Voluntary Report - public distribution

**Date:** 4/6/2005

**GAIN Report Number:** E35067

E35067

**EU-25**

**Food Processing Ingredients Sector**

**The EU\'s Food and Drink Industry**

**2005**

**Approved by:**

![](media/image1.wmf)Norval E. Francis, Jr.

U.S. Mission to the EU

**Prepared by:**

Hilde Brans

**Report Highlights:**

The food and drink sector is of major importance in economic terms and
plays an important role in consumer protection issues. Due to the
economic slowdown and the strength of the Euro against the US dollar,
the food and drink industry in the EU-25 registered a growth of only 1.9
percent in its turnover in 2003 compared to 2002 and exports of food and
drink products decreased slightly.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Brussels USEU \[BE2\]

\[E3\]

#  

[INTRO 3](#intro)

[EU DEMOGRAPHY 3](#eu-demography)

[STRUCTURE & EMPLOYMENT OF THE F&D INDUSTRY
4](#structure-employment-of-the-fd-industry)

[SECTORS OF THE F&D INDUSTRY 6](#sectors-of-the-fd-industry)

[TOP EU MANUFACTURERS 8](#top-eu-manufacturers)

[CONSUMPTION 8](#consumption)

[**EU-15 8**](#eu-15)

[**EU-25 9**](#eu-25)

[DETERMINANTS OF FOOD CHOICE 9](#determinants-of-food-choice)

[TRADE 11](#trade)

[EU/US TRADE IN PROCESSED AGRICULTURAL PRODUCTS
12](#euus-trade-in-processed-agricultural-products)

[INFO FOR U.S. EXPORTERS 13](#info-for-u.s.-exporters)

[GLOSSARY 14](#glossary)

[SOURCES 15](#sources)

#   {#section-1 .unnumbered}

# THE EU'S FOOD & DRINK INDUSTRY

# INTRO

The food and drink (F&D) industry is the sector that processes and
packages products for human and animal consumption. It is of major
importance in economic terms and plays an important role in consumer
protection issues. The processing of agricultural products is subject to
very strict EU food safety, quality and labeling rules. Given its tight
link with the agricultural sector, the EU's F&D industry is deeply
affected by the developments in the common agricultural policy (CAP).
Because of the CAP, agricultural prices on EU markets are higher than on
world markets, resulting in higher input prices for the F&D industry.
However, the EU pays export subsidies to European F&D enterprises to
increase their competitiveness on world markets. The F&D industry buys
and adds value to 70% of all EU agricultural produce.

Due to the economic slowdown and the strength of the Euro against the
U.S. dollar, the F&D industry in the EU-25 registered a growth of only
1.9% in its turnover in 2003 compared to 2002 and exports of food and
drink products decreased slightly.

# EU DEMOGRAPHY

The enlargement of the EU with 10 new member states has increased the EU
population by 20% to 457 million inhabitants but only increased its GDP
by 4.5%. With enlargement, the percentage of the world's 6.3 billion
inhabitants living in the EU has risen from 6.1% to 7.2%, making the EU
the third most-populated political entity (behind China and India) and
55% larger than the U.S. Nearly three-quarters of the EU's population
live in 6 of the 25 member states (Germany, U.K, France, Italy, Poland
and Spain) while the remaining quarter are distributed among 19 member
states with small to very small populations. Differences in the social
situation between the majority of the EU-15 and the new member states
are large in several areas.

The EU is facing unprecedented demographic changes that will have a
major impact on society and the economy. People are living longer and in
better health. Fertility rates have dropped to 1.5 children per woman
and by 2030, Europe will have 18 million fewer children and young people
than today. In 2030, the number of "older workers" (aged 55 to 64) will
have risen by 24 million and the EU will have 34.7 million citizens aged
over 80 (compared to 18.8 million today). Enlargement will not change
the EU's ageing process. The potential for economic growth and social
improvement will continue to be affected by a contracting active
population and an expanding population in retirement.

