The Hungarian food industry: A short overview from the political regime change to now

Central Europe saw an era of change after the end of socialism. Hungary's food industry had to adapt to an entirely new environment with the advent of the market economy.

A worker labels sausages in a meat processing factory in Hungary
©Netherlands Embassy Budapest

Hungary’s food industry witnessed a dramatic shift since the political regime change of the early 1990s. The transition to the capitalist free market found a food industry unprepared to fully cope with the internal and external requirements of the new economic regime, going into significant decline until the 2010s. The early years of transitioning saw overdriven state intervention, marked by the milestone legislation 1993. Act on Agricultural Market Order.

Strong state intervention –among others - meant significant subsidy schemes to buffer impacts that the free market may have posed to a sector which existed in a completely different policy and market environment for forty years beforehand. The often generous state support for agricultural export sometimes even lead to special procedures in the frames of the GATT.

State subsidies could of course fulfil their function to help companies in need, however, they did not enhance the kind of cooperation that is prevalent in the Netherlands and Denmark. Cooperatives – in the Dutch sense –  are not seen favorably in the Hungarian agricultural sector, due to historical reasons.

However, the situation is subject to change, according to recent communiqués of the Ministry of Agriculture and the National Agricultural Research and Innovation Centre (NAIK). Alongside with stressing the need to reform agricultural middle and high level education, the introduction of cooperation between agricultural stakeholders is essential for the development for the sector. In this regard, Hungary is looking to the Netherlands for inspiration.

As the privatization process concluded in 1994, concentration began among food retailer companies. It was led by western stakeholders who had recently entered the domestic market, and it came like a sudden surge.

While Western Europe had five to six decades to get accustomed to this process, Hungary witnessed a transition period of a few short years. Concentration started to accelerate in the early 2000s as western food giants started to build factories and distribution hubs across Central and Eastern Europe.

This promising trend slowed down in Hungary when the financial crisis hit in 2008 and multinational retailers started to rationalize their regional presence, many of them moving production out of the country. For instance, a notable example is the exit of Danone.

The vast majority of the market comprises micro and small enterprises whose competitiveness is limited, especially on export markets. Medium and bigger companies are represented in smaller numbers. One of the main reason for this is the lack of an enabling subsidy environment.

An example for the few big domestic stakeholders is the Bonafarm Group, developing and expanding since the early 2000s, whose portfolio ranges from feed production, pig farming, meat processing, dairy industry to wine production. The other major conglomerate is the Talentis Agro Group which was created  in the past ten years. Its portfolio contains arable farming, animal husbandry, game management, hunting tourism, milling industry, winery, large-scale and egg production. Both domestic giants operate countrywide and aim for regional expansion.

Since the 2010s the sector has been on a promising development curve. The Hungarian food industry produced 1.8% of the total national GDP, employed 3.2% of total employment  and made significant contribution to the total agricultural sector with a total volume output worth 9.3 million euros in 2018.  (Source: Central Statistical Office)

As the general level of procession of food products is increasing and level of the general public’s connection to food and its origin is decreasing, high-value added, high quality food products gain international importance.

The Hungarian food industry recognizes this and sets the direction of development in high value-added food products with continuous strong export orientation. A multiannual, international marketing campaign is essential to increase the fame and establish international recognition and confidence in Hungarian food products.

Some major highlights of events, organizations and campaigns of the Hungarian food industry:

Hungarian Association of Food Processors:
 The National Association of Food Processors (ÉFOSZ) is the national economic and professional interest representation organization of Hungarian food companies. The primary goal of EFOSZ is to help domestic food processors supply Hungarian consumers with good quality, safe and realistic food at reasonable prices commensurate with the cost of production. In addition to the above, EFOSZ also contributes to the creation of a regulatory environment conducive to improving the domestic and international competitiveness of member companies. Click here for an overview of its members.
Major food industry-related events in Hungary:

The National Food Industry and Agricultural Exhibition (OMÉK) is the most significant event for food producers and processers in Hungary and the Carpathian Basin. (Website) As the number one venue of the food industry in this region, the biannual exhibition brought together stakeholders from all branches and size of the food industry and agriculture in Budapest under the motto ’The Essence of Hungarian Land’ for the 79th consecutive time in September 2019, having Morocco as guest of honour. In 2020, the event would have taken place in May for the 27th consecutive year, bringing together traditional breeders, policy makers as well as companies of state-of-the-art genetic technology. Unfortunately, due to the recent COVID-19 pandemic, this year's event was cancelled.

The countryside hosts other important events, oftentimes labelled as ‘Associated OMÉK event’, signalling the the countrywide and regional significance. One of the most illustrious fair is the Great Plains Animal Husbandry Days, which takes places in early May every year in Southeast Hungary, where animal husbandry and vegetable – principally paprika - production looks back to centuries of tradition and high quality, production for domestic and export markets.

Hungarian Food Product Programme: food labeling programme focusing on quality and origin of food products, established in 2006 by The Hungarian Food Product Nonprofit Ltd. Assessments are carried out by an independent organization. Over 90% of costumer are familiar with the labelling and 71% affiliates it with trustable products.

Six label categories inform consumers approximately 4000 products of 140 companies:

  • 100% Hungarian origin in terms of ingredients and procession
  • At least 50% of ingredients come from Hungary
  • Processed in Hungary, made of import ingredients
  • Hungarian added value over 75%
  • Outstanding prime quality
  • Environmentally sustainable

Sources

"Structural changes in Polish and Hungarian agriculture since EU succession: Lessons learned and implications for the design of future agricultural policies" Research Institute of Agricultural Economics, Budapest, 2014. (link)

Website of the National Food Industry and Agricultural Exhibition (link)

"The Hungarian agriculture and food industry in figures, 2018" Ministry of Agriculture, Budapest, 2019. (link)