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Italy, 2022: Drought and expensive energy, a nightmare summer

05/01/2023 - François-Xavier Branthôme
For the Mutti tomato processing company, the production campaign has been miraculously saved despite the crisis that increased costs by 1200%. As for Rosso Gargano, the company believes that a return of tomato product prices to their previous levels is not realistic.

According to remarks made in November 2022 by the managers of the Rosso Gargano company, "the cost of tomato products has doubled: processing tomato prices in the food service channels have more than doubled to cover the increased energy costs, especially when it comes to gas (which alone increased by 620%). According to a projection, the cost of tinplate, which has already shot up by 58%, will increase by another 15% in 2023. In such a situation, it is impossible to even think about finding tomato products at just 59 eurocents," stresses Giuseppe Stasi, sales manager for Rosso Gargano.

 "The work we keep doing by investing in the chain is bearing its fruits: we have managed to penetrate the northern Italian market with eight platforms, part of the big retail chain. The approach to consumer choices is changing as well as the awareness of consumers: they are affected by the crisis and their lower purchasing power, so they want to spend their money well. We will all have to tighten our belts in 2023, hoping that the price of gas will drop, though we are also aware that it is unthinkable that the price of tomato products will go back to what it used to be."

For Francesco Mutti, interviewed by the Italian press last November, the 2022 production season was saved almost miraculously, despite one of the worst water crises of all times, and it was marked by a surge in the cost of energy that is disrupting the accounts of all Italian companies. The CEO of the Parma-based family business, which has been operating in the processing of Italian tomatoes for more than 120 years, summed up the crisis in a few figures: "In 2020, for the same volumes processed, we spent 3.5 million euros. By 2022, we've increased to 42 million. That is an increase of 1,200%." The figures for the 2022 processing campaign, which closed at the end of September, are nevertheless positive, with 603,000 tonnes of tomatoes processed. "Despite the difficulties, we are pleased that we have been able to guarantee quality."

How has the drought affected your company's operations?
"In Northern Italy, almost miraculously, production targets have been practically met: we estimate the decrease to be around 5 or 6% compared to 2021. The industry has been able to compensate for the lack of water, but what happened should certainly make us think, because miracles rarely repeat themselves."

What exactly are you referring to?
"To the fact that in southern Italy, despite its imperfections, the water network that has been installed allows better management of rainwater with a significant storage capacity, while this is not the case in the north of the country. The North, traditionally well supplied in water, does not have this same culture of water management and has therefore been less well equipped to manage this crisis."

Has the water crisis been compounded by energy costs?
"I must admit that the drought was my biggest concern, but it was solved without major consequences for the industry. Conversely, the energy issue has had disastrous impacts. Specifically, we're talking about a line item that has gone from 1.5% of product costs to over 12% at present."

A difficult winter lies ahead for Italian companies. What changes for a company like yours that has very different production cycles throughout the year?
"80% of our gas consumption is concentrated between the second half of July and the end of September, so it's at the heart of our processing campaign, while in the remaining ten months we consume the remaining 20%. So for us, more than the winter, the main problem has been the energy expenses of the summer of 2023."

The new government is about to take office, what actions are you asking for in order to cushion the cost of energy for businesses?
"I am still surprised that it is impossible to set a ceiling on the price of gas at a European level, which would certainly be the best solution. If this is not possible, an alternative would be a national price cap, which would nonetheless have a significant cost. The call we are making is obviously for the extension of the tax credit system, to last until the end of 2023."

As a consequence of the phenomena we have mentioned, 2022 also saw a surge in consumer prices. How much of the increase in raw material costs is passed on to the final product?
"We have taken on a significant amount of the inflation ourselves, but we probably need to understand what scenario we will be facing. We certainly can't position ourselves as a barrier to such exponential increases for much longer."

Source:  La Republica,
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