+-----------------------------+---------+---------+---------+----------+
| **Eurostat base scenario,   |         |         |         |          |
| EU-25 (in thousands)**      |         |         |         |          |
+-----------------------------+---------+---------+---------+----------+
|                             | **2005  | **2005  | **2010  | **203    |
|                             | -2050** | -2010** | -2030** | 0-2050** |
+-----------------------------+---------+---------+---------+----------+
| Total Population            | -2.1%   | +1.2%   | +1.1%   | -4.3%    |
|                             |         |         |         |          |
|                             | (-9642) | (+5444) | (+4980) | (-20066) |
+-----------------------------+---------+---------+---------+----------+
| Children (0-14)             | -19.4%  | -3.2%   | -8.9%   | -8.6%    |
|                             |         |         |         |          |
|                             | (       | (-2391) | (-6411) | (-5612)  |
|                             | -14415) |         |         |          |
+-----------------------------+---------+---------+---------+----------+
| Young people (15-24)        | -25.0%  | -4.3%   | -12.3%  | -10.6%   |
|                             |         |         |         |          |
|                             | (       | (-2488) | (-6815) | (-5139)  |
|                             | -14441) |         |         |          |
+-----------------------------+---------+---------+---------+----------+
| Young adults (25-39)        | -25.8%( | -4.1%   | -16.0%  | -8.0%    |
|                             | -25683) |         |         |          |
|                             |         | (-4037) | (       | (-6375)  |
|                             |         |         | -15271) |          |
+-----------------------------+---------+---------+---------+----------+
| Adults (40-54)              | -19.5%  | +4.2%   | -10.0%  | -14.1%   |
|                             |         |         |         |          |
|                             | (       | (+4170) | (       | (-13027) |
|                             | +19125) |         | +10267) |          |
+-----------------------------+---------+---------+---------+----------+
| Older workers (55-64)       | +8.7%   | +9.6%   | +15.5%  | -14.1%   |
|                             |         |         |         |          |
|                             | (+4538) | (+5024) | (+8832) | (+9318)  |
+-----------------------------+---------+---------+---------+----------+
| Elderly people (65-79)      | +44.1%  | +3.4%   | +37.4%  | +1.5%    |
|                             |         |         |         |          |
|                             | (       | (+1938) | (       | (+1219)  |
|                             | +25458) |         | +22301) |          |
+-----------------------------+---------+---------+---------+----------+
| Very elderly people (80+)   | +180.5% | +17.1%  | +57.1%  | +52.4%   |
|                             |         |         |         |          |
|                             | (       | (+3229) | (       | \        |
|                             | +34026) |         | +12610) | (18187\) |
+-----------------------------+---------+---------+---------+----------+

Source: Eurostat

# STRUCTURE & EMPLOYMENT OF THE F&D INDUSTRY

Accounting for 13.6% of the total EU-15 manufacturing sector in 2002,
the EU's food and drink (F&D) industry is still the largest
manufacturing sector in the EU. As the demand for food products is
relatively static, the F&D sector's activity is less cyclic and more
constant than manufacturing in general. The F&D sector is less affected
by economic fluctuations than other sectors but also shows more modest
growth.

+-----------------+------------+------------+------------+------------+
| **EU FOOD AND   |            |            |            |            |
| DRINK SECTOR:   |            |            |            |            |
| STRUCTURE /     |            |            |            |            |
| PRODUCTION BY   |            |            |            |            |
| COUNTRY**       |            |            |            |            |
|                 |            |            |            |            |
| **2002 & 2003   |            |            |            |            |
| ESTIMATES**     |            |            |            |            |
+-----------------+------------+------------+------------+------------+
|                 | **         |            | **E        |            |
|                 | Production |            | mployees** |            |
|                 | (Current   |            |            |            |
|                 | Prices -   |            | **(x       |            |
|                 | Billion    |            | 1000)**    |            |
|                 | Euros)**   |            |            |            |
+-----------------+------------+------------+------------+------------+
|                 | **2002**   | **2003**   | **2002**   | **2003**   |
+-----------------+------------+------------+------------+------------+
| Belgium         | 29.9       | 30.4       | 87.6       | N/A        |
+-----------------+------------+------------+------------+------------+
| Denmark         | 17.7       | 18.3       | 78.7       | 76.3       |
+-----------------+------------+------------+------------+------------+
| Germany         | 125.2      | 127.9      | 530.8      | 525.3      |
+-----------------+------------+------------+------------+------------+
| Greece          | 9.4        | N/A        | 66         | N/A        |
+-----------------+------------+------------+------------+------------+
| Spain           | 58.9       | 62.1       | 376        | 381        |
+-----------------+------------+------------+------------+------------+
| France          | 134        | 136        | 420        | 421        |
+-----------------+------------+------------+------------+------------+
| Ireland         | 15         | N/A        | 47         | N/A        |
+-----------------+------------+------------+------------+------------+
| Italy           | 100        | 103        | 276        | 274        |
+-----------------+------------+------------+------------+------------+
| Netherlands     | 39         | 39         | 135.4      | N/A        |
+-----------------+------------+------------+------------+------------+
| Austria         | 11         | N/A        | 79         | N/A        |
+-----------------+------------+------------+------------+------------+
| Portugal        | 10.9       | N/A        | 99.3       | N/A        |
+-----------------+------------+------------+------------+------------+
| Sweden          | 14.9       | 15.2       | 60.7       | 60.3       |
+-----------------+------------+------------+------------+------------+
| Finland         | 8.7        | 8.8        | 38.5       | 37.1       |
+-----------------+------------+------------+------------+------------+
| U.K.            | 108        | N/A        | 491        | N/A        |
+-----------------+------------+------------+------------+------------+
| **NEW MEMBER    |            |            |            |            |
| STATES**        |            |            |            |            |
+-----------------+------------+------------+------------+------------+
| Czech Republic  | 8          | 7.8        | 144.7      | 135        |
+-----------------+------------+------------+------------+------------+
| Estonia         | 0.7        | 0.7        | 20.2       | 21.5       |
+-----------------+------------+------------+------------+------------+
| Hungary         | 7.8        | 8.9        | 121.4      | 118.1      |
+-----------------+------------+------------+------------+------------+
| Latvia          | 1          | 1          | 33.4       | 32.1       |
+-----------------+------------+------------+------------+------------+
| Lithuania       | 1.3        | N/A        | N/A        | N/A        |
+-----------------+------------+------------+------------+------------+
| Poland          | 27.2       | 24.9       | 473        | 471.2      |
+-----------------+------------+------------+------------+------------+
| Slovakia        | 2          | N/A        | N/A        | N/A        |
+-----------------+------------+------------+------------+------------+
| Slovenia        | 1.9        | 1.9        | 19.5       | 18.6       |
+-----------------+------------+------------+------------+------------+

