IV range to the wall. What was supposed to be a transitional, skin-change phase after the Covid shakeup turned out to be a cul de sac.
The skin change desired by industry players took inspiration from what happened to the U.S. industry about 15 years ago: the transition from a disorganized and fragmented supply chain to a production fabric composed of large, structured and technologized companies through a process of aggregation.
Too many players in the IV range
The major players in the Italian sector had begun to take advantage of the post-Covid market conditions that had given the sector a major shakeup, to come, even gradually, to aggregate the ultra-fragmented areas and the related weakened production fabric. Having large players in the sector would have meant that it would have been possible to plan production supply and preserve profitability along the entire supply chain, starting with the agricultural side.
The situation, experts explain, however, has definitely gotten out of hand, and the excessive number of player (even improvised) chasing profitability denounced by all yards in the industry is proving to be a boomerang unmanageable to the point that some quarters have called for a cap, or worse, a cut, in the number of operators.
Operation recompacting
On this chessboard, which has now become incandescent, is convened the next table of the IV gamma committee of the Interprofessional Organization (orbit Confagricoltura) whose chairmanship has been strategically assigned to Antonio Salvatore, former president of Op Oasi (supplier to Bonduelle which, in the Belpaese is the second largest market player in the IV gamma sector after the distributor brand).
Salvatore’s appointment is even more strategic because he is also vice-president of Unaproa, the political voice, in Coldiretti’s orbit, of UIF IV gamma, the association that brings together the nine major industries in the sector.
In summary, represents a recompacting of the entire supply chain in the face of the difficult phase of crisis that threatens to saw off the legs of a plethora of companies that are important to the country’s agricultural economy in terms of number of employees, turnover and, above all, in terms of the forward push (read investment) toward sustainability that is necessitated here by a stringent law (that on IV gamma).
In search of competitiveness
The standard imposes, among other things, a strict storage temperature level along the cold chain, 8° C. A mandatory level that is not imposed on any other supply chain in the world of fresh fruit and vegetables and would like to make it even stricter with the expected reform of the same law that would raise to 4° the temperature along the cold chain.
‘In the face of this crisis, the road of aggregation is a necessary path,’ Massimiliano De Core, president of the Interprofessional Organization, explains.. ‘The government has already fielded two decrees aimed at the IV gamma supply chain with which Masaf recognizes the greater difficulties of this sector compared to others and its greater criticalities related to the increased consumption of energy, for example, or plastic that have burdened costs beyond measure without an adjustment of equal magnitude in prices.
We look forward to the outcomes of the next meeting of the interprofessional IV range committee to be convened by July 20. At the same time, in late June, we requested a meeting with Masaf director general Luigi Polizzi to try to figure out how to restore competitiveness to this sector. We are waiting for a response’.
The road to aggregation (which has basically turned into a ‘winner takes all,’ with large industries being secured under the umbrella of private label that guarantees, at the very least, movement of large volumes) is proving, however, that something is not going right. One proof is the resounding deblacles of some of the major companies operating in this industry, such as Cultiva, queen of organic IV gamma.
The IV gamma organic sector, this known
The Rovigo-based company was approached but preferred not to respond, pursuing a line of communication that has always been rather buttoned-down toward the press.
The ‘multinational corporation in miniature’ veneta (that’s what it calls itself)-which also made a major leap forward with its production expansion in the U.S. and its agreement with Taylor Farms with a view to becoming the leading supplier of IV gamma to the U.S. East Coast-in Italy, it had specialized in organic IV gamma production, becoming, at first, PL’s main supplier to some of the largest retailers in the Peninsula.
Then, partly because of the failure of the commercialupgrade of theagrifood organic in general, which has failed (yet) to carve out the coveted space in mass distribution, has had to capitulate in the face of the higher costs of organic–already tripled for conventional product–that have not been remunerated by the prices recognized by the large-scale retail trade. Products from private label always travel, even for large weights such as 200g and 500g pouches, around the price of 0.99 cents per pack.
The downward price spiral
In the downward price push in the anti-inflationary direction, there is no shortage of intentions by traditional retailers to build customer loyalty in the no-holds-barred competition with discounters that are increasingly aligned with supermarket standards in terms of quality of offer, format and assortment depth. In this scenario, the few suppliers of organic (and biodynamic) IV gamma end up in a meat grinder that certainly does not help bring the sector out of the crisis.
