Country Market Profile: Netherlands

Euromonitor reports that the Dutch contracted sharply in 2020. The Coronavirus (COVID-19) pandemic derailed the Dutch economy in the first two quarters of 2020. Since the relaxation of the containment measures in late spring, a partial rebound has been under way; this continued to take hold in the third quarter. Real Gross Domestic Product (GDP) will improve to growth of 2.4% in 2021 and will gradually decline to reach about 1.3% per year in 2024-2027.

• Real GDP fell by 3.7% in 2020 – down from growth of 1.7% in 2019. This marks the end of six years of consistent growth and will be the largest post-war contraction in the country’s history. • The real value of private final consumption rose by 1.5% in 2019 and a fall of 6.8% was expected in 2020. Consumption expenditure is weighed down by persistent Coronavirus (COVID-19) related uncertainties that depress consumer confidence, as well as adverse employment expectations that are set to keep precautionary savings elevated. • The unemployment rate rose from 3.4% in 2019 to 4% in 2020. Initially, the rise in unemployment pertained to the shedding of workers on flexible and temporary contracts in affected sectors. However, the continued increase after the economy reopened stemmed mostly from the re-entry into the labor market of those who lost their jobs at the onset of the crisis.

The Dutch economy depends crucially on foreign trade. Rotterdam is Europe’s largest port, handling more than twice as much cargo as its nearest European rival, Antwerp. The port’s industrial and distribution activities generate annual added value equivalent to around 10% of Dutch GDP. There are also a large number of coastal and international vessels providing cargo services and important ship servicing facilities.

Growth in productivity is improving but lags behind that of many European Union member states. The workforce will contract in the medium term as a result of population ageing, making improvements in labor productivity even more important. Larger fiscal surpluses will be needed to offset expected increases in population-related spending.

The Netherlands’ population was 17.3 million in 2019, up from 15.9 million in 2000. Total population will be growing very slowly in the future. Median age in 2019 was 42.7 years – 5.4 years greater than the figure for 2000 and above the regional average.

USDA’s Foreign Agricultural Service, FAS, Office of Agricultural Affairs or “OAA”, located in The Hague, hereinafter referred to as “Post” reports that although the Netherlands is a small country geographically, it is the gateway for U.S. products into the European Union (EU) due to the presence of the Port of Rotterdam, Amsterdam Schiphol Airport, the confluence of two major European rivers, and an excellent road and railway infrastructure. It is the largest importing country within the European Union (EU) and continues to be the second largest exporter of agricultural products in the world, after the

1 United States and before Germany. These exports include products produced in the Netherlands (€68.3 billion in 2020) as well as imported products that are re-exported (€27.3 billion), often after further processing and adding value.

The Netherlands is the largest market for U.S. exports of consumer ready food products in all of Europe and the 8th largest export market in the world. U.S. exports of consumer ready food products totaled US$1.2 billion in 2020, a decline of 8%. The Netherlands are the 2nd largest U.S. processed food export market in Europe after the U.K. and the 9th largest overall, totaling just over US$918.3 million, a decline of 2%. Top processed U.S. food products exported to the Netherlands in 2020 included:

• Food Preparations & Ingredients • Fats & Oils • Canned, Dried &Frozen Fruit • Alcoholic Beverages • Processed Vegetables & Pulses • Non-Alcoholic Beverages

Retail Sector:

Euromonitor reports that the packaged food retail sales value reached US$21.5 billion in 2020. That represented a growth of 11% or over US$2.1 billion since 2016. They also predict growth of 12.7% by 2025, amounting to nearly US$2.7 billion for a total packaged food value of nearly US$24.5 billion. High growth categories in the forecast include:

• Ready Meals • Pet Food • Processed Fruit & Vegetables • Sauces, Dressings & Condiments • Breakfast Cereals • Savory Snacks • Ice Cream & Frozen Desserts

Post reports that the Dutch retail sector is rather consolidated, employing over 300,000 people and operating over 4,300 stores. This industry profited from the closure of many HRI-Foodservice outlets. The industry’s turnover for 2020 is forecasted at US$52.8 billion, up by 11%. High-end continue to gain in popularity as consumers are demanding service, variety, and fresh and convenient products.

The two largest food retailers control 56% of the market. Consumers are increasingly looking for sustainable products, healthy foodstuffs, and convenient products. The Dutch are expected to continue to buy more plant-based foods and private label brands. Moreover online shopping is expected to remain popular, and consumers are expected to continue to utilize home delivery services for their groceries. Finally, food retailers are

2 expected to continue to invest in innovative food service concepts at their supermarkets in order to attract customers.

