Economy

Food industry needs to reorganize to avoid collapse

Manuel "Coco" Morales and Manuel Maldonado, chairman and CEO, respectively, of Intelligence Forecasting. (Credit: © Mauricio Pascual)

Puerto Rico consumers spend $8.5 billion in food annually, an amount that represents 15 percent of their total expenses, making the sector one of the most important components of the local economy.

However, the industry is facing certain risks that call for making drastic changes, such as creating a better flow among members of the supply chain, educating to strengthen the decision-making process and striking strategic alliances and consortia among producers, suppliers and distributors, among other strategies.

“Companies are dealing with the pressure of managing their cash flow, reducing their debt and generating adequate profit margins,” said Manuel Maldonado, who along with Manuel “Coco” Morales, of Intelligence Forecasting Corp. presented a snapshot of the island’s food industry sponsored by the Marketing, Industry and Food Distribution Chamber, known as MIDA.

The executives noted that the food industry’s problems have been compounded by a loss of about 12 percent of its business volume this year, resulting from a reduction in consumer traffic and the average cash register receipt.

“Puerto Rico’s population was reduced by 82,000 from the year 2000 to 2010, and 48 percent of the commercial bankruptcies are attributed to restaurants, two significant issues that affect the food service industry,” said Maldonado.

Meanwhile, Economist José Joaquín Villamil said the island’s main economic indicators show a drop in employment, but an increase in food sales that put the figure at levels similar to 2009.

“Consumption levels at food and drink establishments outside the home, however, continue to drop, showing stagnant sales, which is probably a reflection of the contraction in discretional spending that consumers have implemented,” Villamil said.

While consumers expressed distrust in the economy during the third quarter of the year, something his Estudios Técnicos firm analyzed, there are indications that an improvement is ahead in comparison to 2010, Villamil said.

“This has been reflected in the consumption levels of perishable and non-perishable goods. While there are factors that introduce a level of uncertainty in any projection, the basic scenario shows an increase in sales of about 3 percent over 2010,” Villamil noted.

Author Details
Business reporter with 25 years of experience writing for weekly and daily newspapers, as well as trade publications in Puerto Rico. My list of former employers includes Caribbean Business, The San Juan Star, and the Puerto Rico Daily Sun, among others. My areas of expertise include telecommunications, technology, retail, agriculture, tourism, banking and most other areas of the economy.

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Comments (1)

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