ITALIAN AGRI-FOOD FIRMS FACING INTERNATIONALIZATION: GOALS, STRATEGIES AND RESULTS

Transcription

1 ITALIAN AGRI-FOOD FIRMS FACING INTERNATIONALIZATION: GOALS, STRATEGIES AND RESULTS Irene Monasterolo, Cristina Brasili, Elisa Ricci Maccarini, Roberto Fanfani. Dept. of Statistics, University of Bologna.

2 Introduction In the last decade fast appearance of new powerful export oriented lower income Countries, like China and India enhanced competitiveness on the international market, change in the structure of governance, distribution of gains (Gereffi,2005), geographical slice up of production (Krugman, 2007). New competitors offer manufacturing products at lower prices because of lower costs of production (labour costs in manufact. in Bulgaria just 6% of the EU-15 average in 2001), lacking labour and environmental legislation. Not always fair: falsification of Made in Italy products (e.g. Parmigiano Reggiano, Prosciutto di Parma) a yearly 53 billion Euros business (1/2 Italian agri-food turnover), 3 billion Euros loss for Italian agriculture. To face stronger competition & avoid destabilizing problems, Italian firms started going international 20 years ago BUT in labour intensive sectors already ripe and protected in Italy (manuf., agriculture). Main destinations: CEEs (Rumania, Bulgaria, Poland). m1

3 Slide 2 m1 monasterolo;

4 Aim and structure of the paper Investigate how Italian agri-food firms faced and still face this process. Section 2: overview on the characteristics of the Italian agri-food industry, its position within the economy, its recent commercial results on international markets. Section 3: analysis of the way internationalization was carried on by Italian firms in the last years and its evolution: characteristics of the firms involved, their objectives and the strategies. Section 4: examine and comment the data contained in Tenth Survey on the Italian Manufacturing Industry (published by Unicredit Corporate Bank, 2008, for 416 firms including SMEs), focusing the attention on firms decisions and perspectives related to internationalization and business development.

5 Characteristics of the Italian agri-food industry third most important sector within manufacturing industry; key elements of the Italian Made in Italy, 12.8% of the EU-25 turnover (importance of agrifood export, also thanks to well known typical products). anti-cyclical role in the economic pattern: in , negative performance of the industrial sector (-1.9%) but agri-food production +9.5%. 9.9% of total occupation of industry, +1.9% 2006/2005 no deindustrialization. Declining value added per worker affects negatively productivity of the sector (still it doubles productivity in agriculture), due to specialization in sectors characterized by low technology and presence of several SMEs. 32,000 firms, 476,000 employees, 43% in the production line, 22% in quality assurance. main filiere: dairy sector (13% of the total agri-food production 2006), wine (10%), bakery (9%), cold cuts (7%). Beer and wine record notable increase 2006/2005 (+41%, +39%). Deeper integration along the filiere.

6 The Italian agri-food industry in the World importance progressively increased > openness to the markets (EU&extra): share of Italian agri-food export to extra EU Countries (on the total EU Countries) from +7.0% in 2000 to +9.1% in 2004 and +8.8% in Products with best performance: fisheries and related products (6.2% in 1998 to 15.2% in 2007), agri-and horticultural products (9.6% in 1998 to 9.5% in 2007). > Import value from 23 (1995) to 31 billion Euros (2007), but the agri-food share on the total Italian total import quota decreased from 13.3% in 1995 to 8,4% > export value from 13 billion Euros circa in 1995 to 23 in 2007 BUT its share on the total Italian export remained still (6.9% in % in 2007). the Italian agri-food trade balance negative already in 1995 (-9 billion Euros circa), still negative in 2007 (-7 billion Euros circa), just like total trade balance. Negative impact of the current financial crisis: agriculture -4% but agrifood products +2%, while other manufacturing sectors had a remarkable fall in export (-7.3% textile, -11% leather products).