Roughly 80% of all food retail outlets are full-service supermarkets, operating between 500 and 1,500 square meters of floor space and located in cities or residential areas. Retailers with full-service supermarkets have responded to the need of the Dutch to have these supermarkets close to their homes. The remaining 20% includes: mainly ‘on the go’ or convenience stores including City, Jumbo City, Vandaag, and AH To Go, located near office buildings, and train/metro stations, and high traffic areas in city centers; some wholesalers; and a few superstores like XL and Jumbo Foodmarkt (all conveniently located in shopping malls or industrial parks).

The top two food retailers in the Netherlands, Albert Heijn and Jumbo, had a combined market share of almost 56% in 2019. The combined market share held by German discounters, and , was almost 18% in 2019. Independent food retail stores are increasingly leaving the market due to shrinking margins, growing competition from online sales, and on-going consolidation.

Post reports that overall sales of the Dutch food retail industry have increased 9% since the outbreak of the coronavirus (COVID-19). Because social distancing recommendations have prevented most people from eating out, consumers are increasingly buying more food from their local , including treating themselves with comfort food as a form of compensation. However, supermarkets and convenience stores located in tourist-focused areas, busy shopping streets, train stations, airports, and other places that depend on foot traffic have seen a significant decline in sales (or have closed their doors entirely). With the increased number of people at home, supermarkets have seen their online sales burgeon, as home deliveries have increased by 40%.

Supermarket chains saw their online sales burgeon, up 41% in the first 19 weeks of 2020 compared to the same period a year earlier. While half of Dutch consumers say they will revert to their old purchasing habits after the pandemic, roughly a quarter believe the long-term effects of COVID-19 will persist. Consumers say that for many categories (including dry groceries, beverages, and packaged foods) they plan to continue using online platforms after the crisis ends (instead of returning to a physical store).

Euromonitor reports that supermarkets saw significant growth in 2020 as a result of the COVID-19 pandemic. Supermarket density in the Netherlands is very high, and as such most consumers have a supermarket within walking or cycling distance of their homes, making visits to this grocery channel easy and convenient. As greater numbers of local consumers worked from home during the pandemic, they were able to shop in supermarkets more frequently, and those stores located in residential areas saw the strongest growth. The wide product variety and value for money that retailers in this channel can offer was also appreciated by Dutch consumers during the pandemic.

3 Albert Heijn remained unchallenged as the leader in supermarkets in value terms in 2020, thanks to maintaining the largest number of outlets, which are spread across the country. The company benefits from strong recognition for its Albert Heijn brand and years of leadership in grocery retailing. One challenge for the company has been to counter the damaging perception amongst Dutch consumers that Albert Heijn is expensive, and the company has sought to expand its private label range, in particular through its budget private label range. Albert Heijn also recently began to trial self-scanning checkouts in some of its supermarkets, after its successful experience with this payment model in its convenience stores. Jumbo Supermarkten is Albert Heijn’s main challenger, and the latter achieved rapid growth over the last decade, primarily due to the acquisition of former rivals, but did not increase its value share in 2020.

Best Product Prospects:

Post reports U.S. products present in the market that have good sales potential include nuts (almonds, peanuts walnuts, pistachios, pecan and hazelnuts); fruit juices (orange and grapefruit); beverages, (super) fruits containing high levels of antioxidants like pomegranates, all berries, etc., non-alcoholic beverages; craft beers, dried fruits (dates, figs, cranberries, raisins)

Foodservice Sector:

Post reports that the Dutch hotel, restaurant, and institutional (HRI) foodservice industry’s turnover for 2020 is forecasted at almost US$11 billion, down by 34%. The steep decrease is due to the measures taken to prevent the spread of the COVID-19 virus. For much of 2020 and 2021, public places, including bars, cafés, and restaurants, have had to temporarily close their doors (with takeout and delivery keeping some restaurants afloat). The turnover of the Dutch foodservice market in 2019 was valued at US$16 billion, up 4% from the year before.

In 2020 the Dutch HRI industry was hit hard by the social distancing measures imposed to combat the spread of coronavirus (COVID-19). Online ordering and delivery of meals, however, is benefiting and saw sales grow, in some cases by as much as 25%. Dutch consumers continue to seek out food products that are healthy, authentic, and tasty. Foodservice chains from the U.S. are and continue to be successful on the Dutch market because they have been able to respond to changing consumer needs. Products that are innovative, convenient, tasty, healthy, and affordable have the best sales potential in the Netherlands.

On October 27, 2020, in an effort to contain the rising number of coronavirus (COVID- 19) infections in the Netherlands, the Dutch Government decided that foodservice-HRI outlets will remain closed until, at least, early December. Restaurants’ kitchens will only remain open for take-away and home-delivery of meals. In addition to the existing support measures, the government offered an additional US$47 million in financial support for the foodservice-HRI sector.

