Puerto Rico’s food sector optimistic despite threat of ‘double-dip’ recession
Puerto Rico’s food industry eliminated 3,000 jobs during the 12-month period ended August 2012 and is bracing for the effects of a double-dip recession that could thwart sales, at least during the first half of 2013.
However, the findings of the Marketing, Industry and Food Distribution Chamber’s (known as MIDA) “Food Industry Snapshot” study point to a sector that is generally optimistic in terms of sales growth, although the island’s expected economic performance really points toward little or no improvement.
“Contrary to expectations associated with the economic stabilization experienced in recent months, Puerto Rico’s economy appears to have entered into what is known as a double-dip recession. We believe Fiscal 2014 will reflect negative growth,” Feliciano said while explaining the study’s findings.
During the presentation, Feliciano predicted the sector would grow modestly, about 2 percent, during the first six months of next year.
Puerto Rico’s food sector has been quite battered in recent years, as fragile economic conditions have put pressure on profit margins for retailers who rather than passing price increases onto consumers, have had to turn to other mechanisms to stay ahead.
According to the study, one of the results of the spiraling economy has been lay-offs, with industry jobs dropping to 22,900 in August 2012 from 25,900 in the same month the year prior. Food sales also declined moderately during the same period from $432 million to $422 million. Meanwhile, food inflation has remained moderate with an increase of 1.5 percent from October 2011 to October 2012, below the general inflation rate of 1.7 percent.
But despite the negative numbers, retailers are keeping their hopes up for a recovery.
Retired retailer Iván Santos, who chaired Wednesday’s meeting with the media, said, “although the Puerto Rico economy shows no growth trend, the food industry has seen improved performance in recent months, and key members project better volume for 2013, albeit modest.”
Strategies to stay afloat
Reacting to the findings, a panel of food industry experts discussed the strategies to face the upcoming challenges, framed within MIDA’s claims for the establishment of a sweeping food policy.
“We continue to hear about the traditional approach of only developing an agricultural policy, which excludes 85 percent of the island’s food market and is therefore 85 percet of the solution,” said MIDA Executive Vice President Manuel Reyes-Alfonso.
Companies have continued to pump money into advertising to generate sales, while 63 percent of them invested in mechanisms to increase efficiency. Although retailers are hoping to retain the current number of jobs, they plan to reduce investments, an indication of the existence of a shrinking economy.
“Given this scenario, we’re presenting 10 urgent strategies to put our businesses successfully back on track,” said Ramón Rivera, president of Quality for Business Success. “In particular it is necessary to move toward ‘cooperative competition’ (“coopetition”) throughout the supply chain. It is essential to implement measures in the short and medium term to help eliminate inefficiencies and grow the total market pie, as well as public policy.”
Meanwhile, MIDA President Ferdysac Márquez noted that the study’s value lies in that it gives members “the necessary elements to meet the challenges expected in the economy for 2013. It’s important to ask our public policy makers for the tools to address them successfully.”