6 reasons to start food processing in Eastern Hungary

Expanding on European market could mean a new food processing plant in the low-cost Central and Eastern Europe. Eastern Hungary's strong food cluster provides more benefit to start here.


Eastern Hungarian food processing cluster

#1: Save the long-distance food transport costs

It has relevant shipping costs of exporting processed dairy products to the European Union. If you spare long food miles, you not just save money, but also protect our environment. Plus, there are no legal barriers befor market entry inside the EU. The Eastern European food processing countries, like Poland and Hungary, have relevant food export to the western part of the EU, so its an existing model for businesses. Eastern Hungary has excellent transportation connections to Western Europe: the length of the Eastern Hungarian motorways reaches 600 kms (373 miles), it’s longer than the motorway system of entire Slovakia and almost two times longer than Romania has.

Boosting milk production

#2: Boosting raw material production, increasing efficiency

The Eastern Hungarian food processing cluster is based on one of the strongest agriculture in Eastern Europe. Raw material production and sales is the integral part of local economy. The agricultural production is not low-cost only, but its efficiency is also improving.

Join the winners

#3: Award winning location

Eastern Hungary is one of the most awarded Eastern European locations by Financial Times’ fDi Magazine: 2 regions and 2 cities of Eastern Hungary was ranked for the top doing business locations of Eastern Europe.

#4: Specialized business park offers
Eastern Hungary has 95 industrial parks, it’s more, than the number of industrial parks in Poland. The competing real estate market resulted specialized business parks, including food processing parks (e.g: Karcag Industrial Park).

#5: Large labour supply

The number of unemployed people in Eastern Hungary is more, than 300,000, more than 60% of total unemployment in Hungary. Big numbers of blue/white collar workers are available, and strong governmental re-training programmes provide company-specific knowledge for them. The food business is one of the target sectors of government`s job creation strategy.

#6: Governmental incentives are focusing on Eastern Hungary
The goal of governmental incentives is to orient foreign direct investments into underdeveloped regions with high unemployment. Eastern Hungary is among the most intensively (potentially 50%) subsidized regions of the EU. So, when you think about to invest in Eastern Hungary, prepare for a pleasant surprise.

European perspectives
Food trade is free inside the EU common market, however Common Agriculture Policy (CAP) of EU has a fundamental impact on member state's agriculture. The following short video helps in the better understanding of presence and future of CAP:

The best food logistic hubs in Eastern Europe

Food business requires a strong logistic support, to organize supply chain as cost-effective as possible. The Eastern European food market is served from some matured and some emerging hubs.

Hungary

 M0 Motorway, Hungary

Budapest. The main logistic hub of Hungary (and maybe Eastern Europe) is Budapest. The M0 Motorway around the City is not a bypass only, but the location of several logistic parks and warehousing companies, developing ~3 million sq.meters (approx. 32 million sq.feet) industrial and logistic facilities. The US-based Prologis is the market-leader service provider in Hungary, and has almost 500k sq.meter (~5,3 million sq.feet) warehousing spaces in more logistic parks along the M0. Besides transportation infrastructure, developed logistic services are the keys to success.

  

Rewe Group's logistic hub in Karcag

Karcag. The emerging hub of Karcag Industrial Park is located by the main route nr.4, which connects Budapest and Western Europe to Ukraine and Russia. Romania, Ukraine and Slovakia can be reached in 2 hours by truck. The Germany-based food retail company, REWE (Penny Market) has the Eastern-Hungarian distribution centre in the Park. The REWE evaluated the logistic potential of Karcag Industrial Park: the nearness of suppliers and consumers.
Subsidized rental fees are under 3€/sq.meter/month (under 3.3€/sq.feet/year).

Poland

Poland's logistics map 2012

The polish logistic market is devided in 3 parts: the Sector I is the City of Warsaw, Sector II are the logistics parks around Warsaw, and Sector III are the logistic locations outside Warsaw. Although the Warsaw-sectors with ~2,5 million sq.meters are the largest logistics sites of Poland, the food market are supported mainly from smaller hubs, like Lodz. Average rental fees are between 3-3.5 €/sq.meter/month.

