2020 Vision: Global Food & Beverage Industry Outlook

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Frost & Sullivan analysis of the global food & beverage industry.

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2020 Vision: Global Food & Beverage Industry Outlook

  1. 1. 2020 Vision Global Food & Beverage Industry Outlook Christopher Shanahan Industry Analyst May 18th, 2010 Frost & Sullivan’s Growth Consulting can assist with your growth strategies
  2. 2. The CEO’s 360 Degree Perspective of the Complex Business Universe 1. Global Perspective 2. Integrated Industry Perspective 3. Technology Perspective 4. Economic Perspective 5. Competitive Perspective 6. Customer Perspective 7. Best Practices Perspective 2
  3. 3. Global Food & Beverage Retail Revenues, 2002 through 2014 Global demand for Food & Beverages Reached $11.6 Trillion in 2009 and is likely to reach $15 Trillion in 2014 CAGR (2009 – 2014) 16.0 5.5% Retail Food & Beverage Industry Sales ($ Trillions) 14.0 CAGR (2004 – 2009) 9.6% 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2004 2009 2014 Latin America (LA) 1.1 1.7 2.2 Europe (EU) 2.0 2.6 3.0 Asia Pacific (APAC) 2.4 3.6 5.1 Mid. East & Africa (MEAF) 1.8 2.5 3.3 North America (NA) 1.0 1.2 1.5 Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan 3
  4. 4. Food & Beverage Retail Sales by Region, 2002 - 2014 Global share of demand for Food & Beverages is increasing in Emerging Regions which is driving continued Globalization of the industry 2014 NA LA 10% 15% 2009 EU 20% NA LA 11% MEAF 14% 22% 2004 EU NA LA 22% MEAF APAC 12% 13% 21% 33% EU MEAF 22% APAC 24% 32% APAC 29% Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan 4
  5. 5. Food & Beverage Demand by Product Category, 2009 Spending on meat and poultry increases with increased market development Increasing odds of Health Issues?? Food & Beverage Market: Product Category Share of Revenues per Region, (World), 2009 100% 8.9% 8.0% 7.1% 6.6% 7.4% 90% 3.2% 4.6% 5.5% 5.5% 5.7% 80% 30.0% 29.2% 28.6% 25.9% 70% 34.1% 60% 50% 26.5% 19.0% 24.3% 26.4% 27.1% 40% 30% 14.6% 14.2% 14.6% 14.0% 15.5% 20% 10% 20.1% 18.4% 17.7% 16.6% 20.2% 0% NA EU APAC LA MEAF Bread & Grains Dairy Fruit & Vegetables Meat & Poultry Fats & Oils Sugar & Sweeteners Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan 5
  6. 6. The Food & Beverage Industry Today and Tomorrow Key Mega Trends’ Impact as a Function of Time on the Food & Beverage Industries Mega Trend 2010 2015 2020 Globalization Economic rebound continues Rising Food Prices Due to Demand Full industrialization & Changing from Bioenergy of developing countries Economics Increasing consolidation within food processing Continuous re-assessment of Increased Use Increasing urbanization impacts the Health & demand for health & wellness “safe” chemicals and materials for of Health Claims Wellness solutions beyond BRIC F&B and agricultural production China begins to The Adoption of Safety & Food Safety Customers increasingly gain Sustainability Strategies & access to F&B shake off food ingredient safety concerns will be Common-place Sustainability processing information as opposed to being the exception 6
  7. 7. The Economic Downturn of 2008 & 2009 and 2010 Recovery The Relative Impact of the Economic Downturn and Recovery on Specific Industries Total Value of the Market Capitalizations of Top U.S. Public Companies Per Industry in Years 2008, 2009, and 2010 Relative to its Value in Jan 2007 (US), 2007 – 2010 140% 133% Relatively Little 131% Change in Industry 126% 125% 120% Performance J - 2007 100% 102% 101% 96% 95% 93% 93% 92% 92% 87% 87% 80% 84% 84% 83% 81% 79% 79% 78% 78% 78% 60% 62% 62% 60% 56% 40% 20% 0% Food Processing Health Care S&P 500 (Total Energy Personal and Crops Containers & Paper & Paper Chemical Market) Household Care Packaging Products Manufacturing J-2008 J-2009 J-2010 Source: Frost & Sullivan 7
  8. 8. The Economic Downturn of 2008 & 2009 and 2010 Recovery Production Input Costs have Stabilized Since 2008’s Historic Rise, For Now… Commodity Food and Beverage Price Index Monthly Price Commodity Food and Beverage Price Index, 2005 = 100, (Global), March 2005 to March 2010 ••Price growth has Price growth has 200 abating since its abating since its rapid rise in 2007- rapid rise in 2007- 175 2008 2008 Back to Back to Historical Growth Historical Growth 150 Rates, For Now Rates, For Now ••Commodity prices Commodity prices 125 are highly are highly correlated with correlated with 100 crude oil prices crude oil prices Likely to Happen Likely to Happen 75 Again Before 2020 Again Before 2020 50 Mar-05 Nov-05 Jul-06 Mar-07 Nov-07 Jul-08 Mar-09 Nov-09 Source: FAO 8