7 External trade of agri-food and non agri-food products (in billion Euros) Agri-food Agri-food./total (%) ,91-9,37-9,45 Agri-food ,5-7 Not agri-food 33 10,11-1,87-2, Agri-food Not Agri-food Import Agri-food Agri-food./total (%) Export Trade balance Normalized trade balance (%) Source: Our elaborations on ISTAT data 2007

8 Different path of primary and agri-food sector >importance of trade for processed prod. on raw materials. primary sector: high trade balance deficit (5 billion Euros in 2007)/ much lower for the processing industry (2 billion Euros circa), thanks to the continue increase in export of agri-food processed products since Agri-food export reached 18 billion Euros circa in 2007, confirming its relevant position within the manufacturing sector. Primary sector Source: Our elaborations on ISTAT data 2007 Agri food

9 Cont. Agri-food import: agricultural products to be transformed as processed meat (30% of total import), diary. Agri-food export: other alimentary products (23% of total export), agriculture. Trade characteristics explained by different local models of specialization among regions and even provinces in agriculture and even more in the agri-food industry: export-vocated regions (primary sector) located in three different areas: Emilia Romagna in Central Italy (15% of the total Italian export), Veneto (14%) in Northern Italy and Puglia (12%) in the South. Lombardy has the leading position in export of agri-food products (19% of the national export), followed by Piedmont and Emilia Romagna (both 16%). Just regions in Northern Italy share the best performance in import of both products. Lombardy 17% of the total Italian import, its agri-food import share 29% of the national one, then Piedmont and Veneto (both at around 15%).

10 Product Import 2006 Agricolture Export , , , , , , , ,615 Processed meat 5.418, , , ,223 Processed fish 2,915, , , ,943 Processed fruit and vegetables 1.274, , , ,455 Oils and fats 2.841, , , ,180 Diary products and ice creams 2.955, , , ,104 Mill, starch, potato flour 601, , , ,961 Foodstaff 621, , , ,512 Other alimentary products 2.397, , , ,346 Beverages 1.289, , , , , , , ,088 Fishing

11 The geography of Italian agri-food trade Import & export mainly from the EU-27. Agricultural import from France (2 billion Euros,19.5% of total import), Spain (7.5%), Brazil (6.9%). Agri-food import from Germany (4 billion Euros, 40%), France (29%), Spain (21%). Export value agri-food products increased by 82% , in 2007 agrifood sector exported 4 times more than the primary one (18,8 billlion Euros). Primary sector export mainly to EU-27: Germany, France, UK but no real concentration (first ten countries account for 33% of total export). Agri-food export mainly to three countries: Germany (33%), France (22.7%), USA (21.7%). Presence of new EU member States (primary sector).

12 Main trading partners-primary sector, 2007 (million Euros) Import Country Value Export % on the total Country France Spain 761,1 Brazil Value % on the total Germany France 419, ,3 6.9 Great Britain 341,1 3.4 The Netherlands 692,8 6.8 Spain 299,2 2.9 USA 457,9 4.5 Austria 234, Germany 435,3 4.3 The Netherlands Hungary 367,8 3.6 Belgium 168,8 1.7 Austria 269,9 2.7 Greece 141,7 1.4 Greece 240,5 2.4 Poland 135,8 1.3 Canada 233,1 2.3 Slovenia 100,3 1.0 Source: Our elaborations on ISTAT data 2007

13 Main trading partners- agri-food sector, 2007 (in million Euros) Import Country Value Germany 4.049,8 France Export % on the total % on the total Country Value 39.9 Germany 3.364, , France 2.301, Spain 2.140, USA 2.199, The Netherlands 1.921, Great Britain Austria 816,6 8.0 Spain 782,3 7.7 Belgium 791,7 7.8 Austria 598,7 5.9 Denmark 763,4 7.5 Belgium 551, The Netherlands 541,6 5.3 Great Britain 613,3 6.0 Greece 475,2 4.7 Greece 387,3 3.8 Canada 433,5 4.3 Argentina Source: Our elaborations on ISTAT data 2007