Lodz. Lodz is located in the cross-road of north-east A1 motorway and the east-west A2 motorway, in the heart of Poland. More logistics-focused facilities provides A-class warehouses on 1 million sq.meters. The Goodman Lodz Logistic Centre has 27k sq.m total size, and the Logistic City in Piotrkow (Lodz Metro Area, closed to Lodz International Airport) with its 450k sq.m is one of the largest facility in Poland.

Czech Republic

 Czech logistic market 2012

Food processing is not a leading industry in the Czech Republic, however food consumption makes it a relevant marketplace in Central and Eastern Europe.

Prague. The logistic centres around Prague are available for 2.5-4.5€/sq.meter/month (2.8-5€/sq.feet/year) rental fees. The Airport Logistic Park has a 56,000 sqm hall development in the surrounding of Prague International Airport.
Brno. Brno, the second largest city of the country is also the second most relevant logistics center. The CEE market leader Prologis will launch soon a brand new development called Prologis Logistic Park Brno on 90,000 sq.meter

Related content
If you are interested in food business, do not miss the presentation of Dr. Csorjan, FoodSites' chief editor:

How to select your new food processing site in Eastern Europe? from Balazs Csorjan dr.

related content on FoodSites Blog: 
Food logistics in Slovakia

3 hot trends in Europe's agriculture

The European Comission ("federal government of EU") published its agricultural yearbook in March 2012. The following brief overview would like to provide a starting point to European food raw material business.

Share of agriculture in GDP (source: EC)

#1: Boosting agri-production


After the horroristic 2009, 2010 and 2011 was characterized by +10% and +3.7% increase in real agricultural income.The general agri-production was increased by 1.4% in 2011 (and the prices increased by  5.7%). Raw milk production has increased to 151.4 million tonnes, the average yield per diary cow is approx. 6,431 kg (17,230 pounds).Poultry meat production slightly increased by 0.4% in 2011, but the EU export grew by 13% (mainly to China and to Middle East). The EU beef consumption remains at 16.2 kg per capita, and the beef production increased by 1.8% in 2011. The pig sector is facing a continuing process of concentration  to larger production units, and the production increased by 1.7% in 2011.

#2: Rising prices


The increasing global demand for food has increased both production and prices of EU agriculture in 2011. The raw milk prices has increased with 11% in 2011, from 30.5€/100kg to 34€/100kg (=12.68€ per cwt). Polutry meat prices has reached the historical 194€/ 100kg (=72.38€ per cwt). Beef prices were between 333-380 €/100 kg (124-142€ per cwt), higher levels in all categories than in 2010. Average pig meat prices reached 153€/100kg (57€ per cwt), 13€/100kg higher than in 2010.

#3: Increasing efficiency 


The agricultural employment fell by 2.7% in 2011 (compared to 2010). The agricultural income per annual labour unit (practicly, the labour productivity) boosted in more Eastern European states, especially in Romania and Hungary (over 40%). Developing technologies, concentrating farms resulted a more efficient agri-business in EU.


Some background information


The following short video provides a brief guide to the EU Common Agriculture Policy, for the better understanding of European food business' sandbox:

How to select your new food processing site in Eastern Europe?

Dr. Balazs Csorjan, chief editor of FoodSites Blog published a new SlideShare presentation:

How to select your new food processing site in Eastern Europe?

View more PowerPoint from Balazs Csorjan dr.

The Eastern Hungarian food processing cluster

The Hungarian Great Plain has good natural conditions, good transportation infrastructure, equipped and large farms. These conditions are the fundaments of the strong local food processing industry.


Eastern Hungarian food processing cluster

Leading companies

The leading local food processing companies are representing almost the entire food business. The stock-exchange listed Pick Szeged produces salami and other meat products. The 2nd Hungarian food processing company, Debrecen Group is famous about its sausages (Debrecziner). The Germany-based Friesland has more milk processing facilities and the market-leader Milli brand. The French Bonduelle produces canned and frozen vegetables.

