Legislation and the onset of the G.M. food debate are in their respective spheres bearing down on the European starch applications market. The realisation of which may well prompt change in an industry that already appears to be on the verge of significant consolidation developments. An injection of dynamism will prove vital in the bid to combat widespread over-capacity and downward pricing pressures.
These key pointers are derived from a new strategic research from Frost & Sullivan, the international marketing consulting company. The report entitled ‘European Food Starch Applications Markets’ provides a comprehensive analysis of the market in question. Frost & Sullivan forecasts point towards a compound annual growth rate of 6.3 per cent for the period 1999 to 2006. Whereby, annual total revenues are set to rise from $1.77 billion in 1999 to $2.71 billion in 2006.
The market will undoubtedly need to prepare for the onset and the
subsequent fall-out from the implementation of the ‘Agenda 2000 programme’. This key piece of E.U. legislation will strive to formulate a new financial framework for the community and provide emphasis to a multitude of other E.U. policies. Key reforms proposed include a 15 per cent price cut for cereals, whilst, quota reductions will prevail with respect to potato starch.
The ensuing G.M.food debate divulges an array of long-term scenarios for the industry. In many respects, starch manufacturers are at the mercy of consumer attitudes, the scales may tip in either direction with the bid to gain consumer confidence. The possibility of a heightened consumer backlash, or the complete/partial banning of Genetically Modified Organisms G.M.O’s) add profound weight to the need for market participants to fully explore their strategic options.
An inert approach does not essentially characterise the market; indeed
the battle to cope with an uncertain future is being fought with numerous weapons. The achievement of competitive advantage is manifesting itself in the form of product development, Nirixa Patel, Frost & Sullivan research analyst
“New products are being developed to meet changing customer needs. Recent innovations include native starches with increased functionality, and gelatine replacement agents.”
Encompassing analysis of the industry illustrates the largest sector as being the Confectionery Products market; this is in turn followed by the Beverage Products market. In line with market opportunities the fastest growth sectors will be the Confectionery and Processed Foods segments.
A contemporary appraisal of the industry’s competitive structure
illustrates numerous edifying features in terms of the markets composition. A two-tier structure exists, whereby, on a primary level large global or regional companies are present, operating in most or all of the food sectors and starch product types. This tier includes the top eight companies, which collectively account for over 90 per cent of the food starch market. These are Cerestar, Roquette, Amylum, AVEBE, Cargill, Emsland-Stärke, National Starch & Chemical and
Agrana Stärke. The second tier contains those companies that focus on
national or regional markets. This structure, however, looks set for a marked shake up, a consequence of the factors already outlined, coupled with other pressing issues such as the forecasted increased insurgence of American suppliers.
An informative approach to strategic options that are open to market participants draws broad attention to the minimal amount of consolidation activity endured within the industry over recent years. However, the changing nature of the market will inevitably put pay to this, Nirixa Patel comments:
“Virtually no restructuring has taken place in the European food starch market, despite continued over-capacity. Frost & Sullivan do however expect the pace of merger and acquisition activity to quicken in the near future.”
To summarise, the market may well look at paying the cost for not
pre-empting over-capacity. An unclear future is afoot, legislative measures and the complex issue of ‘consumer attitudes’ should indeed prompt market participants into a full comprehension of the challenges that lie ahead. No guarantees of success can be seen as given, however, with an in-depth and considered stance clarity should be increasingly forthcoming.
Frost & Sullivan is an international marketing consulting company that
monitors the chemicals market for trends, measurements and growth rates. This study is utilised to update a series of online research such as The European Market for Organic Dairy Markets – # 3630-88 and U.S. Nutraceuticals and Functional Foods Markets – #5119-39. This is complemented by support for industry participants with custom consulting needs. Free executive summaries of all Frost &
Sullivan reports are available to the press.
Report Code: 3829-39
Publication: Title European Food Starch Applications Markets Publication Date: March 2000
Price: 3,950 Euros