Rabobank: EU Food Contract Manufacturing to Double by 2020

An anticipated compound annual growth rate (CAGR) of more than 8 percent will see contract manufacturing reach a size of at least EUR 14 billion to EUR 16 billion in the coming eight years.

11 Oct 2012 --- The European contract manufacturing market in food and beverages is expected to roughly double in size by 2020, driven by underlying demand growth, market share gains of ‘A-brands’ and increased levels of outsourcing activity, according to a new report by Rabobank Food & Agribusiness Research and Advisory. An anticipated compound annual growth rate (CAGR) of more than 8 percent will see contract manufacturing reach a size of at least EUR 14 billion to EUR 16 billion in the coming eight years.

Contract manufacturing addresses some of the most profound challenges faced by the food and agri (F&A) industry to date, such as the scarcity of agricultural raw materials, a constrained financial playground, growth in private label and the ongoing consolidation in the most important distribution channel: food retail.

Despite the buoyant growth outlook, contract manufacturing will still be a modest niche even in 2020, by then representing only 6 percent of the European processed food and beverages market. However, in terms of the implied shift in the supply structure and the headache reduction for brand manufacturers, contract manufacturing is unmatched in its impact on the food and beverage market.
 
The main limiting factor in the growth outlook for contract manufacturing is the required goal congruence. Without a balance between both parties, there is limited incentive on either side to make a success of any outsourcing deal. Finding this balance takes a lot of time and effort, which means that outsourcing trajectories are difficult to predict and that growth may not necessarily be linear.
 
Source: Rabobank