Leading locations

Szeged, one of the largest Hungarian city, closed to the Romanian and Serbian border (and closed to Timisoara and the Banat Region). The HQs of Pick are here, and the city's First Industrial Park provides 10 hectares industrial area for sale.

Karcag is a little town in the middle of the Hungarian Great Plain ('pusta'). The actual Minister of Agriculture and Rural Development was the mayor of Karcag, which represents the traditional food orientation of the town. The food processing focused Karcag Industrial Park is located by the main route nr.4, which connects Budapest and Western Europe to Ukraine and Russia. The Park has prepared real estate development projects: manufacturing and warehouse halls with procured building permits. Preparation includes plans and permissions, so the Park can deliver a brand new facility in 4-6 months.

Transport infrastructure in Central- and Eastern Europe

Developing transportation infrastructure makes differences between Central- and Eastern Europe and other emerging manufacturing locations of the world.

Motorways

 EU motorways map 2011

The European Union has a vision about the cross-European transportation, called Trans-European Transport Network (TEN-T). The goal of TEN-T developments (funded by EU) is to make the EU internal market more competitive and to speed up the market access. The developments of member states fit into this framwork, including the low-cost CEE Region.

The motorways developments in these countries are in different stages: the Hungarian and the Czech motorways can be regarded as a mature or extended networks, achieving 1,000+ kms line. The Slovakian and Romanian motorways are under construction.

Notice, there are various motorway toll (road fee) for cars and trucks in many CEE countries.

Railways

 EU high-speed railways map 2011

The Central- and Eastern European motorway network is underdeveloped compared to the Western European networks, but the CEE railway network is in much better status. The extended railway network was built in the last century, and large-scale EU programmes are running to rebuilt and develop it. The European Union prefer railway transportation, because environmentally it seems to be cleaner. However, the Eastern European rail cargo companies are often not so reliable and not flexible enough, that's why the road transportation has significantly bigger share.

Manufacturing sites and business parks have often a railway access, the typical construction cost of 1 km (0.62 miles) industrial rail is roughly 1 million euros. 

River transportation

To be honest, the river transport is regarded as an exotic solution in European transportation system. The Rhine-Main-Danube Channel is the main water way inside the EU. Some Danube ports have very serious logistics potential, but the river transportation itself is deeply underdeveloped in CEE.

EU efforts

Maybe you realized that EU policies have a fundamental impact on the future of CEE transport infastructure. Here is a short video about EU's debates and visions of transportation:

Food logistics in Europe: Komarno, Slovakia

Komarno is located in the main agricultural area of Slovakia, but the logistic position makes it more exciting: it can be reached via waterway from any place of the world, and provides a low-cost distribution for the European market.

Chile winemakers not rarely export wines to Europe via big, specialized wine tanker ships. The wine itself is bottled in Europe (e.g. in German wine growing region Rhein-Pfalz, reached on the River Rhein) and distributed from here. They save the ocean-cross shipping cost of bottles and other packages, and some wharehousing costs at the target market.

The "Chile-modell" can be usefull for other food companies: transport in bulk, and manage your logistics (packeging, wharehousing, distribution) inside the EU - eventually in a low-cost Eastern European location.

 Rheine-Main-Danube Canal

The Rheine-Main-Danube Canal provides a low-cost water way to reach Eastern Europe. The Danube river ports and their environment can be considered as distribution centers in this model. The river ports in Slovakia and Hungary are closed to Western European markets and provides good infrastructure.

The port of Komarno, Slovakia provides 6,600 m2 wharehouses (for 33-50€/m2/year rental fee), 26,000 m2 open storage area, and can manage the custom clearence. The port has excellent railway connections, but even more: the extended Hungarian motorways (at the other side of the River) connect Komarno to Western markets.

 EU motorways, 2011

Komarno is a little town at the bank of Danube. In fact, the Slovakian Komarno at the left side of the River and the Hungarian Komárom at the right side of it, are the same town, with 70,000 citizens. The Komarno region of Slovakia is also the main agricultural area, so it's no problem to find any food processing related local supplier.