 billion (€475m) and produces around 400,000 tons of produce a year. In European terms that makies it only second in size to the canning industry in France. Main markets include Russia and the former CIS countries, but increasingly western Europe is starting to play an increasingly important role as accession has made the flow of goods so much easier.

But accession to Europe has proved to be two pronged for many of the countries smaller canning firms who are struggling to come to terms with the loss of generous government subsidies, which for many years had buoyed them against the impact of larger players in the domestic market.

"In Hungary right now many of the smaller canning firms have big problems as they don't have developed distribution channels to help them increase their business reach out of local and domestic markets,"​ said Istaván Temesföi, CEO of Globus​, Hungary's largest canned and frozen foods company. "Because domestic demand is relatively small and demand for canned produce is being overtaken by frozen produce, the Hungarian market alone will not prove big enough for many canning businesses."

During the course of the last two years the Hungarian Canning Association has been consistently outlining fears that many smaller canning businesses would simply go under after accession. Now those concerns are turning into a reality as only last week the Hungarian News Digest revealed that an estimated 100 canning companies - out of a total of 300 businesses - are facing closure as the cost of steel, electricity and low market demand continue to put pressure on the sector.

However the report also emphasized that those hardest hit were smaller players specialising in the processing of fruit and vegetables, with distribution limited to the domestic market.

"This is where a company such as ours has the advantage to weather the storm,"​ said Temesföi. "As well as the distribution channels to foreign markets, we are also a well recognised brand name, something that will always provide us with a strong foundation when market conditions are more challenging."

However, it has not just been accession that has hit the industry, historically the downturn of the Russian economy led to major problems for many Hungarian canning manufacturers, a factor that led to a around a dozen closures in the period 2000 to 2002 and one that many are still struggling to recover from.

Related topics Market Trends

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