Source: CIAA

The turnover of the F&D industry in the EU-25 amounted to EUR 799
billion in 2003. It registered a slow growth of its turnover in current
prices estimated at 1.9% in 2003 compared to 2002. Reflecting their
demographic weight, France, Germany, U.K., Italy and Spain are the
leading producers in the EU. Together, they represent around 65% of
total EU turnover and 50% of the employment.

The F&D sector is a relatively fragmented one. A few multinationals
compete on the global market with global brands and a large range of
products while smaller enterprises serve local markets and concentrate
on regional preferences. In the EU, the F&D industry is a major employer
with 4.1 million employees of which 61% are employed in small and medium
sized enterprises. In 2001, 99% of the companies in the F&D sector were
small and medium sized enterprises with less than 250 employees.

  ------------------------------------------ -------------- -------------
  **Value Added & Employment by Size of                     
  Enterprise in the EU - 2001**                             

                                             **EU-15**      **EU-25**

  **Value Added (%)**                                       

  Companies with 1 to 49 employees           24.4           23.9

  Companies with 50 to 249 employees         22.3           23.3

  Companies with 250 or more                 53.3           52.8

  **Number of persons employed by size of                   
  enterprise (%)**                                          

  Companies with 1 to 49 employees           38.8           37.0

  Companies with 50 to 249 employees         22.3           24.3

  Companies with 250 or more                 38.9           38.7

  **Apparent labor productivity (EUR                        
  1,000/person employed)**                                  

  Companies with 1 to 49 employees           28.8           25.8

  Companies with 50 to 249 employees         45.9           38.4

  Companies with 250 or more                 62.8           54.6
  ------------------------------------------ -------------- -------------

Source: Eurostat

The F&D manufacturing sector has somewhat atypical characteristics with
regard to labor. Although the food sector is like most sectors dominated
by males, women filled more jobs than in other manufacturing sectors and
there was a greater recourse to part-time work. According to a 2002
labor force survey, 38.5% of F&D employees in the EU-15 were women which
was more than 10 percentage points above the corresponding average for
manufacturing as a whole.

The average value added generated by each person employed reached EUR
47,000 in the EU-15 in 2001, below the manufacturing average of EUR
51,200. However, average personnel costs were also lower than the
manufacturing average at EUR 28,700 in the EU-15 (EUR 24,200 in the
EU-25) against EUR 35,700 for the whole of manufacturing. The F&D sector
is more labor-intensive than manufacturing as a whole but the apparent
productivity of the work done varies widely by country. The disparity
has increased further with the accession of the new member states. Value
added is no more than EUR 15,000 per person employed in Estonia,
Lithuania, Hungary and Slovakia but over EUR 50,000 in Belgium, Denmark,
Finland and the U.K. The apparent productivity reached EUR 39,700 per
employee in the EU-25 in 2001.

+-----------------------------------------+--------------+------------+
| **Labor Productivity & Personnel Costs  |              |            |
| by Sector - EU-15, 2001**               |              |            |
+-----------------------------------------+--------------+------------+
|                                         | Apparent     | Average    |
|                                         | Labor        | Personnel  |
|                                         |              | Costs (EUR |
|                                         | Productivity | 1,000 per  |
|                                         | (EUR 1,000   | employee)  |
|                                         | per person   |            |
|                                         | employed)    |            |
+-----------------------------------------+--------------+------------+
| Production, processing, preserving of   | 35.5         | 25.2       |
| meat, meat products                     |              |            |
+-----------------------------------------+--------------+------------+
| Processing and preserving of fish and   | 33.7         | 22.1       |
| fish products                           |              |            |
+-----------------------------------------+--------------+------------+
| Processing and preserving of fruit and  | 46.4         | 27.3       |
| vegetables                              |              |            |
+-----------------------------------------+--------------+------------+
| Manufacture of vegetable and animal     | 65.6         | 39.7       |
| oils & fats                             |              |            |
+-----------------------------------------+--------------+------------+
| Manufacture of dairy products           | 54.6         | 33.6       |
+-----------------------------------------+--------------+------------+
| Manufacture of grain mill products,     | 60.1         | 39.0       |
| starches and starch products            |              |            |
+-----------------------------------------+--------------+------------+
| Manufacture of prepared animal feeds    | 60.2         | 36.1       |
+-----------------------------------------+--------------+------------+
| Manufacture of other food products      | 38.4         | 25.2       |
+-----------------------------------------+--------------+------------+
| Manufacture of beverages                | 83.1         | 40.0       |
+-----------------------------------------+--------------+------------+

