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Spain: Tourism is a strategic sector for food and beverage

Spain is a major producer and exporter of food and agricultural products, with other EU countries as its primary export destination. Spanish producers, processors, wholesalers, retailers, food service operators, and importers are all part of a well-developed agribusiness sector, contributing to a competitive and dynamic domestic scenario.

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Spain’s powerful world empire of the 16th and 17th centuries ultimately yielded command of the seas to England. Subsequent failure to embrace the mercantile and industrial revolutions caused the country to fall behind Britain, France, and Germany in economic and political power. A peaceful transition to democracy following the death of dictator Francisco FRANCO in 1975, and rapid economic modernization (Spain joined the EU in 1986) gave Spain a dynamic and rapidly growing economy.

More recently, Spain has emerged from a severe economic recession that began in mid-2008, posting four straight years of GDP growth above the EU average. Unemployment has fallen, but remains high, especially among youth. Spain is the Eurozone’s fourth largest economy. The country has faced increased domestic turmoil in recent years due to the independence movement in its restive Catalonia region.

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Spain economy indicators

Tourism is a strategic sector for Spain, providing 12.3 percent of GDP and 12.7 percent of employment. After hosting another record-breaking number of foreign visitors in 2019, in 2020, Spain received 19 million visitors, 77.3 percent less tourists compared to the previous year. From January to August 2021, Spain recovered 25.8 percent of the tourists lost because of the pandemic, receiving 15 million tourists.

In terms of population and demographic trends, Spain’s population went from 40.5 million in 2000 to 47.4 million in 2020, partly thanks to the economic growth of the early 2000s. Nevertheless, having one of the lowest fertility rates in the world is causing Spain’s population to age rapidly and this trend is forecast to continue in the next decade. Correspondingly, the market will have to adapt to this demographic change and the impact on future consumer trends and preferences. This will create opportunities for new formats and products targeting that segment of the population.

In 2020, Spain imported $43.9 billion worth of agricultural products from the world.

Best Consumer-Oriented Product Prospects Based on Growth Trends:

Frozen Fish
Significant competition from local producers. Domestic consumption and exports largely exceed local supply. Other major suppliers offer high quality fish products at competitive prices.

Almonds
Spain produces almonds, mostly used roasted as a snack. Limited competition from other countries. Spanish demand is high, and production is insufficient to satisfy demand.

Pulses
Spain is a traditional consumer of pulses. Local production is not sufficient to fulfill internal demand. Strong competition from Argentina, which increased its presence in recent years, and Canada, a traditional supplier.

Pistachios
Local pistachio production is growing, but still very limited. Demand continues to grow significantly. Germany is the main entry point for U.S. and Iranian pistachios to the EU which are re-exported to other Member States.

Sunflower Seeds
Traditional snack. Local production is insufficient to meet demand. Growing competition from China, Argentina and Israel for confectionery.

Sweet Potatoes
Demand and consumption continue to be strong. The main origin of Dutch sweet potatoes is the United States, many of which are re-exported to other countries like Spain.

Condiments & Sauces
The U.K. is facing export challenges due to Brexit that could benefit U.S. suppliers. Main competitors are other EU countries.

Spain food and beverage indicators

The Spanish Food Retail market

Supermarkets will have to adapt to the increasing competition from convenience stores as consumers enjoyed, both during lockdown and pre-pandemic, the speed and convenience of shopping at such retailers. As a result, supermarkets will focus on expanding with smaller sized supermarkets closer to customers, considered a winning strategy for future development.

Mercadona continues to be the dominant retailer in Spain, accounting for 24.3 percent of total sales, far outperforming others. Despite this, it lost ground to its competitors in 2020, for the first time in twenty years, and realized the largest loss in market share among all of the major chains (losing 1.1 percent of the market). Carrefour remained the second largest player, accounting for 9.3 percent of the market, but down 0.3 percent from 2019. Despite recovering buyers, Carrefour was impacted by the poor performance of its hypermarket channel as consumers faced significant mobility limitations.

Spanish retailers with an aggressive price strategy are winning ground, particularly Lidl, who began 2020 as the third largest retailer, holding 5.0 percent of the market, up 0.5 percent from the previous year. As a result, retailer DIA fell to the 5th position, with 4.6 percent of the market, losing 0.6 percent from 2019.

In addition, according to Kantar, traditional markets and specialized traders (e.g., fruit, fish and meat) retained 19 percent of the market and halted their progressive market share decline of the last five years.
Furthermore, two new players entered the market: Mere and Amazon Fresh. The Russian and U.S. giants landed in Spain with two very different models.
Mere does not have shelves, counters or clerks. Everything is sold from pallets or boxes in a format known as ‘no-frills,’ which focuses on austerity, discounts, and bargains.
On the other hand, Amazon Fresh’s strong points are know-how and network, offering luxury, speed, and convenience as world leaders in home delivery — a sector clearly expanding in Spain.

E-commerce experienced a substantial push in 2020, especially during the strict confinement period from March until May. The pandemic further enabled a shift towards e-commerce in Spain, which was already developing before the pandemic. In particular, food and drink e-commerce grew considerably during the lockdown period as consumers looked for safe and contactless ways to complete their grocery shopping.

Changing consumer habits and the development of new technologies are leading the sector to develop new commercial formats and greater diversification. According to Euromonitor, the digitization progress is leading to a reinvention of commercial formats, which is translating into greater diversification. The omnichannel strategy has been identified by retailers as the most desired, especially in food.

Omnichannel places focus on the customer not the product, removing boundaries between the different channels. This omnichannel includes formats such as online shopping, telephone, delivery services, or click & collect.

The Spanish Foodservice market

Typically, Hotel-Restaurant-Institution operators buy their food ingredients from importers or wholesalers. Some large companies buy directly from foreign suppliers.

Spain exports around 20 percent of the Spanish food production, mainly to the EU. Some food-processing companies concentrate on the domestic or on export markets, but most of them will have mixed customers. Companies supplying mainly the domestic market frequently market their products directly and have their own logistic infrastructure. However, their customers will vary from wholesalers to buying groups and retailers. Companies producing for re-export may have their own marketing office overseas, local agents, or may work with local importers.

Spain welcomed 18.9 million foreign tourists in 2020, down from the record of 83.5 million in 2019. This was a decrease of 77.3 percent in the number of foreign tourists visiting the country in 2020 because of the coronavirus pandemic, according to data published by the Spanish Statistical Office (INE).

The HRI supply channels are diverse and serve small and large customers with different needs. Beverage suppliers are very specialized since most beverage consumption takes place in bars, cafeterias, and restaurants.

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Exporters face great challenges with EU labeling and traceability regulations. Labeling is required for any product that contains genetically modified ingredients. Since consumers have relatively low acceptance of genetically modified foods, food processors, retailers, and the HRI sector are reluctant to purchase these processed products or food ingredients for processing.

The Spanish importer and/or agent is responsible for obtaining the appropriate Import Certificate.

Route-to-market

The Spanish market is composed of regional markets serviced by two major hubs, Madrid and Barcelona. Spain has sales channels ranging from traditional distribution methods – whereby wholesalers sell to small retailers that sell to the public – to large multinational supermarkets and retail stores.
However, personal relationships are still very important, especially within smaller organizations. There is no substitute for face-to-face meetings with Spanish business representatives in order to break into this market. An initial “yes” usually means that the company will study the situation, and not necessarily that they will buy the product.