14 Internationalization: strategies and objectives Italian firms quite late (at the end of the 80s) in comparison with their European competitors, on foreign markets, mainly delocalization of the lower part of production. Reasons: high presence of SMEs, having lower access to credit, financial capacity, logistic organization, less active and open-minded management. specialized in niche production (Made in Italy): highly personalized, linked to the fashion effect and to the brand name don t allow the creation of scaleeconomies (V multinational companies). Need for trustworthy collaboration with all the parts of the productive filiere and with sub-contractors, difficult to be reproduced abroad (districts way of production). Instruments: non-equity, Foreign Direct Investments (FDI), displacement of productive structures in countries characterized by lower labour-costs (delocalization) exchanges with the main firm in Italy. Strategies change according to the size of the firm and to the product. Destination: CEEs (for unskilled labout intensity activities; for entering new markets).

15 Gross FDI from Italy Low involvement in the internationalisation process (spec.agricultural component) low level of FDI abroad. FDI from Italy mainly to food industry (84%). Growth rate much lower (1.4%) than the one recorded by the Italian economy (4.7%). Sector Million Euros 2005 % on total ec Agri-food Agriculture , economy Source: processing Ismea on Ice and Uic data

16 Gross FDI to Italy: importance of agri-food sector on the total economy In 2005, FDI in the agri-food sector reached 9.3 billion Euros, almost 7% of total FDI in the Italian economy.! , FDI in the Italian agri-food industry recorded a much higher average growth than the rest of the economy (+53%), as a difference from FDI from Italy. Mainly utilised in agriculture sector (5.9 billion) in comparison with the food industry (3.4 billion Euros), as a difference from FDI from Italy. Sector FDI FDI Million Euros % total ec. Year Growth rate % Agri-food 9, Agriculture 3, Food Industry 5, economy 137, Source: processing Ismea on Ice and Uic data

17 Participations in foreign and from foreign companies Participations of Italian agri-food industries in foreign ones increasing in manufacturing (4,773 5,475)/ decreasing in the agri-food industry but still relevant ( ). Employment increases in manufacturing (834, ,367) but decreases in agri-food (120,219 73,069). Agri-food turnover as a percentage of manufacturing onedeclines (13.2% 8.2%). Participations of foreign companies in Italian ones increases both in manufacturing (2,372 2,406) and in agri-food ( ). Employment decreases both in manufacturing (571, ,730) and in agri-food (46,183 37,870). Turnover of manufacturing increases and so does the agri-food one.

18 Foreign companies with partecipations from Italian companies Companies Sector Manufacturing Industry Agri-food Industry ,773 5,112 5,187 5,269 5,41 5, ,897 16,696 16,928 17,142 17,253 17,2 Employees Sector Manufacturing Industry 834, , , , , ,367 Agri-food Industry 120, , , ,379 73,724 73,069 1,109,75 8 1,177,88 5 1,175,00 8 1,153,03 2 1,123,93 4 1,120,55 0 Turnover (million Euros) Sector Manufacturing Industry 153, , , ,55 167, ,423 20,23 20,729 16,238 15,073 13,4 14, , , , ,07 298, ,868 Agri-food Industry Source: Banca dati Reprint, Politecnico di Milano - ICE

19 Italian companies with partecipations from foreign companies Companies with participation abroad Sector 2000 Manufacturing Industry Agri-food Industry ,372 2,488 2,533 2,51 2,45 2,412 2, ,307 6,797 7,062 7,114 7,098 7,054 7,094 Employees of companies with participation abroad Sector 2000 Manufacturing Industry Agri-food Industry , ,27 633, , ,47 560, ,73 46,183 37,755 37,399 37,259 39,597 37,598 37,87 792, , , , , , ,039 Turnover of companies with participation abroad (million Euros) Sector 2000 Manufacturing Industry Agri-food Industry , , , , , , ,302 15,483 13,074 13,717 14,662 16,917 19,221 19, , , , , , , ,078 Source: Banca dati Reprint, Politecnico di Milano - ICE

