The Spanish food sector – although less cyclical than sectors such as tourism or construction – is not immune to the current economic slowdown and rising inflation. It has also been impacted by extreme weather conditions that have affected the harvest of certain food products.
The impact on Spain’s food processing sector has been significant: until July, production levels showed a decrease of 2.5% compared to the previous year, due to the reduction in national and international demand.
There have been signs for some time that consumers have been buying less. Food and beverage retail sales volumes declined 1.7% in 2022 and remained under pressure in the first quarter of 2023, according to national statistics agency INE.
Consumer spending on food and drink has also been affected across Europe, although unlike other EU countries such as Germany and the Netherlands, food retail sales volumes in Spain have been picking up since the spring, partly thanks to a strong influx of tourists.
While we expect the Spanish food sector to contract, we see divergent trends between subsectors. Production by vegetable oil processors, fresh produce and grain mills has been reduced more sharply due to weather and harvest conditions. The fish processing industry has been hit by sharp increases in energy prices and operating costs, while higher sales prices curb fish consumption. On the other hand, the production of some other subsectors (meat, bakery, beverages, dairy) has shown much more resilience. Staple food products are generally less price sensitive than other food products.