COVID-19 impact summary in spanish food and drink industry

The food and drink industry is a key player for Spain, a source of economic and social stability. Within a global economic context marked by uncertainty, the food and beverage sector stands as the first industrial sector in the country. It is a competitive and efficient industry, which allocates its production 70% to domestic demand (Home and HORECA channel and Impulse) and 30% to foreign demand. 

As a consequence of the crisis caused by COVID-19, the value chain of all industrial sectors of the Spanish economy has been affected, so this government has adopted a series of extraordinary economic measures in order to mitigate the problems of liquidity and solvency of all entities that are part of the Spanish business fabric, regardless of their legal form, but providing they carry out an economic activity. Forecasting the effects of COVID-19 involves excessive uncertainty associated with the duration of confinement, the intensity with which it will affect the economy, the gradual lifting of restrictions, the probability of a re-emergence, the time to develop a vaccine, and finally of the effectiveness of the policies adopted by this Government. 

Despite the existing uncertainty, companies are beginning to evaluate the impact on invoicing, contracting and investment, being very significant in all the magnitudes of the economic situation. We believe that the impact of the health crisis can focus on: 

1. 1. 1. Decrease in business activity in the sector, measurable in terms of production. 
      2. Reduction of product exports to third countries. 
      3. Impact on job creation and maintenance because of a reduction in the above variables. 

EMPLOYMENT

In March and April, COVID destroyed a total of 14,352 affiliated worker positions in food and drink industry. The month-on-year and year-on-year drop is being less than for the manufacturing industry, except for the case of the beverage segment. The beverage segment is being the most affected.

We encountered a similar level of affiliation to the closure of 2018.

EXPORT

The average growth of exports in 2019 was 2.5%. Spanish food and drink industry has become more internationalized in the last 10 years. However, protectionism and the health crisis could change this tendency. The latest data does not reflect this situation yet but falls of around 5% are estimated in 2020. 

HORECA   

The HORECA sector in Spain has more than 300,000 establishments and generated more than 1.7 million jobs before the crisis. According to data from a study recently carried out by the Bain & Company consultancy and professional services firm EY, these businesses could suffer a loss of turnover of up to 40% during this year.

Regarding liquidity levels, this same study points out that without support measures to increase them, the need for financing by hotel companies to cover fixed operating expenses during the crisis would fluctuate between 6,000 and 16,000 million euros.

As for employment, according to data from the Ministry of Labour, the month of April has registered 243,000 fewer workers than in the same period last year.

According to the data handled by the HORECA sector, after the end of the crisis there could be a drop of around 15% in the volume of establishments. The sector affirms that it is already possible to speak of 40,000 companies with serious survival difficulties after the crisis.