CZECH FOCUS: Food industry demands marketing support to survive
since the fall of the Communist regime in 1989, bringing with it
new challenges and threats, writes Anthony Fletcher.
In today's post-accession economy the food industry finds itself facing increased competition and regulation, and according to the Federation of the Food and Drink Industries of the Czech Republic, is now desperate for marketing support in order to survive in a common market of some 450 million consumers.
"I'm optimistic, but the industry, which is so close to being consolidated, has probably a 50 per cent chance of expanding and a 50 per cent chance of collapsing," Josef Sajdl, head of the Federation of the Food and Drink Industries of the Czech Republic's legislation department told www.foodproductiondaily.com.
The food industry's concerns post-accession contrast with the manic race to comply with EU regulations that characterised the years leading up to membership of the EU. Ministry of Agriculture external communications head Hugo Roldan said that as a result, the Czech Republic was one of the best-prepared new Member States because all the groundwork was laid early.
"Between 2002 and 2003 we invested around 0.5bn Czech crowns (€17m) in business incentives, and this support in turn generated 3bn in investments," he said. "Some companies had to close as they were not able to meet the requirements, but these would probably have had to close anyway, whether we joined or not."
Sajdl agrees that much of the work done prior to 2004 meant that the Czech food industry was placed in a strong position. "Food manufacturers in the Czech Republic invested between 30 to 40 billion crowns to get up to standard," he said.
" I have meetings with my Hungarian, Polish and Slovakian counterparts and I know the situation in these countries. We are at the top, because many of these sectors still have problems implementing EU regulations.
For example one country recently completed a project after which 50 per cent of food companies were HAACP-compliant. In the Czech Republic, every firm was compliant prior to accession, or they were closed down."
But concerns have changed post-accession; some issues are no longer relevant, while new concerns have developed.
"Before accession, most people were frightened that prices would increase, and the Ministry of Agriculture had its work cut out to calm opinion and to explain that all the signals suggested that such a development was not predictable," said Roldan.
"After accession prices remained almost the same because of strong competition. And the market to some extend has been enriched. Consumers are seeing more opportunities to purchase items such as cheese from France and Holland."
This of course means greater competition. "Membership of the EU has definitely been seen as a challenge," said Roldan.
"Our businesses face open competition from other member countries, and this competition has manifested itself in the production of primary commodities. It is a challenge, say, for our potato growers to compete in a bigger market."
In addition, the EU is now one of the most highly regulated markets in the world, which according to Sajdl can cause problems. "The EC wants to put all these directives in all these countries, but they tend to be interpreted differently," he said.
"Also, the EU is vastly over-regulated in comparison to third countries and this is a big problem for the European food industry. Environmental legislation, food and hygiene laws are all higher than in the US, and this raises costs."
In such a competitive and tough environment, Sajdl believes that the Czech food sector needs more help if it is to prosper. "While most companies implemented changes prior to accession, they now need help to market their products," he said.
"There is nearly no assistance in this matter. Most help goes to the agrarian sector, so manufacturers are stuck. They are fully compliant, but they need help marketing."
According to Sajdl, the Czech food industry's main opportunity is to manufacture and market typical Czech products - something Roldan also mentions - as the sector cannot compete in producing generic products on a Europe-wide basis. But Czech products such beer and bakery goods could do very well - if they are adequately supported.
"You can have the best product in the world, but if you can't market it, you won't sell it," he warns. "If the Czech industry can be properly supported, then I am optimistic about the future."
Roldan says that government programmes are available for small and medium-sized companies. "A special fund has existed before accession that pays part of the interest on loans. This is widely used, and the fund can also act as a warranty."
In addition, the Marketing Department of the State Agricultural Intervention Fund (SZIF) came into existence in January 2004 with the task of offering marketing support for the domestic agricultural and food production sector. It is open to all food producers in the Czech Republic.
"Marketing and promotion support to production is considered one of the most effective instruments for maintaining jobs in the sector," agrees Jan Hock, director of SZIF.
Even if the Czech food sector finally gets the marketing support that Sajdl believes is necessary, the sector still faces a number of challenges in the post-accession economy, such as complying with new labelling laws. But he believes that the sector now has a strong voice through the federation and is increasingly being heard in the corridors of power.
"We are satisfied with our influence, and there have been big changes over the past five years," he said. "Ministers know that we represent the food industry and that through the Food Law Act, we negotiate in the name of the food sector."
