NAICS & NACE codes: what are they and how to use them

Those who work within a company might not be familiar with the NAICS and NACE codes. Yet these are very important elements for analysing new markets.

For example, a market intelligence strategy involves gathering information about an area in order to develop effective tactics.

In this process, international industry codes are essential for studying the most interesting sectors.

But what exactly do NAICS and NACE stand for? And how can they be used?

Source: Eurostat – RAMON

NACE: the European standard industry codes

In the European Union, the reference point in this field are NACE codes. This is the acronym of the French expression “Nomenclature statistique des Activités économiques dans la Communauté Européenne”.

It was introduced in 1970 by Eurostat, the statistical body of the European Commission. Since then, the system has undergone several revisions, including a major one in 2006, which came into force the following year.

The need that led to its creation was to harmonise the classification of economic activities across European countries, adopting a common reference framework. On the basis of this, the single countries then adopted conversion tables for the codes.

The image displays an example of NACE code for citrus fruits production.

NAICS codes: the North American standard

What about countries outside EU?

The standard used by the United States, Canada and Mexico is represented by NAICS codes.

The North American Industry Classification System – hence the acronym NAICS – has the same purpose as NACE: to rationalize the classification of economic activities by bringing them together in homogeneous groups and facilitating statistical analysis at national and international level.

The system is an evolution of the SIC (Standard Industrial Classification), introduced in the 1930s in the USA and based on the use of 4-digit codes.

The need to reflect the evolution of the market and its complexity led to the revision of this system to the current six-digit NAICS codes. The image shows the six levels into which the system is divided.

The importance of NAICS and NACE codes for market analysis

Besides the statistical purposes we have mentioned, there are other reasons to know the NAICS and NACE codes.

One of these is the need to carry out market analysis.

Knowing how an industry is structured is a vital step in increasing sales through new distributors, developing joint ventures with industrial partners, expanding your supply chain and more.

To achieve these goals, it is important to know the codes for the sectors you want to explore.

One factor that distinguishes them is their specificity: even the smallest market niches have their own NAICS or NACE code, and the example of citrus production demonstrates this. This makes it possible to carry out very accurate analyses, identifying even companies that a shallow search might miss.

Often we rely on tools such as search engines or social networks, where not all companies are present or where the results are too scattered.

Knowing the industry codes and related activities allows you to focus on the target of your search, concentrating only on specific market segments. Business data providers usually offer databases based on these divisions.

However, even these solutions have limitations. It is necessary to go through the websites of the companies within them, checking one by one which features are important to us.

Let’s clarify with an example related to citrus fruits. An agri-food distribution company is interested in locating producers of Diamante citron abroad.

To do this, it might choose to purchase a database of citrus producers in a specific country, or it might carry out online searches without the certainty of finding all producers. Either way, it would be a time-consuming process to manually select those who grow the variety of fruit.

But digital technologies offer an alternative: the possibility of automating this task, reducing the time and cost of identifying companies that meet the goals of our distributor.

NAICS and NACE codes for automated market analysis

Explore is Matchplat’s platform that combines a global database of companies with artificial intelligence algorithms.

This makes it possible to analyse markets using industry codes, but going beyond them. AI makes it possible to classify companies in real time on the basis of products offered, certifications held and much more.

So NAICS and NACE are the starting point for a fast and accurate process, where the opportunity to focus on specific sectors is combined with the chance to identify the best companies within them.

Returning to the example of our distributor, the search for a company specialising in Diamante cedar becomes immediate, without requiring more hours of work in front of a PC.

Obviously, it remains essential to know the production processes associated with a specific code, in order to choose the correct ones to set up an effective market analysis.