Source: Eurostat

# SECTORS OF THE F&D INDUSTRY

The EU F&D industry traditionally has four major sectors: "various or
other food products", beverages, meat processing and dairy products. The
four major sectors represent together around 80% of the EU's F&D
sector's total turnover. The evolution of turnover in these sectors over
the past 15 years, mostly reflects changing consumer behavior.

With EUR 65 million in 2001, the "various foods" category is the largest
contributor to the EU-25 value added. This category is a heterogeneous
group of products that includes bakery, pastry, chocolate and sugar
confectionery products, noodles and pasta, tea and coffee and all other
non-defined or relatively new food processing activities. The
manufacture of bread, fresh pastry goods and cakes was the largest
activity in this category.

The meat processing sector generated a value added of EUR 31 billion.
Preferences for different types of meat differ from member state to
member state. In the past years, the EU's meat processing sector has
been confronted with several animal and human health safety crises such
as dioxin contaminated poultry, BSE, foot and mouth disease, Avian Flu.
Despite these incidents, the meat processing sector has maintained and
even improved its position within the F&D sector.

The dairy products sector generated a value added of EUR 18 billion.
Most dairy products are destined for human consumption with the
exception of powdered milk which is also used for cattle rearing. Facing
a saturated final market, the dairy sector responded to changing
consumers' demands by introducing low-fat products and fresh products in
most product segments and uses health claims as a marketing tool for
product differentiation. Milk production in the EU is governed by
production quotas which imposes higher input prices on dairy
manufacturers compared with free market conditions.

The EU-25 beverage sector generated a value added of EUR 31 billion in
2001. The beverage sector is marked by a strong differentiation of
products and has, in contrast to many other food products, high
advertising budgets. Multinational corporations dominate the beverage
market. Typical for the EU beer market are the exclusive distribution
contracts whereby brewers control a network of outlets to exclusively
sell their beer brands. The largest product segment in volume terms was
packaged water.

  --------------------- -------------- --------- ----------- --------- ------------- -------------
  **EU-25 PRODUCTION BY                                                              
  SECTOR - 2001**                                                                    

  **Sector**            **Turnover**             **Value               **Number of   **Number of
                                                 Added**               Employees**   Companies**

                        **EUR          **%**     **EUR       **%**     **1,000**     
                        billion**                billion**                           

  Meat products         161            20.5      31          17.6      976           47,417

  Fish products         19             2.4       4           2.3       134           3,799

  Processed fruit &     46             5.9       10          5.7       257           8,194
  vegetables                                                                         

  Oils and fats         34             4.3       4           2.3       67            7,200

  Dairy products        117            14.9      18          10.2      396           10,632

  Flour & Starch        31             3.9       6           3.4       118           6,997
  products                                                                           

  Animal feed           52             6.6       7           4.0       131           5,115

  Various food products 207            26.4      65          36.9      1,861         172,992

  Beverages             118            15        31          17.6      446           19,462

  **Total**             **785**        **100**   **176**     **100**   **4,386**     **281,808**
  --------------------- -------------- --------- ----------- --------- ------------- -------------

Source: Eurostat

![](media/image2.wmf)

![](media/image3.wmf)

# TOP EU MANUFACTURERS

Top EU manufacturers ranked by 2003-2004 sales:

