Despite the Netherlands falling in an attractive second place in BMI’s Business Environment Ratings for the region, the impact of the global economic downturn on the Dutch economy appears to have deterred investors at least in the short term, and as such Q309 saw little industry activity within the country’s food and drink sector. With private consumption turning negative for the first time in four years it is not surprising that food and drink producers are remaining cautious. The Dutch mass grocery retail (MGR) sector, given its essential nature, had been holding up fairly well in light of the economic conditions.

However, results released this quarter from a number of the country’s leading retailers suggest that the grocery segment may just now be starting to feel the full effects of the downturn. Netherlands-based supermarket chain Sligro Food Group announced that for H109 profit fell 6% to EUR27mn while sales for the period fell 0.7% to EUR1.08bn. While at first glance, Ahold’s results for Q209 look relatively strong; sales rose 11.5% and operating profit increased an impressive 26%, this was largely due to the integration of 56 former Schuitema stores and identical sales at Albert Heijn supermarkets actually increased by only 0.4% year-on-year (y-o-y) representing a significant slowdown on Q109 sales.

This slowdown implies that things may get tougher for retailers in the second half of the year as rising unemployment continues to impact on consumer spending. Unsurprisingly, discount stores will be the main beneficiary of declining consumer confidence and BMI is forecasting that sales from such stores will increase 16% to reach EUR2.88bn in 2013. Meanwhile in the food and drink sector, this quarter has seen mixed financial results from a number of the country’s producers. Anglo-Dutch consumer goods giant Unilever announced a 4.1% increase in underlying sales for Q209, however, despite the rise in sales net profit fell 4% for the period. The dip in profit is attributed to price cuts and increased marketing as the company attempts to maintain sales growth to the detriment of its margins during this period of recession. Elsewhere, Dutch brewer Heineken posted better than expected financial results for the first half of the financial year. For the period net profit climbed 20% y-o-y to EUR489mn while net sales rose 11% to EUR7bn. Results released this quarter serve to highlight the pressures food and drink manufacturers as well as retailers are under in the current financial climate, and the environment is likely to remain tough until well into 2010.