Sluggish growth predicted for global packaged foods markets

The industry relies on urbanisation and consumer affluence to generate demand but when these two stagnate growth is restricted, say analysts at RTS Resources. “Populations in mature markets are not growing fast enough to support expansion in the packaged food industry, and demand in developing countries is not high enough to generate significant additional revenue,” said RTS managing director, Steve Rice. The global retail and food service market is currently worth $4.4 trillion, according to RTS, and will increase to $5 trillion by 2017. This equates to a growth rate of 2.8%, which is a far cry from the double digit growth previously achieved through emerging markets. Slowing growth “The global population is growing by 1.2% year on year and this is expected to continue for the next five years,” Rice explained. “However the figure in mature markets, which dominate globally in value and account for approximately 60% of food consumption of packaged goods, is even lower – and non-existent in Eastern Europe – leaving very little room for expansion.” Much of the population growth is in countries with low disposable incomes, such as Africa, Asia and the Middle East. While they may be generating demand they are also driving down value. Asia/Pacific is the population growth powerhouse, but urbanisation rates remain low. “We forecast a 3% year-on-year increase in value growth for packaged food in the next five years, largely as a result of trading up in the Asia/Pacific region,” Rice continued. “This is quite a good performance compared to population growth but still represents a slump in trade. Migration to urban areas would create more wealth in the region and change the situation considerably.” In the meantime there are certain trends that manufacturers can focus on to generate value growth in the health, fitness and fashion sectors. “There are still hot-spots out there with high growth potential - especially those associated with health,” said Rice. “They are expanding faster than base markets because they target specific consumer needs. The same can be said for mood food, which is another growth area. Therefore it’s not all doom and gloom.” “The key is to be able to identify up and coming markets and the opportunities they present for expansion.”

Sluggish growth predicted for global packaged foods markets

A slowdown in global packaged food markets is expected over the next five years as supply in developed countries reaches saturation point combined with insufficient opportunities elsewhere, but health and Asia offer hope.

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