+------------+------------+----------+---------+----------------------+
| **Manu     | *          | **Food   | **Em    | **Sector**           |
| facturer** | *Country** | Sales**  | ployees |                      |
|            |            |          | (1      |                      |
|            |            | **EUR    | ,000)** |                      |
|            |            | b        |         |                      |
|            |            | illion** |         |                      |
+------------+------------+----------+---------+----------------------+
| Unilever   | Neth       | 26.2     | 253     | Dairy, beverages,    |
|            | erlands/UK |          |         | dressings, frozen    |
|            |            |          |         | foods, cooking       |
|            |            |          |         | products             |
+------------+------------+----------+---------+----------------------+
| Diageo     | UK         | 13.7     | 32      | Alcoholic beverages  |
+------------+------------+----------+---------+----------------------+
| Danone     | France     | 13.1     | 89      | Dairy, beverages,    |
|            |            |          |         | biscuits and cereals |
+------------+------------+----------+---------+----------------------+
| Cadbury    | UK         | 9.4      | n/a     | Beverages,           |
|            |            |          |         | confectionery        |
| Schweppes  |            |          |         |                      |
+------------+------------+----------+---------+----------------------+
| Heineken   | N          | 9.3      | 61      | Beer                 |
|            | etherlands |          |         |                      |
+------------+------------+----------+---------+----------------------+
| Parmalat   | Italy      | 7.6      | n/a     | Dairy, snacks,       |
|            |            |          |         | beverages            |
+------------+------------+----------+---------+----------------------+
| Scottish & | UK         | 7.3      | 16      | Alcoholic beverages  |
| Newcastle  |            |          |         |                      |
+------------+------------+----------+---------+----------------------+
| Associated | UK         | 7.1      | 35      | Sugar, starches,     |
| British    |            |          |         | prepared foods       |
| Foods      |            |          |         |                      |
+------------+------------+----------+---------+----------------------+
| InBev      | Belgium    | 7.0      | 38      | Beer                 |
+------------+------------+----------+---------+----------------------+
| Oet        | Germany    | 4.8      | 19      | Multi-product        |
| ker-Gruppe |            |          |         |                      |
+------------+------------+----------+---------+----------------------+
| Carlsberg  | Denmark    | 4.7      | 31      | Beer                 |
+------------+------------+----------+---------+----------------------+
| Tate &     | UK         | 4.6      | 7       | Sweetener, starches  |
| Lyle       |            |          |         |                      |
+------------+------------+----------+---------+----------------------+
| Sudzucker  | Germany    | 4.6      | 18      | Sugar, prepared      |
|            |            |          |         | foods                |
+------------+------------+----------+---------+----------------------+
| Ferrero    | Italy      | 4.5      | 17      | Confectionery        |
+------------+------------+----------+---------+----------------------+
| Bongrain   | France     | 4.0      | n/a     | Dairy                |
+------------+------------+----------+---------+----------------------+
| Nutreco    | N          | 3.7      | 13      | Meat                 |
|            | etherlands |          |         |                      |
+------------+------------+----------+---------+----------------------+
| Campina    | N          | 3.7      | 7       | Dairy                |
|            | etherlands |          |         |                      |
+------------+------------+----------+---------+----------------------+
| Pernod     | France     | 3.5      | 12      | Alcoholic beverages  |
| Ricard     |            |          |         |                      |
+------------+------------+----------+---------+----------------------+
| Numico     | N          | 3.2      | 11      | Prepared foods       |
|            | etherlands |          |         |                      |
+------------+------------+----------+---------+----------------------+
| Wessanen   | N          | 2.4      | 10      | Prepared foods       |
|            | etherlands |          |         |                      |
+------------+------------+----------+---------+----------------------+

Source: CIAA -- figures refer to world sales

# CONSUMPTION

## EU-15

According to 2001 estimates, 13% of household budgets in the EU-15 was
spent on food and non-alcoholic beverages. The share of the household
budget spent on food fell between 1995 and 2001, mainly as a result of
increasing available household income. The share varies with GDP per
head: the lower GDP per head of a country, the higher the share of money
spent on food.

![](media/image4.wmf) Source: Eurostat

## EU-25

Consumer habits vary significantly among the 25 EU member states.
Factors such as culture, tradition, household composition, income and
degree of urbanization can influence habits in each member state. The
enlargement of the EU with 10 new member states has made these
variations even more prominent than before. Consumer patterns across the
enlarged EU reflect income differences but also the availability of
goods and services. In the 1990's, the share of the household budget
spent on housing increased in the EU-15 while the share spent on food
dropped proportionally. This is not the case in the new member states
where food is still the largest expenditure, largely due to lower income
levels.

# DETERMINANTS OF FOOD CHOICE

Food choice is not only based on individual preferences but are is also
determined by social, cultural en economical circumstances. Population
studies have indicated that there are clear differences in social
classes with regard to food and nutrient intakes. Low-income groups have
a greater tendency to consume unbalanced diets. As the price premium on
healthy foods in also greater in low-income groups, there is a stronger
reliance on energy-rich but nutrient-poor foods. This leads to both
under-nutrition and to overweight and obesity.

Obesity and diet-related illnesses are a growing problem in the EU. An
increasing number of EU citizens, especially children and adolescents
are overweight. The European Commission is in the process of reviewing
how various EU policies could contribute to the fight against obesity
and launched a European Platform for Action on Diet, Physical Activity
and Health. The Platform brings together key EU-level representatives of
the food, retail, catering and advertising industries, consumer
organizations and health NGO\'s. The creation of the Platform is part of
the Commission\'s overall strategy on nutrition to address the obesity
epidemic in Europe. Members of the Platform will put forward action
plans detailing the activities they will undertake to promote healthier
diets.

Nutrition and health have become major driving forces for research and
the development of new products within the EU F&D industry. New ranges
of low-calorie products and products with lower levels of fats, sugars
and salt are being developed to cater to diet-conscious consumers. Other
major drivers for food innovation are pleasure, ethics, well-being and
convenience.

