A Global Perspective on the Food Industry

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A Global Perspective on the Food Industry

Euromonitor International Francisco Redruello – Senior Food Analyst

© Euromonitor International

What is happening to food regulation? Where is the food market going? Is it possible to be healthy in a recession? Will the cost of food increase? What are the choices facing manufacturers? Where are the opportunities for private Label?

Where are the opportunities for brands? Q&A

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Euromonitor International – Danish Food and Drink

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What is happening to food regulation?

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Euromonitor International – Danish Food and Drink

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Heavy Regulation in EU Food and Drink Market

EU food & drinks market is heavily regulated

Regulatory environment in emerging markets is more flexible

Convergence expected in the medium term

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Euromonitor International – Danish Food and Drink

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Stricter Food Regulation in Emerging Markets Could Open Door to International Manufacturers

Stricter food regulation

Market consolidation

Competitive edge for international manufacturers 5

Euromonitor International – Danish Food and Drink Federation

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Where is the food market going?

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Euromonitor International – Danish Food and Drink

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Emerging Regions Will Lead Food Sales Growth Packaged Food Sales by Region. Retail Value Growth (%)* 5 4

3 2 1 0 -1 -2

2009-10

2010-15 CAGR %

*Constant 2010 Prices – US$ Fixed 2010 Exchange Rate 7

Euromonitor International – Danish Food and Drink

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Maturing Consumer Demand Slows Food Growth in Denmark Packaged Food. Retail Volume Sales Growth by Sector (%) 8 6 4 2 0 -2 -4 -6 -8 2009-10

2010-15 CAGR % 8

Euromonitor International – Danish Food and Drink

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Is it possible to be healthy in a recession?

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Euromonitor International – Danish Food and Drink

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Dairy is Largest Functional Food Sector

Functional/Fortified Food Sales by Sector. Retail Value (2010). US$ Million. World Level. 70.000 60.000 50.000 40.000 30.000 20.000 10.000 0

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Euromonitor International – Danish Food and Drink

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Bakery Products Lead Functional Growth in 2010 Functional/Fortified Food Sales Retail Value Growth (%)* (2009-10). World Level.

3,5 3,0

2,5 2,0 1,5 1,0 0,5 0,0 Bakery Products

Confectionery

Dairy Products

Oils and Fats

Snack Bars

Other Food

*Constant 2009 Prices • Fixed 2009 US$ Exchange Rates 11

Euromonitor International – Danish Food and Drink

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Sports Drinks is Largest Functional Sports Drinks Sector

Functional Beverage Sales by Sector. Retail Value (2010). US$ Million. World Level. 18.000 16.000 14.000 12.000 10.000 8.000

6.000 4.000 2.000 0

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Euromonitor International – Danish Food and Drink

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Concentrates Lead Growth in 2010 Functional/Fortified Beverage Sales Retail Value Growth (%)* (2009-10). World Level

Sports Drinks RTD Tea Fruit/Vegetable Juice Energy Drinks Elixirs Carbonates Bottled Water Other Hot Drinks Chocolate-Based F P Drinks

-4

-2

0

2

4

6

8

10

*Constant 2009 Prices • Fixed 2009 US$ Exchange Rates 13

Euromonitor International – Danish Food and Drink

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Organic Certification Still Matters

• Organic outperforms

conventional formats • Recovery is more rapid

for organic food • Consumers still willing to

spend more for better quality

*US$ million at constant 2009 prices, fixed 2009 exchange rates 14

Euromonitor International – Danish Food and Drink

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Will the cost of food increase?

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Euromonitor International – Danish Food and Drink

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Food Commodity Prices Picking UP

Note: Commodity Food Price Index includes Cereal, Vegetable Oils, Meat, Seafood, Sugar, Bananas, and Oranges, 2005=100 16

Euromonitor International – Danish Food and Drink

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Moderate Increase in Labour and Energy Costs Expected

Source: Eurostat

Source: International Energy Agency 17

Euromonitor International – Danish Food and Drink

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What are the choices facing manufacturers?

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Euromonitor International – Danish Food and Drink

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Impact on Supply Chain

Distribution

• Raw materials suppliers in

stronger position to pass on higher costs

Processing

• Retail chains unlikely to fully

Raw Materials

• Pressure on manufacturers

take on price increases

to adapt to new business environment

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Euromonitor International – Danish Food and Drink

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The Two-Pronged Strategy

Upper • Added end of value is market king maker

Lower • Focus on price and end of value for market money

Specialisation into high growth niches

Diverting a larger share of production to private label 20

Euromonitor International – Danish Food and Drink

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Private Label Benefits for Suppliers

Economies of scale

Simplified logistics and supply chain

Sustainable Growth

No listing fees

No direct advertising investment required 21

Euromonitor International – Danish Food and Drink

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Private Label Benefits for Retailers

• 20-30% cost savings

Lower retail prices

for retailers relative to brands • Savings only partially

passed on to consumers

Strategic control Higher mark-ups

• Higher control of shelf-

space and delivery schedules 22

Euromonitor International – Danish Food and Drink

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Where are the opportunities for Private Label?

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Euromonitor International – Danish Food and Drink

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Private Label is Highest in Meal Solutions

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Euromonitor International – Danish Food and Drink

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Private Label in Developing Countries Still Minimal

• Western Europe, North

America and Japan claim 93% of total private label retail value sales • Private label negligible

in fragmented emerging markets

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Euromonitor International – Danish Food and Drink

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Key Trends in Private Label: Price

• Wal-Mart’s private label

offerings are simply designed • Lack the sophistication of

brands and target priceconscious consumers • Private label in US gained

retail share across most sectors in 2009

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Euromonitor International – Danish Food and Drink

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Key Trends in Private Label: Added Value Sainsbury’s Chocolate in UK

Edeka Bio Feta in Germany

El Corte Ingles Yoghurt in Spain

Auchan Rice in France

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Euromonitor International – Danish Food and Drink

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And The Latest Innovation Highlights Are…

• Private label taps into demand for

health properties • ‘Ethical’ private label is new

emerging trend 28

Euromonitor International – Danish Food and Drink

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Where are the opportunities for brands?

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Euromonitor International – Danish Food and Drink

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Brands Fighting Back in Developed Markets

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Euromonitor International – FIE Conference

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And The Latest Innovation Highlights Are…

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Euromonitor International – FIE Conference

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The Future of Food is Called Asia…

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Euromonitor International – Danish Food and Drink

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…And Brands Are Already There

• Middle-class consumers

drive demand for brands • Standards similar to

developed markets in some food categories 33

Euromonitor International – Danish Food and Drink

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Q&A

Q&A THANK YOU. Francisco Redruello Senior Packaged Food Analyst Euromonitor International [email protected] www.euromonitor.com

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