  9. 9. Global Food Industry Industry Consolidation Fragmented and Stable Market, but Expected to Slowly Concentrate Over Time Market Share of the Top 20 Global Food Processors by Region (2008) The Largest 20 Food Processors Command 20% of the Global Market Western Europe Eastern Europe North America Latin America Asia Pacific World 100% 100% 100% 100% 100% 100% 90% 90% 90% 90% 90% 90% 80% 80% 80% 80% 80% 80% 70% 70% 70% 70% 70% 70% 60% 60% 60% 60% 60% 60% 50% 50% 50% 50% 50% 50% 40% 40% 40% 40% 40% 40% 30% 30% 30% 30% 30% 30% 20% 20% 20% 20% 20% 20% 10% 10% 10% 10% 10% 10% 21.2% 12.8% 37.5% 22.3% 5.8% 20.9% 9
  10. 10. Increasing Demand for Health & Wellness Ingredients Shift from Reduced 'Bads' to Fortified with ‘Goods’ Food & Beverage Growth of Added Goods accelerating year on year Growth of Added Goods accelerating year on year Global Sales of Reduced 'Bads' Dairy Compared to Nutraceutical-Fortified Dairy, $$ Billions, (World), 2002 - 2015 Global Sales of Reduced 'Bads' Dairy Compared to Nutraceutical-Fortified Dairy, Billions, (World), 2002 - 2015 ales ($US Billion) $80.00 Fortified ‘Goods’ Dairy Fortified ‘Goods’ Dairy $70.00 Global S $60.00 $50.00 Reduced 'Bads' Dairy Reduced 'Bads' Dairy $40.00 02 03 04 05 06 07 08 09 10 11 12 13 14 15 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Source: Frost & Sullivan Avoiding ‘Bads’ is Key Megatrend that is Set to Continue Through to 2020 Avoiding ‘Bads’ is Key Megatrend that is Set to Continue Through to 2020 10
  11. 11. Increasing Demand for Health & Wellness Ingredients The Need for Health & Wellness Solutions Will Increase with Increased Urbanization Beyond BRIC Beyond BRIC Look for increasing urbanization, Look for increasing urbanization, dietary changes, and economic development in dietary changes, and economic development in emerging markets, especially in Latin America and emerging markets, especially in Latin America and Africa, as these are future growth regions for Africa, as these are future growth regions for Health & Wellness Solutions Health & Wellness Solutions y = 0.0524x + 3.6258 y = 0.3578x + 21.648 % POP w/BMI >= 25 kg/m² Total expenditure on health 20 100 R2 = 0.1831 R2 = 0.1646 80 15 as % of GDP 60 10 40 5 20 0 0 0 20 40 60 80 100 0 20 40 60 80 100 % of Urban Population % of Urban Population 11
  12. 12. The State of Food Safety & Sustainability Confusion Over Standards Impacts Implementation of Effective Safety Practices • The plethora of choices of voluntary food safety standards and mandatory government regulation has been an inhibitive factor on the adoption of any type of voluntary/mandatory industry standard • Some industry participants feel that voluntary/mandatory food safety standards are redundant with already- existing government regulations that merely need to be enforced • Some companies feel that it is much easier to just meet the minimum level of government-enforced safety laws without being noticed 12
  13. 13. What is Sustainability? Optimization of the bottom lines over time GOAL The more Green we are the more Green we make Maximize Growth Change in Bottom Line Change in Bottom Line L ine Max/Min ttom Bo Positive/Negative mic Ec ono Impact on Internal Line and External Economic Bottom Community il ity esponsib Social R Time Social Responsibility reness ntal Awa En vironme Env Time iron m enta Minimize Waste l Awa rene and/or the Negative ss Impacts on the Environment Yesterday’s Objective Today’s Objective In the past, the only metric that a given company really paid attention to and worked toward sustaining was its economic bottom line (EB). Social responsibility (SR) and environmental awareness (EA) were not considered key objectives. This has changed With the growing power of external constituents that demand increasing social and environmental responsibility, companies now must adopt business practices that meet these additional objectives. 13
  14. 14. Having a Best Practices Perspective Employing Innovation to Enhance Food Supply Chains and Safety ••The company’s ink product is incorporated into its patented barcode array and automatically modifies The company’s ink product is incorporated into its patented barcode array and automatically modifies ordinary coded data into an advanced cold chain monitoring mechanism when exposed to an adulterating ordinary coded data into an advanced cold chain monitoring mechanism when exposed to an adulterating temperature level or other negative environmental factors temperature level or other negative environmental factors ••The ink is invisible under normal circumstances The ink is invisible under normal circumstances ••If tampering or other negative environmental factors are present, the ink will