Here’s what the Catalan referendum means for food and drink companies

As the fallout from the disputed Catalan independence referendum continues, food and drinks companies will be bracing themselves for more disruption. So far the impact on their operations has been minimal and most commentators expect the region to remain a part of Spain. However, the instability in the region has raised the threat of product boycotts and the drop in consumer confidence in the country could hurt sales in the run-up to Christmas.

The short-term impact: Catalan product boycotts

Actions by pro-independence parties to declare Catalonia an independent republic have angered many in Spain, leading some commentators to call for a boycott of Catalan products. Cava has been targeted in previous boycotts of Catalan products, as this product is heavily tied to the region. But the severity of recent actions means that some have called for a boycott of products from brands such as Nestlé and Danone, which have manufacturing operations in the region.

The political situation is likely to calm down, taking the wind out of the sails of any efforts to boycott Catalan brands. And the number of people boycotting the products is likely to remain small. In an age of deep logistical ties not just within Spain, but across Europe, any boycott is likely to be ineffective and short-lived.

The medium-term impact: threat to investment and consumer confidence

With Catalonia one of the richest regions in Spain, this crisis will harm economic growth in the country. Spain has only recently recovered from the deep recession brought on by the financial crisis. Tourism is an important industry in Barcelona and along the Catalan coast; even though the referendum happened outside of the peak tourist season, events have still harmed the profits of restaurants and hotels in the region as the number of visitors drops.

It is too soon to measure the full effect this crisis has had on Spain’s GDP growth and business and consumer confidence. But the longer this crisis continues, the more likely it will be that economic conditions will deteriorate for the whole country.

The long-term impact: will Nestlé relocate?

The referendum has raised the prospect of companies moving out of Catalonia to guarantee continued access to both Spain and the EU. The most high-profile movers have been banks, with Caixabank and Banco Sabadell moving their domiciles outside the region.

However, there’s a big difference between a bank changing its registered address and a large-scale move of manufacturing facilities. Large companies such as Nestlé and Danone have invested heavily in facilities in the region. With a long-term agreement to keep Catalonia in Spain the most likely scenario, there will not be an exodus of manufacturers from the region.

Meanwhile the region’s quality transport links and educated workforce mean that FMCG companies will continue to invest in manufacturing facilities and research and development facilities in the region.

What next?

Despite some short-term instability, the most likely scenario remains a peaceful rapprochement between Catalonia and Spain, potentially with the region receiving further autonomy.

One region to look out for is the Basque country. This northern and industrial Spanish region has a violent history of separatism. The Catalan situation may cause separatists in the Basque country to peacefully push for further autonomy, should Catalonia receive any concessions. This could cause further disruption in Spain, further harming the economy and its attractiveness as a destination for investment from food and drink companies.