Higher food prices lead to reduced consumption and production

Whilst prices have continued to rise, resulting in a decrease in sales whilst the manufacturers and distributors have still managed to maintain excessive profits, the food industry in Spain has experienced a strong crisis in the first half of 2024, which has led to a 2.6% drop in production and the closure of more than 1,800 companies.

According to Pouey International, inflation is one of the main drivers of this crisis, which, together with the high costs of energy and raw materials, has deteriorated the profit margins of food companies, and yet those same food companies have still managed to maintain those profits.

According to the FIAB (Spanish Federation of Food and Beverage Industries), the conflicts in Ukraine and the Middle East, due to their relationship with supply chains and the evolution of costs, have a strong impact on the sector, which, together with the rise in prices, interest rates, have harmed consumption and the investment capacity of companies.

“In addition, the global economic slowdown has also had a direct influence on Spain. The reduction in domestic consumption, together with economic uncertainty, has negatively affected the demand for food products, further aggravating this crisis, which is marked by the decrease in production and exports, as well as the closure of numerous companies. which has generated an increase in the unemployment rate,” says the risk management expert company.

“Although some companies have tried to adapt by adopting advanced technologies and sustainability practices, the reality is that these measures are not enough to address the negative effects of the crisis and ensure the recovery of the sector. All of this reflects the difficulties of companies in remaining operational in the face of current economic and structural challenges,” they add.