The European meat sector faced its fair share of market turbulence even prior to the outbreak of the COVID-19 pandemic. Shifting market demand meant that the European Commission was expecting total meat production levels to decline by 2.3% by 2030 when compared with 2020 levels - and that was before the pandemic brought additional disruption.\
But while it might initially be assumed that COVID has been an unmitigated economic disaster for the meat sector - as it has for many other industries - in reality, the picture is more complicated. Although sales have been damaged across some product groups and channels, others, perhaps unexpectedly, have received a boost.
Recent research encompassing industry data for the entirety of 2020 paints a nuanced picture of agile companies thriving amid wider disruption, tight margins, and the emergence of innovative new developments such as meat alternatives. While the data presents a mixed-bag, longer-term prospects continue to give cause for concern.
Product-by-product breakdown
If there is one product segment that can look back at 2020 as a successful year, it’s pork. This was primarily the result of strong export sales and high prices at the end of 2019 that were carried over into the start of 2020. Challenges still manifested themselves, such as an outbreak of African swine fever in Germany and Poland that dented EU exports of the meat, but, on the whole, continued high demand from China and other countries in the APAC region resulted in pork outperforming all other product groups. It is fair to mention that the actual results for end 2020 and 2021 will probably not be as great as expected, due to a challenging outlook which is not yet showing in the data.
Companies with large shares of business in both beef and pork, however, experienced more mixed results. Viewed as a more premium product, beef sales were hit much harder by lockdowns, with foodservice trade falling to nearly zero when the most stringent restrictions were enforced. Similar struggles were seen in the “other” meat category, which included products such as lamb and veal, where it was more difficult to shift sales into retail channels. Nevertheless, the most agile companies were able to stabilise their returns despite the impact of the pandemic.
The data suggests that poultry, meanwhile, is set to continue its downward trajectory. Profitability and average EBIT declined across 2020 and growth slowed slightly. The product segment appears in need of a new angle to generate added value after years of good performance. The various labels that speak towards quality and sustainability (breed, origin, and production method) could present a viable way of kick-starting growth but most of the premium opportunities in these segments remain with retailers.
Success for individual companies
As with product categories, individual companies operating in the European meat sector also had a mixed year in 2020 - with some enjoying huge success. In terms of the fastest growers, companies like JBS Toledo that specialise in the development of beef and chicken products for use on pizzas and in ready meals profited from COVID-related trends, with consumers consuming more ready meals. Other retail-focused brands, including the Hilton Food Group, which was able to leverage its close relationship with retailers, experienced a strong year. German firm Steinemann, meanwhile, saw its net sales boosted by 47.3% following the acquisition of rival firm, EGO Schlachthof.
Looking purely in terms of profitability, several other companies stood out in 2020. Spanish pork companies, including Batallé, Friselva, and El Pozo, managed to sell high-value products at strong EBIT margins. A similar approach also paid off for Italy’s Raspini, which focuses on high-quality cured meat. In addition, Agro Rydzyna not only managed to grow its net sales strongly in 2020 but also its EBIT margin.
Key insights
Of course, the shadow of the COVID-19 pandemic looms large over the performance of the European meat sector in 2020. While premium products, including beef and less commonly eaten meats, saw sales decline across the foodservice channel, in particular, premium products that were sold via retail channels actually performed well, pointing to the importance of portfolio diversity. In addition, company agility was key to success, as was robust export sales.
Even the best-performing products may see dark clouds gathering on the horizon, however. The second half of 2020 was not positive at all for pork. The rising Chinese production, the shrinkage of the European pig farming sector due to swine fever, and the restrictive climate-related policies provide little cause for long-term optimism. Looking more generally, a complete supply chain reorganization and a movement towards the consumption of entire animals (rather than select cuts) may be needed to secure profitability in the European meat sector in the years to come.
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