Abstract
Despite the country’s economic downturn and the negative impact this is
having on the country’s food
and drink sector, leading Italian
companies are continuing to pursue expansions through acquisitions, as
discussed in BMI’s recently published Italy Food & Drink Report for
Q309. Although Italy is known for
having some of the highest levels of
spending on food and drink in Europe, growth has stagnated in recent
years, reflecting the high level of market maturity as well as preferences for
traditional eating habits. Only
adding to the difficulty of local food and
drink producers is the current economic downturn. Italy is set to
under-perform the eurozone as a whole both this year and over the long-term,
as BMI forecasts Italy' s
economy to contract by 3.9% this year, with a
2.5% decline in private consumption growth.
Given this very weak outlook
for the local industry, the country’s leading food and drink producers
have
been looking abroad for growth opportunities. For example, in April
Italian drinks major Gruppo
Campari announced its acquisition of the Wild
Turkey Bourbon brand from French drinks group Pernod
Ricard, the largest
acquisition in Campari’s history. Campari is known for mopping up brands
that
become available following major mergers and acquisitions, and this
acquisition is a continuation of this
strategy. Earlier Campari had
announced that it had put aside a fund of EUR600mn (US$787mn) for
possible
acquisitions during 2009, as it has been looking to diversify its portfolio
and win over more
young consumers, who represent the strongest long-term
growth opportunities.
Then in May, Italian dairy giant Parmalat agreed to
buy a band of dairy assets from Kirin-owned
Australian company National
Foods in a deal worth AUD70mn (US$54.6mn). This is its largest
acquisition
since the US$18bn accounting scandal which put the it into administration in
2003. National
Foods is required to sell the assets due to competition
concerns arising from its AUD910mn
(US$709.4mn) takeover of Dairy Farmers,
and Parmalat – who missed out in its bid for the latter –
looks
set to benefit after all. Parmalat will acquire Dairy Farmers'
manufacturing facilities in New South Wales
and Australian Capital
Territory, while it will also secure some licensing and distribution deals in
these
states as well as in South Australia.
Parlamat and other dairy
companies are feeling the pinch from the economic downturn even more than
producers in other food and drink categories, as consumers are increasingly
turning to private-label dairy
products. While Italian consumers have been
slower than their counterparts in other European countries to
embrace
private-label food and drink products and brand name goods still dominate the
sector, there are
now signs that the combination of rising food prices and
stagnant economic growth may be encouraging
more Italian consumers to move
away from branded products, providing a boost to producers of private
labels. This in turn has led many of the country’s leading retailers to
put their weight behind their privatelabel
products, indicating that this
could be a strong growth opportunity in coming years.
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