![](media/image5.wmf)

Source: CIAA

![](media/image6.wmf)

Source: CIAA

# TRADE

In 2003, the value of total EU exports of food and drink products
amounted to EUR 44.5 billion, a slight decrease compared to 2002 (-4%).
With total EU imports amounting to EUR 38.7 billion in 2003, there was a
positive trade balance of EUR 5.8 billion. European enterprises receive
export refunds for transformed agricultural products (the so-called
Non-Annex I products) to increase their competitiveness on world
markets.

The U.S. is still the main export destination for European food and
drink products, accounting for 21% of total EU exports. Other important
markets are Japan, Russia and Switzerland. Brazil, Argentina and the
U.S. are the main suppliers of food and drink products to the EU.
Imports from Brazil and Argentina are mainly soybean oilcakes used in
animal feed.

The two most important categories in terms of exports are beverages and
various food products which covers chocolate, biscuits, confectionery
and food preparations. Together they represent more than half of total
EU exports of food and drink products. In contrast with the good
performance of the various foods category (+3.4%), the exports of the
meat sector, in particular poultry meat (-20%) suffered on competitive
world markets. In terms of imports, the EU's fish sector represents a
quarter of total EU imports of food and drink products.

  -------------------------------------------- ---------- ---------- ----------
  **EU-15 EXPORTS -- BY SECTOR (Million                              
  Euros)**                                                           

  **Sector**                                   **2003**   **2002**   **%
                                                                     Change**

  Meat sector                                  3 904      4 451      -12.3

  Processed and preserved fish and fish        1 901      1 974      -3.7
  products                                                           

  Processed and preserved fruit and vegetables 2 604      2 797      -6.9

  Animal and vegetable oils and fats           2 781      2 992      -7.1

  Dairy products and ice cream                 4 768      4 767      0

  Grain mill products, starches and starch     1 757      1 868      -6
  products                                                           

  Prepared animal feed \*                      1 135      1 353      -16.1

  Chocolate, biscuits, confectionery & food    11 178     11 388     -1.8
  preparations                                                       

  Beverages                                    13 989     14 080     -0.6

  Other                                        527        652        

  **Total**                                    **44 544** **46 322** **-3.8**
  -------------------------------------------- ---------- ---------- ----------

\* This category includes prepared feed for farm animals and prepared
petfood and excludes bulk commodities such as oilseed cakes and fish
meal

Source: Eurostat

  ------------------------ ------------- ------------------- -------------
  **EU-15 TOP EXPORT                     **EU-15 TOP IMPORT  
  DESTINATIONS - 2003**                  ORIGINS - 2003**    

  **Country**              **Million     **Country**         **Million
                           Euros**                           Euros**

  U.S.                     9 178         Brazil              3 935

  Japan                    3 351         Argentina           3 311

  Switzerland              2 813         U.S.                2 799

  Russia                   2 456         Poland              1 582

  Canada                   1 396         New Zealand         1 433

  Norway                   1 211         China               1 325

  Poland                   1 165         Switzerland         1 299

  Czech Republic           919           Thailand            1 168

  Australia                836           Norway              1 167

  South Korea              711           Turkey              1 066

  Others                   19 968        Others              19 643

  **Total**                **44 544**    **Total**           **38 728**
  ------------------------ ------------- ------------------- -------------

Source: Eurostat

  ------------ ---------- ---------- ---------- ---------- ---------- ----------
  **Annual                                                            
  increase (%)                                                        
  of EU                                                               
  exports of                                                          
  food and                                                            
  drink                                                               
  products**                                                          

  **1997**     **1998**   **1999**   **2000**   **2001**   **2002**   **2003**

  11.4%        -3.1%      -3.9%      12.5%      5.0%       2.9%       -3.8%
  ------------ ---------- ---------- ---------- ---------- ---------- ----------

Source: Eurostat

# EU/US TRADE IN PROCESSED AGRICULTURAL PRODUCTS

The U.S. remains the EU's main export destination for processed
agricultural products. EU exports to the U.S. in 2003 amounted to EUR
9.2 billion while imports from the U.S. amounted to EUR 2.8 billion, a
positive trade balance of EUR 6.4 billion. EU exports to the U.S.
increased by 46% from 1998 to 2003 while total EU exports of food and
drink products registered a growth of only 12% over the same period.

Beverages represent more than half of the EU's processed agricultural
products to the U.S. Other main products exported to the U.S. are: dairy
(EUR 536 million), oils and fats (EUR 498 million), preparations of
cereals, flour, starch and milk (EUR 494 million) and cocoa preparations
(EUR 424 million).

Main EU imports of processed agricultural products from the U.S. are:
animal feed (EUR 680 million), beverages (EUR 676 million), processed
vegetables and fruit -- incl. processed nuts - (EUR 244 million) and
oils and fats (EUR 110 million). Beverages cover both alcoholic and
non-alcoholic beverages: mineral waters, soft drinks, beer, wine and
spirits. Fruit juices are listed as a separate category.

