Manufacture of food products in Europe

With a turnover exceeding €1.4 trillion and an annual growth in consumption of ~1.5%, food production is the largest manufacturing industry in Europe. Accessing the food production market in the European Union would provide entry to a market of 448 high-income consumers, as well as offering clear business mechanisms, government support and developed transport infrastructure.

Using a cluster analysis of key indicators of the European food production industry since 2000, alongside indicators developed by our analysts, we have identified the main groups of countries based on their market entry strategies.

General

For companies with a B2B business model in the food production industry, the optimal market entry strategy in European markets is to focus on supplying raw materials for growing production in highly competitive markets (the second group of countries).

For startups, enter markets with a low level of innovation and no structured market (the third group of countries — local, small markets with high fragmentation of companies in the food production industry).

Large corporations should enter the market by acquiring small companies with a history, moving towards dominance through M&A transactions in the first group of countries (economic giants with a consolidated market).

Cluster 1: Market leaders with moderate competition

Germany, France, Italy and Spain.

These are leading European economies with growth rates slightly below the median, and with moderate competition among companies in the food production industry. Consumers in these countries have high standards when it comes to product quality, environmental friendliness and sustainability. The market has a well-developed infrastructure and strict regulations governing production and distribution processes.

Strategies

Partnership with local leaders

• Purchase of shares in local companies or creation of joint ventures with residents of the selected country. This approach will expedite market entry and reduce operating costs, thanks to the local partner's expertise and the small business support programs that exist in most countries.
• Franchising can be used for rapid scaling in new markets with external funding from experienced food production industry investors.

Premium positioning

• Focus on quality, environmental friendliness and innovation in your product range (e.g. organic products for the German market). Demonstrate compliance with standards and certificates.
• Use the 'country of origin' to your advantage. For example, Italian PDO products, or products produced in a specific region of France, emphasize local cooking traditions.

Focus on existing distribution channels

• Enter through online platforms such as Amazon Fresh and Ocado. Test demand with small orders without opening a representative office, by working with distributors or supermarkets that have an established food delivery system.

Cluster 2: Growing markets with high levels of competition

Poland and the Czech Republic.

These are markets with medium volumes (€5–10 billion) and growth rates above the European average. However, there is a large number of companies in the food production sector. Consumers in these markets are highly price-sensitive, and there is a trend towards natural products. The infrastructure is well developed, with a network of supermarkets such as Lidl and Kaufland.

Strategies

Price aggression and localization

• Reduce product prices by moving production to the country from the second cluster (e.g. open factories in Poland).
• Adapt products to local tastes (e.g. include meat products made according to local recipes in your product range).

Expansion through M&A.

• Absorbing local brands to quickly capture market share and reduce costs associated with establishing individual business processes (e.g. acquiring a Czech dairy producer).

Focus on retail partnerships:

• Work with discounters (e.g. Lidl and Biedronka) and delivery aggregators (e.g. Glovo and Bolt Food) to quickly test demand for your products.

Cluster 3: Local markets with low competition

Denmark, Sweden, Norway and Finland.

These are small markets (with a value of less than €5 billion) with high income and medium growth rates. There is a low level of competition due to the presence of several large market players that control a significant portion of the food production market. Due to low population density and the complexity of logistics, infrastructure is less developed than in countries from the previous groups. Consequently, food producers focus on digital channels, such as websites and applications, to generate sales.

Strategies:

Focus on sustainability and innovation.

• Launch products with a carbon-neutral footprint (important for Nordic countries) and demonstrate the environmental friendliness of your production processes at every stage.
• Form partnerships with local start-ups that are already well-known in the local market for their high standards and excellent reputation (for example, use alternative proteins produced in Sweden to manufacture your product).

Direct sales through digital platforms.

• Develop D2C (direct-to-consumer) sales through your own websites and mobile applications.
• Participate in niche marketplaces (e.g. Kolonial.no in Norway).

Small batches and the premium segment.

• Production of limited-edition products for connoisseurs (e.g. farm cheeses for Denmark).
• Collaborating with companies from other industries to release a limited batch of goods.

Cluster 4: Stagnant markets with high levels of competition

Examples include Greece, Portugal, Bulgaria, Latvia and Lithuania.

These are markets with a small turnover in the food production industry, low growth rates and high competition, as well as a population with low purchasing power. Outside large cities, infrastructure is practically non-existent, and the delivery of many products is sporadic or completely absent.

Strategies

When developing a strategy for entering these markets, consider the highly fragmented nature of the food production market. It is literally a market of small farms, local bakeries and private cheese dairies. Most companies are unable to grow due to limited domestic demand and a lack of expansion mechanisms. Nevertheless, these markets can be profitable if their advantages are exploited.

Cost optimisation

• Use cheap labour and local raw materials for food production (e.g. olive oil in Greece).
• Outsourcing production or its individual parts can reduce production costs.

Export orientation

• Produce in these countries to supply regions with greater purchasing power (e.g. Latvian dairy products for the EU).

Niche specialisation

• Focusing on traditional products with a protected designation of origin (e.g. Portuguese wines and Bulgarian yoghurt).
• Developing agritourism and sales through local farmers' markets.

Conclusion

This document presents a basic set of strategies that demonstrate the current state of the food industry's markets based on several key business indicators. If you require more detailed information on a specific group of markets or a particular country, please contact our consultant at hello@panopticinsights.com, who will be happy to answer your questions.

We create big data-driven strategies to increase your return on investment in development in both existing and new markets.