4 The Dutch hotel, restaurant, and catering (HORECA) industry organization, Koninklijke Horeca Nederland (or KHN), commented that while the financial support is welcome, the subsidy might come too late for the industry as members are already struggling to pay bills, salaries, and rent. Industry sources report that restaurant and bar owners, especially those that are small and medium-sized, are increasingly depleting their financial reserves.

Unlike the retail sector, the Dutch foodservice industry is fragmented and has many independent players. This is especially the case for cafés/bars, restaurants, cafeterias, and street stalls/kiosks. The majority of fast food and delivery outlets, however, is consolidated and often part of an (international) chain. Well-known examples of international foodservice chains active in the Netherlands include: McDonalds, Domino’s Pizza, KFC, Burger King, Subway, Papa John’s, and New York Pizza.

Chains from the United States are popular in the Netherlands because of their efficiency and consistency, but also because the meals are affordable. They continue to be successful because they have been able to respond to changing consumer demands and now, for instance, offer vegetarian and healthy food products. More U.S. chains recently opened outlets in the Netherlands, including Dunkin’ Donuts (coffee and donuts), Five Guys (burgers and fries), Taco Bell (tacos, burritos and quesadillas) and TGI Friday’s (casual dining fast food style).

Best Product Prospects:

Post reports that U.S. products present in the market which have good sales potential include nuts: almonds, peanuts, pistachios, walnuts, hazelnuts, pecans; seafood: salmon cod, halibut, scallops, lobster; fresh fruit and vegetables: sweet potatoes, cranberries; sauces and condiments; snack foods; California wines, craft beer;

Food Processing Sector:

Post reports that for 2020, the Dutch food processing industry’s turnover is forecasted at US$94 billion, or €80 billion. The industry has been a steady supplier of jobs in the Netherlands. In 2019, roughly 149,000 people worked for a food company, which, despite the pandemic, grew to 154,000 in 2020 due to growing employment in smaller food companies that distribute via food retail and online distribution channels. The number of food companies also continues to grow. According to the Central Bureau of Statistics (CBS) there were 6,930 food companies in the Netherlands last year, 6% more than in 2019. The increase is the result of the growing number of small food companies (with less than 10 employees). This segment grew from 3,285 in 2011 to 5,610 last year.

The industry has been hit hard by the outbreak of the coronavirus (COVID-19) and the measures taken by the Government. For many companies, their turnover, production, exports, and profits have fallen sharply. Food companies that predominantly supply the hotel, restaurant institutional (HRI) foodservice sector have been hit the hardest.

5 Driven by consumer needs for healthier and more nutritious products, there is increased attention among food processing companies to reformulate products. Growing awareness of more sustainable production procedures will continue to further shape the Dutch food processing industry in the years to come. Other consumer needs continue to be affordability, convenience, and taste. Dutch food companies are always on the lookout for good quality and innovative food ingredients. Exporters from the United States compete directly with suppliers from other European Union (EU) Member States.

Many Dutch food companies also operate internationally. In 2020, Dutch exports of consumer-oriented products grew to US$83.6 billion while imports totaled US$45.4 billion. The Dutch export surplus grew to US$38.2 billion, US$300 million more than in 2019. Accounting for nearly 50% of these Dutch food exports, the main export markets were Germany, Belgium, France, the United Kingdom, and Spain.

At present, it remains unclear what the impact of Brexit will be with regard to its importance as a Dutch export market. According to figures published by the Federation of the Dutch Grocery and Food Industry (FNLI), between 2016 and 2019, Dutch exports of food products to the United Kingdom (U.K.) only grew by 1% while total exports of food products grew by 12%. Combined exports of fresh produce and meat products account for more than 50% of Dutch exports of food products to the U.K.

The meat, dairy, and fresh produce subsectors each accounted for roughly a quarter of the food processing industry’s turnover. Sales were driven by local demand as well as growing demand from other European markets. Increased attention to product reformulation and growing food awareness of more sustainable production procedures will continue to further shape the Dutch food processing industry in the years to come. Other consumer preferences continue to be affordability, convenience, and taste. Dutch food companies are always on the lookout for new food ingredients. Exporters from the United States compete directly with suppliers from European Union (EU) countries.

The Dutch food processing industry is mature, well organized and has access to any food ingredient imaginable. In order to be successful on the Dutch market, U.S. food ingredients must have a competitive advantage, for instance on price, quality, volume, variety, size, seasonal availability, packaging and special certification (organic, sustainable), etc.

Best Product Prospects:

Post reports that food ingredients present in the market which have good sales potential in this sector include Nuts (almonds, peanuts, pistachios, walnuts, hazelnuts and pecans), Highly processed ingredients (dextrins, peptones, enzymes, lecithins and protein concentrates), Fish fillets (frozen fillets of Alaska Pollack, cod and hake), (fresh and processed) fruit and vegetables (cranberries, sweet potatoes, grapefruit, asparagus and mangoes).

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