+---------------------------------+---------+--------+-------+-------+
| **EU/US TRADE, BY SECTOR - 2002 |         |        |       |       |
| and 2003 (million Euros)**      |         |        |       |       |
+---------------------------------+---------+--------+-------+-------+
|                                 | *       |        | **2   |       |
|                                 | *2002** |        | 003** |       |
+---------------------------------+---------+--------+-------+-------+
| ## Product                      | **I     | **Ex   | **Imp | **Exp |
|                                 | mport** | port** | ort** | ort** |
+---------------------------------+---------+--------+-------+-------+
| Processed meat                  | 36      | 263    | 38    | 279   |
+---------------------------------+---------+--------+-------+-------+
| Fish products                   | 114     | 38     | 73    | 37    |
+---------------------------------+---------+--------+-------+-------+
| Processed vegetables            | 150     | 462    | 135   | 418   |
+---------------------------------+---------+--------+-------+-------+
| Processed fruit                 | 111     | 94     | 109   | 85    |
+---------------------------------+---------+--------+-------+-------+
| Juices                          | 114     | 78     | 89    | 51    |
+---------------------------------+---------+--------+-------+-------+
| Products of the milling         | 20      | 78     | 13    | 91    |
| industry                        |         |        |       |       |
+---------------------------------+---------+--------+-------+-------+
| Dairy                           | 21      | 545    | 26    | 536   |
+---------------------------------+---------+--------+-------+-------+
| Beverages                       | 669     | 5 903  | 676   | 5 873 |
+---------------------------------+---------+--------+-------+-------+
| Preparations of cereals, flour, | 55      | 555    | 47    | 494   |
| starch & milk                   |         |        |       |       |
+---------------------------------+---------+--------+-------+-------+
| Cocoa preparations              | 16      | 415    | 17    | 424   |
+---------------------------------+---------+--------+-------+-------+
| Oils & Fats                     | 150     | 515    | 110   | 498   |
+---------------------------------+---------+--------+-------+-------+
| Sugar & confectionery           | 65      | 208    | 58    | 183   |
+---------------------------------+---------+--------+-------+-------+
| Animal feed ~1~                 | 842     | 98     | 680   | 86    |
+---------------------------------+---------+--------+-------+-------+
| Coffee, tea & spices            | 27      | 246    | 25    | 255   |
+---------------------------------+---------+--------+-------+-------+
| Other food products ~2~         | 317     | 243    | 275   | 281   |
+---------------------------------+---------+--------+-------+-------+

Source: Global Trade Atlas

~1~ HS code 23 -- includes oil cakes and fish meal

~2~ includes yeasts, sauces, soups, ice cream and protein concentrates

The top-3 importing member states of U.S. food and drink products in
2003 are: U.K. (EUR 822 million), Netherlands (EUR 475 million) and
Germany (EUR 238 million). Main U.S. products exported to the U.K.
include: beverages (EUR 292 million), animal feed (EUR 186 million) and
other food products (EUR 119 million). Main U.S. exports to the
Netherlands include: animal feed (EUR 231 million), other food products
(EUR 106 million) and beverages (EUR 94 million). Main U.S. exports to
Germany include: beverages (EUR 101 million), animal feed (EUR 82
million) and processed fruit and vegetables (EUR 44 million).

The top-3 exporting member states are: France (EUR 2,128 million), Italy
(EUR 1.796 million) and Netherlands (EUR 1.388 million).

  -------------- -------------- -------------- -------------- --------------
  **PROCESSED                                                 
  AGRICULTURAL                                                
  PRODUCTS:                                                   
  EU/US TRADE,                                                
  BY MEMBER                                                   
  STATE -- 2002                                               
  & 2003                                                      
  (million                                                    
  Euros)**                                                    

  **MEMBER       **2002**                      **2003**       
  STATE**                                                     

                 **IMPORT**     **EXPORT**     **IMPORT**     **EXPORT**

  AUSTRIA        15             136            14             197

  BELGIUM        126            198            103            212

  DENMARK        70             361            53             367

  FINLAND        14             51             15             43

  FRANCE         143            2 155          138            2 128

  GERMANY        282            751            238            761

  GREECE         33             110            24             103

  IRELAND        150            213            122            265

  ITALY          125            1 846          109            1 796

  NETHERLANDS    605            1 478          475            1 388

  PORTUGAL       77             80             63             61

  SPAIN          179            677            146            646

  SWEDEN         60             454            50             442

  U.K.           829            1 233          822            1 182
  -------------- -------------- -------------- -------------- --------------

Source: Global Trade Atlas

# INFO FOR U.S. EXPORTERS 

Import regulations are harmonized throughout the EU. Detailed
information on EU import requirements, food standards, customs duties,
etc. is available on U.S. Mission to the EU's website at
<http://www.useu.be/agri/usda.html> and in the "Food & Agricultural
Import Regulations & Standards (FAIRS)" reports on
<http://www.useu.be/agri/fairs.html>. Exporters can also subscribe to a
bi-weekly e-newsletter that provides information on changes to EU rules.

New-to-market as well as experienced exporters may wish to check FAS'
U.S. Exporter Assistance site at
<http://www.fas.usda.gov/agx/exporter_assistance.asp> for information on
trade shows, export programs, buyer lists, etc.