turn the barcode bright red, and If tampering or other negative environmental factors are present, the ink will turn the barcode bright red, and rendering the barcode unscannable or it will change the barcode data to indicate exactly what has happened rendering the barcode unscannable or it will change the barcode data to indicate exactly what has happened Negative Environmental Factors Shipped Product Received Product Distribution Distribution Channel Channel Current work is under development by which the inks can be Barcode # and “turned on” Barcode # and lack of a bright bright purple purple visual Activation devices are in final-stage development by the visual marker marker indicates company for use for weigh scales, printing press add-ons, indicates an a safe product production line systems, Benchtop printers and hand-held unsafe product devices Source: Frost & Sullivan 14
  15. 15. Conquering the Food & Beverage Ingredient Markets • Invest in marketing strategies that focuses on your core product offering • Show that your product is an essential component of the average consumer’s grocery basket • Build brand equity through targeted efforts by Marketing and Sales • Company positioning as a partner to help end users through this tough economic time • Integration of disparate products into a complete solution • Exploit opportunities from consumer feedback • Proactively seek the final consumer’s need set and match product lines to those needs • Establish partnerships with other suppliers • Seek out joint branding with other food manufacturers to exploit complementary synergies 15
  16. 16. Conquering the Food & Beverage Ingredient Markets • Adopt proactive product and service differentiation strategies • Focus on successful product lines and global diversification in order to drive sustainable growth • Focus on product innovation as a long term goal for a sustainable competitive edge • Understand the consumer’s motivation for buying your product • Fear or Greed: these are the primary motivators that impacts whether the consumer will buy your product or not. Consumers will be more willing to buy if the product effectively communicates that it will help avoid a potential loss or pain or help to deliver a gain or pleasure. • Effectively communicate the indirect costs of product switching • Look for opportunities that will communicate to consumers that product switching entails a sacrifice. Such ‘costs’ should be pitched as an investment opportunity for the consumer. 16
  17. 17. Conquering the Food & Beverage Ingredient Markets Success is Based on Boosting Top-Line Growth Through Differentiation Top Line Accelerated Growth Service Differentiation The Solution Provider: The Marriage Optimize Relationships with of Value-Added Quality Customers Enhancement and Customer Relationship Optimization Maximize Customer Value by being the Low Cost Provider Enhance Value-Added Quality Value- through New Product Development Product Differentiation Source: Frost & Sullivan 17
  18. 18. Next Steps Request a proposal for a Growth Partnership Service to support you and your team to accelerate the growth of your company. (myfrost@frost.com) 1-877-GoFrost (1-877-463-7678) Join us at our annual Growth, Innovation, and Leadership 2010: Silicone Valley - A Frost & Sullivan Global Congress on Corporate Growth, September 12-14 2010, Fairmont Hotel, San Jose, CA (www.gil-global.com) Register for the next Chairman’s Series on Growth: The “GIL” (Growth, Innovation and Leadership) Culture: A Critical Element to Long-term Success (Tuesday, June 1) (http://www.frost.com/growth) Register for Frost & Sullivan’s Growth Opportunity Newsletter and keep abreast of innovative growth opportunities (www.frost.com/news) 18
  19. 19. Your Feedback is Important to Us What would you like to see from Frost & Sullivan? Growth Forecasts? Competitive Structure? Emerging Trends? Strategic Recommendations? Other? Please inform us by taking our survey. Frost & Sullivan’s Growth Consulting can assist with your growth strategies 19
  20. 20. Frost & Sullivan on Twitter Follow Frost & Sullivan on Twitter http://twitter.com/Frost_Sullivan 20
  21. 21. For Additional Information Christopher Shanahan Christine Stapleton Industry Analyst Account Manager, North America Chemicals Materials & Food Chemicals Materials & Food (210) 477-8419 (210) 477-8406 christopher.shanahan@frost.com christine.stapleton@frost.com Shomik Majumdar Sarah Saatzer Vice President, Consulting & New Corporate Communications Business Chemicals, Materials & Food (650) 475-4539 (210) 477-8427 shomik.majumdar@frost.com sarah.saatzer@frost.com 21

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