The European port landscape is a mature ecosystem, connected to hinterlands that are not expected to experience drastic changes in its connectivity infrastructure as well as the size of its population. As such, understanding the challenges of the system and its supply chains is critical to succeed in this market. In this article, we present ALG’s view of the structure of the European port ecosystem, the main challenges and uncertainties of the European food supply chain and how logistics players can approach their strategy.
Snapshot of the European Port Ecosystem
The complex competitive landscape of the European ports can be structured by an ecosystem formed by 4 different hinterlands: Le Havre-Hamburg, West Mediterranean, East Europe and Baltic Sea. Each hinterland serves the import/export cargo volumes of different European regions, supported by the connecting land infrastructure between the ports and the main cities.
Figure 1. Hinterlands and cargo import/export flows of the main European ports
The share of import/export volumes across the 4 hinterlands has remained relatively constant during the past decade:
- A slight increase in the volumes of the southern ports can be observed, driven by an improvement of their connectivity infrastructure with central Europe that has helped expanding the reach of the West Mediterranean hinterland up to the southern regions of France.
- The road, railway and waterway connectivity continues to be a key contributor in expanding the reach of the northern ports towards central and parts of Eastern Europe, also supported by a slower development of the connectivity infrastructure with the Balkans, Greece and the Black Sea ports.
- The seaport connectivity of the UK has evolved following the implementation of the Brexit agreement: European traders ceased re-exporting products to the UK due to the double taxation effect. Indeed, the EU’s share of UK imports has been stable at around 70% over the last 10 years, however, in 2021, this figure saw a decrease to 60%.
The largest share of container volumes to and from Europe passes through the Le Havre-Hamburg range, led by the top-three ports of the Continent in 2021 by volume handled: Rotterdam, Antwerp and Hamburg. The three ports combine for an approximate handling capacity of ~54 Mn TEUs, which is going to be expanded to ~60Mn TEUs over the next decade, further securing their leading position in the continent.
Without any structural changes expected in the connectivity infrastructure of the 4 hinterlands, the ports in the European ecosystem depend on capacity improvements and expansions to capture container traffic from neighbouring ports. Moreover, capacity increases not only support traffic capture within the same hinterland, but they also have a cumulative effect that can increase the competitiveness of the hinterland against the rest of the European ecosystem.
Challenges of the food supply chain in Europe
The food trading in the ports supply chain context can be differentiated by two types of trade: dry containers and refrigerated containers. Basic raw ingredients such as grains, sugars, salts or spices are typically transported in dry containers. However, the transportation of perishables such as fruit and vegetables, meat, fish, pre-packaged perishables and ultra-frozen products is carried out through refrigerated containers, or “reefers”. This type of containers is also used for the transportation of pharmaceuticals, flowers and plants. However, the majority of the traffic observed in the European port ecosystem is formed by that of food products.
The import/export volumes to and from the European Union for fruit & vegetables have remained relatively stable in the last 5 years. While the imports experienced a slow annual grow of 0.5%, the exports presented a slight decrease of -0.7% YoY between 2017 and 2021. Furthermore, the projections from the European Commission (EU Agricultural Outlook 2021-31) and the OECD forecast the volumes to remain stagnant for the next decade.
Figure 2. Historical fruits & vegetables imports and exports to / from the EU (Mn tons)
In this market context, companies operating in food trading in Europe face several challenges:
- Lack of integration of the supply chain, leading to higher complexity and extra operating costs
- Increasing costs of the cold chain journey, driven by high energy consumption, maintenance and salaries
- An evolving and complex regulatory landscape, with policies affecting the sector towards environmental protection and country regulations
- Insufficient connectivity infrastructure between the port and the hinterland, in some European regions
- The impact of food security in the context of the EU regulations, with potential implications in the evolution of the import/export flows
- Lack of dedicated food handling facilities and specialization in some ports
Recommendations to enable operations in the European food trading
As such, companies operating in the food trading landscape in Europe must define an approach to market to allow them to navigate the challenges identified.
Figure 3. High level methodology to enable operations in European food trading
Review regulation and understand constraints
In a complex and evolving regulatory landscape, players operating in the food trading industry must be able to identify not only the constraints of the current regulations, but also the impact of new policies into their operations.
The outcomes of a full regulatory landscape review can therefore help companies to optimize the investments into the logistics facilities, set up the appropriate structure within their operations and improve their commercial offering to adapt to changing requirements from end-users.
Estimate addressable market
In a market where access to updated and trustable data becomes a challenge, correctly estimating the addressable market for operators within the food trading industry is critical. Amongst others, the addressable market for food trading logistics operations is defined by the share of traffic across the identified hinterlands, the traffic share between the ports within the same hinterland and the share of reefer containers from all container traffic.
Furthermore, a detailed assessment needs to be carried out to remove the traffic for non-food related products (such as pharmaceuticals) as well as the volume of empty reefers moved within the port.
Identify competitive landscape
The food trading industry in Europe is a market that presents high fragmentation in the number of competitors throughout the whole supply chain. Moreover, in ports with high container traffic, the level of consolidation is low, and supply chains are populated by multiple companies across each one of the trading steps.
A successful approach to enable strong operations will need a map-out of the competitors of the company operating in the same space. The continuous consolidation of the supply chains presents yet another problem, as niche players offering specialized services can see consolidated competitors upscaling their services to provide better, more tailored solutions for the end user.
Analyze supply chain operating costs
The final step will be for the companies to fully assess the potential operating costs they will incur in when developing their activity in the ports of Europe. With high energy and salary costs, low level of automatization and strong regulatory constraints, the companies must be able to find efficiencies in their operations to secure advantages against other competitors.
ALG has extensive experience and knowledge of the European ports and logistics market, through our local and international pool of consultants, as well as a vast experience in the development of strategic assessments, market assessments, commercial and technical due diligences in the sector. If you would like our team to provide you with additional insights or require our assistance to investigate potential business opportunities for your company, please do not hesitate to contact us.
About the authors
Genís García Alzórriz holds a MSc. in Civil Engineering and is a Principal in ALG and Head of Logistics in Dubai firstname.lastname@example.org
Ignasi Buch holds a MSc. in Civil Engineering and an MBA from IESE Business School, and is an Engagement Manager at ALG in Dubai email@example.com
Luís Guimaraes holds a BSc in Chemical Engineering and an MBA in Project Management, and is a Senior Consultant at ALG in Dubai firstname.lastname@example.org
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