Global packaged food sales reached over US$1,254bn in 2003, up by 4.1% in current terms from 2002. North American and Western European sales were driven by increased demand for both healthy and easy-to-prepare packaged food, and premium and indulgent brands in staple sectors such as dairy and bakery products.
Value sales growth was also evident in regions such as Asia-Pacific and particularly Latin America, which had been beset with economic difficulties. Recovery in Eastern Europe strengthened considerably in 2003, and Australasia also enjoyed an improved performance.
Added value underpins developed markets
The key trends driving growth in developed packaged food markets are convenience, functionality and indulgence. The most successful new product developments reflect increasing consumer demand for convenient, portable, easy-to-prepare meal solutions, which ease the effects of faster-paced, urban-based living and the consequent constraints on food preparation and shopping time that affect consumers.
The report shows how demand for “all natural” products has mirrored development of foodstuffs offering “functional” benefits and “better-for-you” attributes as manufacturers respond to consumer concern over growing levels of obesity and the need to self-medicate. The introduction of probiotic yoghurts with active ingredients and functional sugar-free gums continues to meet with notable consumer success.
In spite of the prevailing trend towards healthier products, Euromonitor shows that consumption of premium indulgent packaged food has experienced a significant rise over the review period. Underpinning the trend towards luxury packaged food has been rising disposable incomes in developed markets, with consumer tastes growing in sophistication due to wider international travel, dining out, and “lifestyle” media programming. Products in mature sectors such as dairy and bakery products are key beneficiaries of this trend, with consumers prepared to pay a premium for guilt-free indulgence.
Availability spurs volume growth in developing markets
Euromonitor’s newly published report shows that increased availability of packaged food in developing markets derives from market liberalisation, improved distribution networks and global manufacturer consolidation. Urbanisation in many developing countries is being driven by the creation of new jobs in manufacturing and services in large metropolitan centres. In such markets, the younger urban generation prefers to shop in comfort in modern large-surface retail outlets for meat, fish, fruit and vegetables, instead of at the traditional wet markets or night markets.
Multinational food manufacturers such as Unilever, Nestlé and Kraft Foods have increasingly sought strategic alliances with local producers and distributors. Indeed consolidation among national and international packaged food producers contributed significantly to growth in emerging markets such as China, Russia and Brazil and further consolidation of multinational producers will result in greater penetration of these developing markets.
In relatively immature markets, the focus will also be on the continued development of manufacturing and retail networks, increasing the availability of packaged food to vast regional populations. However, greater concentration in retail environments will eventually result in the growth of private label products, thereby undermining value growth.
Total packaged food: Value sales growth index in major markets in 1998/2003 % constant local currency growth
Health concerns fuel organic growth
Consumer anxiety regarding the safety of food production is a key factor driving the development of “functional” packaged food, but more particularly organic food. Euromonitor shows that both functional and organic foods have received considerable investment from major food companies, and this is expected to stimulate continued growth in both markets.
While organic food is clearly backed by those who prefer natural, unadulterated food, functional food has the potential to offer greater convenience, which may prove to be the winning factor for the average consumer favouring compromise. Products that position themselves as “authentically” or traditionally produced are enjoying increased sales at the premium end of the packaged food market.
Internationalisation of tastes and segmentation
The report also focuses on the related trends towards gourmet and ethnic products in packaged food, as media attention on cooking and an increase in international travel inspires a growing willingness to experiment with novel flavours and ingredients on the part of consumers in many markets. Product sectors such as noodles, pasta, sweet and savoury snacks and sauces, dressings and condiments are all enjoying growth due to consumer demand for exotic or non-traditional flavours.
Moreover, the report highlights the developing trend towards product segmentation, which is starting to play an increasingly important part in manufacturers’ product development strategies, leading to a growing number of products targeting specific consumer groups such as children, teenagers and young adults. New products are also aimed specifically at men or women, or the “grey” market. Each targeted product seeks to offer precise product attributes (for example, convenience, indulgence, novelty or health) to clearly defined consumer groups.
Packaging downsize innovations
Packaging will play an important role in stimulating growth over the forecast period. The report examines how manufacturers can expect this strategy to increase brand recognition and how technological innovations firmly established in North America will spread to other markets during the forecast period.
Single-serve packaging, high design values and heavy advertising are expected to be key strategies in the attempt to “upgrade” the existing commodity status of staple items in sectors such as dairy and bakery products in order to combat the growing strength of private label products. Prolonged storage life benefiting product freshness and flavour, quality-of-origin labels and labels with health-related information will also determine packaging developments over the forecast period.
Retailers grow from strength to strength
Euromonitor examines how the central role of supermarkets in packaged food distribution has led to the development of an extremely strong private label segment. Supermarkets and discounters in North America, Western Europe and Australasia continue to develop their private labels, which target both the economy and premium end of the packaged food market, thereby expanding packaged food product ranges.
The report demonstrates how manufacturers’ need to develop strong and distinctive brand identities is all the more urgent, as they attempt to define their brands in contrast to private label goods. It also examines how this is becoming increasingly difficult as private labels themselves become evermore sophisticated.