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News

Italy: Covid, prices, climate... what processors are saying

13/07/2020 - François-Xavier Branthôme - 2020 Season - Lire en français

Just a few weeks before the start of the 2020 season, in a social, economic and industrial context that is still operating at a pace set by Covid, the Italian processing sectors are gradually finding their feet again and commenting on aspects of the current situation.

Vincenzo Divella, CEO of the eponymous food company that should have been celebrating its 130th anniversary in June 2020 with the printing of 500 000 copies of a commemorative stamp issued in a thematic series dedicated to "the excellence of the economic production system", has stated: "Confronted with this emergency situation, our company increased its profitability and its exports. During the months of March and April, we recorded an extraordinary increase in sales, with a rush on agri-food purchases at the height of the pandemic. In May, sales fell 40%, though we have seen a recovery in consumption since mid-June.
The most obvious impact on the tomato products sector has been a stock surplus in processors' warehouses of large format conditionings intended for the catering sector and a worrying shortage of products intended for the retail sales market. As far as we are concerned, we are going to reduce by 40% the production of formats intended for the catering industry, in particular in 3 kg packs. Out-of-home eating will restart, but slowly, due to distancing measures. This will be the case especially in big cities where movements of the population cannot be managed as they were previously."
The company has a turnover of EUR 300 million, employs 310 people (about 500 if seasonal workers are included) and offers a diversified range of products ranging from pasta to cookies, with processed products made from both oblong tomatoes and round tomatoes, sourced mainly through the region's local agricultural sector.

Although the strong increase in domestic consumption and, until now, the positive trend in exports have partially offset adverse effects, the fact that business in the Horeca sector ground to a halt due to the Covid-19 crisis has caused significant economic damage to the tomato industry. Vincenzo Divella explained: "We mostly process oblong tomatoes grown in Puglia and round tomatoes grown in Emilia-Romagna, near Piacenza. We are counting on a good harvest, which will depend directly on weather conditions: if the weather is favorable, we can harvest until mid-October. […] As for prices, I think that products processed from fresh tomatoes should cost more, knowing that about half of the final cost is linked to the packaging and to all that is involved in manufacturing the product. […]” The executive added: "Our products made from round and oblong tomatoes are processed from fresh products, which means that we do not use pastes. We also do not manufacture private label products: each Divella product is exclusively processed in our own factories, as we do not have contracts with third-party companies. […] The critical issue is knowing how to stay competitive: we are therefore often obliged to pay as little as possible for the raw material, in order to remain competitive on a global level."

The company boss concluded: "Regarding the base price of processing tomatoes and the inability to reach an agreement in the south of Italy (whereas "the north" signed a framework agreement in February, in time for crop planning in the fields), it appears that prices might be left to free negotiation between the parties this year. Unfortunately, here in Puglia, agriculture depends on intermediaries and not on large associations and we are suffering the consequences. The fact remains that in northern Italy, the coronavirus crisis had to be faced, which led to a general increase in production costs. To further complicate matters, a prolonged drought has also compounded problems this year, affecting the entire production area of the province of Foggia, the main growing region."

"We now need to behave responsibly, and reach an immediate agreement on prices"

These were the words spoken by representatives of the Confederazione Italiana Agricoltori (CIA), after the multiple attempts between producers' organizations and processors failed to reach an agreement on the reference price for processing tomatoes grown during the 2020 season. Fears of having to rely on free market trade were expressed in early July by the Italian Confederation of Growers, which has insisted that an agreement should be reached in a responsible manner between the parties as soon as possible.
"According to the information gathered, it seems that companies no longer have available stocks," explained the national President of the CIA, Dino Scanavino, "because with the coronavirus crisis, domestic consumption of sauces and passata increased considerably, notably compensating for losses in the Horeca sector." Processed tomatoes, a product that is traditionally stocked in all households, registered huge growth trends against 2019 figures at the worst of the confinement, with positive variations of more than 35% in volume and more than 45% in value.
"According to the CIA, current conditions are excellent and give hope for a quality crop in 2020," continued Scanavino, "which will give satisfaction to growers and to the industry as a whole. We therefore ask that differences be set aside in order to quickly reach an agreement on prices, insofar as the processing tomato interbranch organization of Italy's south-central region has granted the parties an extension until 10 July of the date for submission of supply contracts, a date that is very close to the start of the harvest, leaving growers with a lot of uncertainties."

Petti: "the lack of retail conditionings is going to cause a price increase"

"In recent years," explained Pasquale Petti, Managing Director of Tuscan food group Petti, "the production of processing tomatoes has experienced a drop in yields, due to increasingly frequent episodes of adverse weather. In 2019, we processed 70 000 tonnes of raw tomatoes, with a 30% decrease due to repeated rainfall. We believe that the 2020 season promises good yields, in line with 2017 figures. For the moment, after the Covid-19 issue, the main problems we need to solve are linked to the lack of inventories caused by the increase in demand during the crucial phase of the health crisis. In summary, there is a shortfall of retail conditionings, which has resulted in soaring prices.
The consequences of the pandemic will have a strong impact on the rise in prices after September 2020, simply because we have to buy raw tomatoes at a higher cost. Unfortunately, it is clear that growers are speculating on production costs, with prices 30% higher than usual.
This is why, for the moment, the South of Italy still has not managed to reach an agreement with processors, despite a proposed price increase compared to last year, in order to compensate for the exceptional nature of this season's harvest, taking into account the Covid crisis, extra costs linked to irrigation, etc."
"As for us," concluded the company executive, "we are working on a new premium range of innovative Tuscan tomato sauces with extra virgin olive oil, which we will launch in October. […] At the same time, with a view to improving environmental sustainability, our brand will use plastic-free paper labels made from recycled and biodegradable paper as of the next marketing year. This is a very important innovation in the canning sector. These labels will be available on the Italian market from July for our range of glass bottles and jars."

Source: freshplaza.it

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ANTONIO PETTI FU PASQUALE SpA

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