20 Structure of questionnaires Relevant sample of firms: 5,137 manufacturing industry of which 416 in the agri-food sector, period turnover: for 5% < 250,000 Euros, 10% 500,000, quite the totality of the sample under 640,000 Euros (just 1 firm declares quite 2 billion Euros). 100 questions in seven sections: general information about the activity of the firm; work force; propensity for investments; innovation and R&D; internationalization; market and competition; finance. Two data sets were used for the extraction of the samples: -Aida data set (300,000 firms, 80,000 belonging to the manufacturing industry, turnover >750,000 Euros). -CEBI data set (40,000 firms). Data collected through interviews, but some firms preferred to write down the questionnaires which were sent them via fax or .

21 Results Lower % of answers than for other sections (work force and finance) it helps understanding the areas in which agri-food firms still faces difficulties in going international and its uncertain trend. The more detailed questions (typologies of services acquired and FDI) the ones less answered. Has the firm exported all or a part of their products in 2006?: 55% yes, positive answer (2.2% leaked it), highest % in Salerno 6.1% (Campania-S, 5% of frims on total sample), Milan (5.7%, N, 4.7% of firms). Verona (N-E) highest % of no, 44%. Just 230 firms answered to the related question In which percentage on your turnover? 11% < 5% on their turnover, 82% < 50%. Just 9 firms exported 90% on their turnover and 2 100%. Destination, just 214 firms answered they exported more than 5% of their turnover into the EU-15 (14 Salerno, 11 Milan, 8 Cuneo), 28.5% < 50% of their turnover. 50% of firms exports 95% of their turnover into the EU-15. Just 61 firms export to the new EU member States (7 Milan, 4 Salerno, 3 Bologna), 70% of them just the 10% of their turnover, 5 firms 50% and one the whole turnover.

22 Cont. Just 48 firms up to the total tried to enter foreign markets (4 Modena,3 Parma & Salerno). No-one from Milan. No firm bought patents and/or licenses from abroad. Just 2 firms (one from Bari and one from Mantua) sold patents and/or licenses abroad. Firms received very little assistance (just 8 firms, mainly from Northern Italy) to go international from Italian operators abroad (both public and private), and mainly in the EU-15. Assistance from the Chamber of Commerce, ICE and private offices. For the Chinese, American and Mexican markets just the Chamber of Commerce provided assistance. Firms which currently realize at least a part of their productive activity abroad (min 5% of services bought) are just a minority and they mainly acquire them from the EU-15.

23 Conclusion Italy well known in the World for the excellence of its agri-food products and the agri-food sector is the only one which didn t follow the economic declining trend-till the crisis BUT panorama which emerges from the analysis of the internationalization activity of Italian agri-food firms is much less optimistic than expected for past & future trends, especially when the effects of the current international crisis will manifest at all. Italian firms late in internationalization and active just when internationalization a necessary choice to survive on the market: Low rate FDI from Italy agri-food sector only 1.6% of the total Italian FDI (0.3% agri), mainly to agri-food (84%), low growth rate of FDI (+1.4%). < participation in foreign companies in the agri-food industry, < employees and turnover. Low propulsion to go and remain in foreign markets, they mainly stop at the nearer ones (CEEs). Just few of them to Russia and China and this is a shared point for firms from all the regions. very limited number of agri-food firms to ask for support from the several Italian public/private institutions for internationalization, just for EU-15.

24 Cont. without a shared and articulate country-strategy to meet the opportunity which internationalization offers to the growth of Italian agri-food firms, the sector will not be able to grow and neither to maintain its market share. Re-thinking the way in which internationalization has been lead on by Italian agri-food entrepreneurs, and the role of the numerous public institution in charge of it in the World, should be a fundamental challenge for the Italian agri-food sector and, as a consequence, for the whole Italian economy.