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SYNDIGEL faces up to difficult issues affecting growth of French frozen foods.

SYNDIGEL Faces Up to Difficult Issues Affecting Growth of French Frozen Foods

The need for vigilance and flexibility in the face of a rapidly changing economic and regulatory climate was the underlying theme of the 1989 European Federation for the Commerce and Distribution of Frozen Foods and Ice Cream (SYNDIGEL) Convention held recently in Marbella, Spain. Despite its Continental-sounding name, SYNDIGEL is a French trade association.

During a workshop on business strategies, some 80 FF executives discussed the evolution of the French market which has seen the rate of increase in domestic production gradually fall since the 1970s. If this trend continues, it was agreed, the 1990s could usher in a period of stagnation.

Meanwhile, FF imports have maintained the market, increasing approximately 10% a year as exports have fallen at the same rate. French producers are running out of steam, the association concluded.

Industrial investments in frozen food production have slowed, and the number of freezing plant openings is decreasing. In 1988 roughly 80% of agribusiness investments for transforming raw foodstuffs into value-added products went into the development of production lines for completely new types of items such as chilled foods. On the brighter side, the drop in production capacity is in the public sector which is tied to a decrease in government purchases of food to maintain price supports. Privately owned freezing capacity is still on the upswing, as are private investments.

Three hypotheses for the future development of the market were put forward: growth; stagnation resulting from the disappearance of factors favoring development; and regression, which would imply in addition the substitution of other products for frozen foods.

The widely held belief that the first hypothesis is the most likely to be realized is based on an estimation of the volume rather than the value of the market. The structure of frozen food sales has changed. Vegetable products, which are high in volume and low in value per kilo, are becoming predominant. In 1975 animal products accounted for 63% of sales; in 1985 they represent only 42%, while vegetable products have gone from 27% to 40%. Profits of distributors are threatened by the combination of an increase in volume and stagnant turnover. The hope for profits lies in prepared dishes, which have a high added value. Such products will conceivably account for 22% of sales by 1995.

Diversification Needed

SYNDIGEL considers the possibilities for FF vis-a-vis other types of prepared foods to be good. It is believed that chilled foods will impact sales of fresh food rather than frozen. Nevertheless, convention delegates agreed that distributors must diversify in order to guarantee the profitability of their businesses. The majority of distributors handling frozen foods deal exclusively with frozen products, but most national distributors of FF handle several types of items. More and more firms are expected to follow the lead of the national companies.

During the convention a position was taken on a current problem in regard to the cold chain, as members protested an exception to a regulation that requires equipment for transportation of perishable food within France to be inspected and certified. The exception for shipments of 200 kilograms or less of frozen food has become the general practice, complained SYNDIGEL. Non-professionals are regularly carrying frozens in trucks that are not equipped for such transport. Thus professional frozen food transporters, who must meet costly requirements, are at a competitive disadvantage, and product safety is no longer assured.

The association also pointed out and protested the incoherence of government policy, in particular in regard to hormones in meat. The United States is the main furnisher of the meat byproducts consumed in France. The ban on importing meats grown with the help of hormones has cut off imports from the U.S. and caused scarcity and a rise in the price of available byproducts. Distributors who already held public contracts were forced to fulfill them, although they often had to sell at a loss.

Taking into consideration such problems, the association's general delegate, Mme. Danielle Lo Stimolo, analyzed the situation facing frozen food distributors: "The sector retains a potential for growth that many other sectors can envy, [but] it is undergoing changes."

The disappearance of inflation has also played a role in slowing down growth in FF sales as customers don't stock up as much to beat price hikes. Restructuring is causing difficulties for people involved in businesses that are essentially financed with personal or family capital. In a single year one distribution firm in six has undergone a change in ownership. This figure would be more than double if the concept of structural change were extended to include internal changes. Furthermore, frozen food businesses are disconcerted by the fact that they are no longer viewed by the media and the public as the most dynamic and innovative sector of the food industry, Mme. Stimolo pointed out.

With the approach of the promised single European Market, the entire regulatory framework in which the frozen food industry operates is changing. The European Economic Community has adopted and published a directive authorizing the free circulation of frozen foods. It was inspired by the French definition of frozen foods and by French principles of the cold chain; but there are differences between domestic regulations and the directive, and some stipulations are so vague that their application has yet to be negotiated. An example of the former is that the directive substitutes for the concept of a temperature of -- 18 degrees Centigrade in the center of the food a temperature of -- 18 degrees Centrigrade on all points of the product (center and surface) with a tolerance of 3 degrees Centigrade. An example of the latter is the regulation of transportation.

Largely because of the EEC, French businesses in general are passing from a tradition of government regulation of the details of commerce to an era when government authorities will set forth principles but will leave the details of their application to businesses and professional associations.

Nevertheless, at the same time as the French government is showing signs of leaving businesses relatively free of regulation, companies are experiencing an increasing dependence on situations outside themselves. Interrelations between competitors are one cause of this.

For example, as the result of complex financial dealings and litigation, Nestle, which owns France Glace Findus, the largest frozen food producer in France, recently bought Buitoni, which holds the capital of Davigel. Findus specializes in sales of food to individuals and families; Davigel is one of three national distributors in the strongest position in sales to restaurants and feeding centers. The change is likely to impact the whole industry. An example of dependence at the global level is the hormone war between the United States and Europe, which started as the result of pressure from consumer groups outside France.

New concerns are emerging for the frozen food industry as environmental preservation becomes a matter of urgency within France and abroad. The protocol of Montreal on chlorofluorocarbons has condemned to disappearance fluids used by distributors to cool their freezers, their transportation equipment, and, in some cases, their warehouses. Companies must economize on the fluids and work out a system of recycling them, while waiting for substitutes that will not be on the market for at least five years.

In the current context of change and uncertainties, SYNDIGEL's members must train and inform themselves in order to be able to take into account as many quantitative and qualitative factors as possible when making decisions, Mme. Stimolo said.
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Title Annotation:European Federation for the Commerce and Distribution of Frozen Foods and Ice Cream
Publication:Quick Frozen Foods International
Date:Oct 1, 1989
Previous Article:Refrigerated segment gains in France as prepared dish packers proliferate.
Next Article:Strong but spotty 1988 growth pattern characterizes maturing U.S. market.

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