The future of food in Serbia
Serbia’s food and beverage industry is shaping up to serve the world
Along with its close cousin agriculture, food and beverage is a hero sector in Serbia. It contributes almost 3% of GDP and, perhaps more importantly, generates around 20% of manufacturing output.
It grew 3.8% in the last year in spite of Covid-19, with beverage manufacturing, for example breweries, being the only sector that recorded a drop – a natural consequence of the halt to hospitality during state of emergency measures. All other sectors recorded decent growth. The largest increase was in dairy and food for pets. “More or less, this year we saw a full recovery. The long-term impact of Covid is not seen in food and beverage,” says Predrag Milenović, head of corporate and SME division of Banca Intesa, Belgrade.
In the last 10 to 15 years, a lot of high-profile global food and beverage companies have arrived in Serbia: Coca-Cola, PepsiCo and Nestlé among them. Naturally, they have brought new models and helped to boost productivity, which in this sector is lower than in comparative regional countries and EU countries, at about 65% of that of Western economies.
Quality standards are also catching up to a certain extent. Small and medium-sized companies are less willing to invest in the improvements to their products that could help them reach bigger global markets, because the domestic market is so price conscious.
“We have a lot of people who are living to small budgets and so the consumer is always driven by the price of food,” says Milenović. “There is no sense to invest in improving the quality of your products or making them premium if the new level of quality will not be recognised.”
Conversely, there are pockets of Serbian food and drink that are recognised for world-class quality. Nine growing regions, to the north of Belgrade and down the middle of the country, produce wines from a variety of grapes.
Even though wine has been made for centuries, it is an emergent export sector in Serbia as smaller producers are beginning to be internationally recognised by wine fans.
High-quality frozen raspberries are a more established export – accounting for 40% of the total value of fruit exported in 2020, some €259 million.
Producers have exported dairy, fruit and finished grain products to EU markets in the last 10 to 15 years, but a new market is opening up in Russia as Serbia has customs-free trade agreements with the superpower. “Most of our companies are trying to reach the EU market and Russia as an alternative, but also we can see that we have a lot of food exported to Dubai, Japan, even to China,” says Milenović.
Consumer preferences for healthy food emerged during the pandemic, especially around organic fruit and vegetable products, and products with perceived immunity-boosting ingredients. Smaller retailers have also become more popular as they are more likely to sell these types of products that are manufactured closer to home.
At-home dining is also taking off and there’s an emergent grocery and hot food delivery sector to go with it. A couple of small start-ups in Serbia have been acquired by bigger European start-ups (Donesi was acquired by Glovo in May 2021, for example). Other developments are in line with what is being seen in the rest of the world: “Big retail chains are investing now in data-driven practices. They are using data more to both acquire new consumers and cater to the needs of existing ones, through things like loyalty cards and apps,” says Milenović.
Sustainability is also moving up the priority list in the food and beverage industry of Serbia. For example, plastic carrier bags are now banned in Belgrade. But domestic consumers are still motivated primarily by cost, especially in times of greater inflation, so there is plenty of room for the development of sustainable solutions in food production that don’t impact the end consumer price.
“We are still at the beginning of this journey, we need to harmonise with the wider agenda, with bylaws and regulations that help businesses tackle this topic,” says Milenović. “We have a lot of positive examples from multinational companies.”
Banca Intesa financed in a biogas plant that uses food waste from a prominent international chain in Serbia and transforms it into energy. “There are plenty of examples of individual businesses in Serbia looking to create Circular Economy solutions. The wider question is how the Serbian food and beverage industry links with wider global supply chains, and the nature of their business,” says Milenović.