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Smooth-running Benelux exporting machine passes global recession by ... thus far; Quick Frozen Foods International magazine's annual, in-depth study of the productive Dutch and Belgian frozen food industries finds guarded optimism despite economic slowdown in Europe.

It's been a long train running for the Benelux frozen food express. The business of making money rolled along as usual for most of the region's hard-working exporters last year. Sales were generally up, and investment in new plant and equipment kept pace. But now there is concern that a stalling German economy across the border could take some steam out of the powerful import locomotive that has pulled heavy loads eastbound over the recent boom years.

Editors of Quick Frozen Foods International magazine spent a fortnight touring the Netherlands and Belgium in the autumn, visiting some 47 companies representing all links of the two countries' vibrant, export-driven frozen food chain. It was during a period when the European Exchange Rate Mechanism (ERM) was misfiring as British, Italian, Spanish and French currencies were either being devalued or seriously stressed. The Bank of England spent [pounds]7 billion unsuccessfully defending sterling against heavy pressure from speculators in September. All the while the Dutch guilder and Belgian franc - both linked to the strong Deutschmark - were sitting pretty. Clearly, a two-tier EEC was emerging, with the Benelux among those nations in the fast track of the autobahn.

What does all this mean now that Jan. 1, 1993, has come and gone without much fanfare over the creation of a borderless European economy? The phasing out of tariff barriers among EEC member states seemed almost to be a non-event in the Netherlands. After all, the Dutch have been very adept at selling their produce with or without duties being exacted by customs agents. Indeed, food processors account for over a quarter of Holland's industrial output.

The now officially-declared recession in Germany is not likely to hurt imports of food too much, although producer prices could suffer. But exporters of equipment, frozen potatoes and vegetables to the United Kingdom were clearly worried about losing customers. "Now our prices are 13% higher in Britain because of sterling's devaluation. Through no fault of our own, we've become relatively expensive in that market overnight," said one manufacturer.

Meanwhile, the seafood sector is glad to put 1992 behind it as consumer resistance to perceived high prices stiffened. Flatfish suppliers to Italy had more to think about than the weakened purchasing power of the lira. With glaze levels as high as 50% on sole and plaice products sold to the Italian foodservice sector, a number of earnest Urk producers called for concerted action among their colleagues to reduce water content and preserve the value reputation of product lines (see story on page 99). Importers were reportedly beginning to discover other species to their liking, while end-users were increasingly turning to inexpensive chicken and meat substitutes.

On the potato front, large surpluses depressed raw material prices to lowly levels scraping the edge of profitability (see report beginning on opposite page). And frozen french fry packers found themselves in the middle of a price war. Vegetable suppliers were benefiting from good harvests relative to drought-stricken parts of Europe, but here too the price weapon had to be unsheathed at times to move certain abundant varieties in highly competitive markets.

Cold storage warehouse operators were fairly upbeat (see page 139), especially those situated at the busy ports of Rotterdam, Amsterdam, Flushing and Antwerp. But there was concern that inland overcapacity will become a problem in the future. And while space occupancy was said to be high at the moment, nobody dared try raising rates charged customers for fear of losing business.

All in all, life has been very good for most Benelux consumers in recent years. While taxes used to finance generous cradle-to-grave social benefits are high, the rate of inflation in the region has been among the lowest in the world. And notwithstanding a persistent unemployment problem, domestic economies have performed well.

One businessman told QFFI that if all his countrymen paid their fair share of taxes Belgium would be ranked as richer than Switzerland. "Apparently our citizens believe that they're more creative at managing their own resources than is the government. Deficit spending is a personal passion, with per capita debt now exceeding one million francs. Most everybody has a new car, a beautiful home and a huge mortgage hanging over his head."

Indeed, Euromoney magazine calculated that at 132%, Belgium has the highest ratio of gross public debt to nominal GDP of the 18 leading OECD countries. The government, on the other hand, has responsibly run a primary (excluding interest payments) budget surplus since 1984. Its current surplus is the highest in the EEC at + 7% of GDP

Things aren't too bad for the masses next door in Holland either, where one finds a lot more than a chicken in every pot and a Volkswagen in the garage. Frozen food consumption rose by 3.1% in 1991 to 277,000 tons, while exports of 619,695 tons were up an impressive 15.7%. Belgium's internal consumption was estimated at 137,575 tons, with an additional 178,932 tons exported.

While the external sales numbers are impressive, per capita intake of frozens in the Benelux lag far behind Euroleader Denmark's whopping 44 kilograms per annum. And the region's growth pattern is not in the same league as Germany, which has racked up double-digit increases in recent years.

One analyst told QFFI that part of the reason for this is that Dutch and Belgian citizens are avid backyard gardeners who grow much of their own vegetables and potatoes for at-home consumption. He noted that Belgians consume only 10% of the frozen vegetables produced industrially, and 20 times more fresh potatoes are eaten than frozen ones.

Another explained: "The typical Dutchman is quite proud, so he would rather spend his money's on something to show off. Instead of buying lobster or shrimp, he's apt to purchase cars, video cameras, CD players or other electronic luxuries."

Perhaps so, but it is export earnings that make such a prosperous lifestyle possible for countries whose combined population is just 25 million. Certainly sales of frozen food and related high-tech processing equipment will continue to play a very important part in generating the foreign exchange that has paid for a standard of living second to that of few other nations of the world. The next 38 pages of this magazine are devoted to reportage about many of the movers and shakers who make up the highly productive Benelux FF sector.
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Title Annotation:News from Europe
Author:Saulnier, John M.
Publication:Quick Frozen Foods International
Date:Jan 1, 1993
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