‘Today you are able to grow and market in organic the more altovendent references such as, for example, arugula, lettuce and lamb’s lettuce, or misticanza, which allow for a lower cash bar. For the others you struggle to make ends meet’, explains Paolo Pari, director of Almaverde Bio.
‘Ismea is having a hard time defining a minimum price for IV gamma references, especially because of the strong differences across all production areas. From the North to the South‘, explains Felice Poli, president of OP Sole e Rugiada, which is the production side of the La Linea verde supply chain as well as co-vice president of Unaproa.
‘We are now working to define the price of arugula, the first IV gamma reference under study in implementation of the decree on unfair trade practices, and the next ones will be lettuce and lamb’s lettuce. Rather than average price, perhaps, it would make sense to talk about vocated areas for each variety.
However, the situation in these weeks remains red-hot. It is also due to a combo of factors. The difficult market situation has occurred during a delicate generational transition phase for many companies, and not all young entrepreneurs are willing to invest in the family business under these conditions. Those who continue the entrepreneurial activity often opt for less ‘complex’ productions such as those destined for the frozen food channel. Certainly, one cannot stand still in a context like this, and Unaproa offers its utmost willingness to participate in all tables dedicated to this crisis‘.
Companies close
Besides Cultiva, the sector also lost other important pieces. Among the more recent ones that have had to raise the white flag are the Romagna-based company Il Melograno or the Campania-based Adinolfi Group (also a producer of organic IV gamma), which has launched a downsizing plan. The crisis is generalized. Experts estimate that this year, precisely because of the lack of profitability, the industry has lost about 20 percent of the hectares dedicated to the sector.
‘Due to the high costs, which increase even more in the summer months in relation to the increased need for inputs such as water and energy, 30-40% of producers in the area decided not to grow the summer crop this year. In the warm months, in fact, few cuts are made that do not exceed three for the entire season. This makes the economic situation of companies even more burdensome to the point that it is more convenient to stop‘, explains Vito Busillo, president of the Consorzio della Rucola della Piana del Sele IGP.
Consumer trends
On closer inspection, however, we are not witnessing a consequence of declining demand for the ready to eat which indeed is growing on all shelves, from theambient, to frozen and even freeze-dried, which has also made great strides thanks to new low-temperature drying technologies that preserve the organoleptic and nutritional properties of the raw material intact and significantly lower production costs.
One wonders why demand is not growing for IV gamma, which, in addition to meeting the demand for ready-to-use product, is perfectly aligned with other important consumer trends such as wholesomeness and freshness, as well as low prices.
The argument does not apply to all chains.
‘In Cedigros, Selex Group, demand for IV gamma is growing. Both in terms of withdrawn and sold. As for private label references, there is no decline in volume. We work with many major companies. Almost all of them are moving to MDD.
In this sense, we need to see if they can then compensate with the volumes they sell under the manufacturer’s brand name. The last part of the cold chain could be a critical issue in maintaining the temperature of 8°C due to the lack of skilled workers in the logistics sector but also in the sales departments, or the intervention of so many middlemen. Inefficiencies could perhaps be generated at this stage’, says Giancarlo Amitrano, group I and IV purchasing manager.
What the policy does
In addition to the two decrees and the hoped-for definition of minimum prices, the latest, highly contested V supply chain announcement with a budget of more than 1 billion euros came out on June 30.
‘In Campania alone, most of the companies that participated are IV gamma,’ Busillo clarifies.
The call provides funding of up to 25 million per supply chain project and could, to some extent, support companies toward technologyupgrades on sustainability.
Today the technologies to make these productions green (value-added) are all there. But it is virtually impossible to access them due to lack of funding. Especially since there is no (for any supply chain) field-to-table carbon footprint that would allow companies that apply all the technological pluses for sustainability to concretely measure the exact amount of emissions they produce or, conversely, save.
‘In Lombardy, we have asked the councillor for agriculture to create benchmarks within the framework of the Psr that can translate into concrete support for the sector born in this region from which a production tradition has radiated out to the entire country,’ Poli says.
Mariangela Latella
Professional journalist since January 1995, he has worked for newspapers (Il Messaggero, Paese Sera, La Stampa) and periodicals (NumeroUno, Il Salvagente). She is the author of journalistic surveys on food, she has published the book "Reading labels to know what we eat".
