Europe — Down, But Not Out

Listening to the media these days, we are lead to believe that Western Europe is about to sink into the Atlantic Ocean. Doom and gloom surrounding the European debt crisis, downgraded credit ratings, austerity measures, public strikes and riots, banking failures, shrinking economies, sensationalized photos and consumer malaise combine to make one feel that the final curtain is falling for the Eurozone (the 17 nations which utilize the Euro as their currency). Time magazine recently published an article titled “The End of Europe.” A European newspaper headline today read, “Berlin experts fear euro break-up from bail-out escalation.” However, on a recent trip to Europe and attendance at the world’s largest trade show for the food industry, Europe is still obviously very open for business.

Let us recall that Europe has been divided for the last two millennia. It has an indomitable spirit which allows it to fight and then establish peace, prosper, and then fight again. After fighting long, bloody wars it invented the industrial revolution as well as advanced art, science and technology. After two world wars in the first half of the 20th century, European nations prospered and formed the European Common Market in 1958. Four decades later they formed a common European Central Bank in 1999 followed by a common currency (Euro) in 2002.
Despite the daily “breaking news” headlines, European leaders will do whatever is necessary to hold together the Eurozone. They realize that the alternative is far worse. In fact, the Eurozone and its individual member nations will emerge stronger as a result of this crisis. While countries’ debt will be re-structured, banks and bondholders will suffer losses, and individuals will lose benefits and income, no country will exit the Eurozone.
At last week’s ANUGA trade show (http://www.anuga.com/en/anuga/home/index.php), it was apparent that European companies continue to launch new products and market aggressively. A Greek fast-food chain operator said his business was down only 7% this year despite the Greek debt crisis. “Only public-sector employees are affected by the crisis, not private-sector employees,” he said. A Spanish distributor of imported food claimed, “Very few consumers in Spain are affected by the debt crisis.” German unemployment is at its lowest level in 25 years. It is clear that, while European consumers may be more cautious with their Euros than previously, they continue to consume and maintain purchase behavior.
How then can U.S. food and beverage companies prepare themselves to seize opportunities in a future, stronger Europe? Firstly, it is important to understand the facts:

• The European Union’s GDP — output of goods and services — is now bigger than that of the USA’s: US$16 trillion (www.cia.gov).
• The population in Europe is 492 million, 57% higher than the USA’s.
• With just 7% of the world’s population, the EU’s trade with the rest of the world accounts for around 20% each of global exports and imports.
• The EU is the world’s biggest exporter and the second-biggest importer.
• The United States is the EU’s most important trading partner.
• The value of EU food and beverage imports increased by more than 9% in 2010, exceeding US$115 billion.

When we understand these facts, then we can begin to think strategically about future plans to enter European markets, increase market share and distribution, gain new customers, and launch new products. While European distributors and importers are being more selective in launching new products through their existing distribution channels, they continue to seek new and innovative imported products. They recognize the consumer trends toward novel products with unique features and benefits. U.S. food and beverage manufacturers of branded and industrial ingredients should plan ahead to seize growth opportunities as Europe begins to emerge from its current economic challenges.
Europe, like the U.S. and other industrialized economies, has emerged and prospered from past crises. This one will not differ. Savvy companies understand this and will exploit their strengths in the large, robust European market.