Although the EU has become a more homogeneous food and drink market,
significant differences still exist in national consumption trends. A
thorough analysis of the best prospects for U.S. products is provided in
the "Exporter Guides" and "Food Processing Ingredients Sector" reports
prepared by the Offices of Agricultural Affairs in the individual member
states. To download these reports go to FAS' Attache Reports site at
<http://www.fas.usda.gov/scriptsw/AttacheRep/default.asp> and select a
category.

# GLOSSARY

\- BSE: Bovine Spongiform Encephalopaties

\- CAP: Common Agricultural Policy

\- EU-15: European Union consisting of 15 member states (Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, Netherlands, Portugal, Spain, Sweden, United Kingdom)

\- EU-25: EU-15 + 10 new member states (Cyprus, Czech Republic, Estonia,
Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia)

\- EUR: Euro (European currency)

\- FAS: Foreign Agricultural Service

\- F&D: Food & Drink

\- GDP: Gross Domestic Product (Final result of the production activity
of resident producer units. Corresponds to the economy's total output of
goods and services, less intermediate consumption.)

\- NGO: Non-Governmental Organization

\- SME: Small and Medium-Sized Enterprises

\- U.K.: United Kingdom

\- U.S.: United States

\- USD: United States Dollar

\- VAT: Value Added Tax

\- Apparent Labor Productivity: value added at factor cost divided by
the number of persons employed (expressed in EUR 1,000 per person
employed).

\- Intermediate consumption: value of good and services consumed as
inputs in the production process.

\- Non-Annex I products: high added value products (such as chocolate,
cookies, ice cream and spirits) not included in Annex I to the Treaty of
Amsterdam eligible to receive EU export refunds.

\- Value added: value added measured at factor cost is the gross income
from operating activities after adjusting for operating subsidies and
indirect taxes.

\- Turnover: corresponds to market sales of good and services supplied
to third parties. It includes all duties and taxes (except VAT) and
other charges (transport, packaging, etc.) passed on to the customer.

Sector Definitions:

\- Meat: covers all meat processing stages that follow on from animal
rearing. Also includes the treatment of hides and skins, the rendering
of fats and the processing of animal offal.

\- Fish: covers the preparation and preservation of fish, crustaceans
and mollusks. Manufacture of fish soups and oils and fats derived from
aquatic species is not included.

\- Dairy: covers the production of fresh milk, cream, butter, yogurt,
cheese, whey, ice creams and sorbets.

\- Other food products: covers the production of bread, sugar,
confectionery, pasta, tea, coffee, homogenized and dietetic foods.

\- Beverages: covers both alcoholic and non-alcoholic beverages.

Exchange rates:

\- 2004: 1 Euro = 1.2433 USD

\- 2003: 1 Euro = 1.1309 USD

\- 2002: 1 Euro = 0.9449 USD

# SOURCES

CIAA (Confederation of the Food and Drink Industries of the EU):

\- Data & Trends of the EU F&D Industry 2004

\- F&D Industry: Initiatives on Diet, Physical Activity and Health

Eurostat:

\- European Business -- Fact and Figures

\- Eurostat 2004 Yearbook

\- Statistics in Focus: The Food Industry in Europe

\- Statistics in Focus: The European Consumer in the Enlarged Union

\- Economy of the European Union 2002

European Commission (DG Employment & Social Affairs):

\- The Social Situation in the European Union 2004

\- Green Paper "Confronting demographic change: a new solidarity between
the generations"

European Food Information Council:

\- Food Today Newsletter

Global Trade Atlas (trade statistics)

**Visit our website:** our website
**[www.useu.be/agri/usda.html]{.underline}** provides a broad range of
useful information on EU import rules and food laws and allows easy
access to USEU reports, trade information and other practical
information. E-mail: AgUSEUBrussels@usda.gov

**Related reports from USEU Brussels:**

  ------------------------------------------------------------ ---------------------------------------------- --------------
  **Report Number**                                            **Title**                                      **Date
                                                                                                              Released**

  E23189                                                       The EU Food & Drink Industry in Figures        10/8/2003

  E35060                                                       Allergen Labeling -- Temporary Exemptions      3/23/2005

  E35025                                                       Pre-Packed Products: Simplified Legislation    2/8/2005

  E34103                                                       Food Contact Materials -- Active & Intelligent 12/13/2004
                                                               Packaging                                      

  E34093                                                       Allergen Labeling on Wine                      11/29/2004

  E34054                                                       FAIRS                                          8/31/2004

  E23136                                                       Commission Proposal on Nutrition & Health      7/2003
                                                               Claims                                         

  These reports can be accessed through our website                                                           
  [www.useu.be/agri](http://www.useu.be/agri) or through the                                                  
  FAS website                                                                                                 
  <http://www.fas.usda.gov/scriptsw/attacherep/default.asp>.                                                  
  ------------------------------------------------------------ ---------------------------------------------- --------------