just-food’s Confidence Survey also included questions on the emerging markets and sustainability. Of the BRIC markets, China gave respondents most cause for optimism. Outside those four countries, markets from Colombia to Vietnam filled others with confidence. And, on the issue of sustainability, alleviating their company’s impact on the environment remained a priority for many despite the gloomy economic landscape.
The emerging markets was a focus of our survey. We asked which of the BRIC markets filled our readers with most confidence in 2012 – and half said China.
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Now, of course, investing in these markets – either via a distribution deal, capital expenditure or acquisition – is risky. For all the potential of selling into the huge consumer markets of China and India, there are pitfalls, too.
On one hand, the IGD has said China has become the world’s largest food retail market, underlining the opportunities available to manufacturers.
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By GlobalDataHowever, India is mulling a retrospective tax on any overseas deal involving an Indian asset, a proposal that has attracted criticism from business organisations around the world.
In reality, entering all of these markets is risky and involves dealing with under-developed distribution networks, an uncertain regulatory climate, and, perhaps crucially, consumers with very different demands and tastes.
That said, our emerging markets pages on just-food have seen a steady stream of news since the turn of the year, from the likes of Nestle and Barry Callebaut who are continuing to invest in developing markets, to the US-focused JM Smucker making its first investment in China and UK crisp maker Tyrrells starting to sell products in that market.
And, don’t forget, a key reason for two of the mega-deals of 2012 so far – Kellogg‘s move to buy Pringles and Nestle’s decision to buy Pfizer‘s infant nutrition business – was to exploit significant operations in emerging markets.
When faced with the mature markets of the West – with their slow economic growth and ageing populations – FMCG companies need to act faster and try to gain a foothold in the emerging markets of today, which will for certain be the economic powerhouses of tomorrow.
The answers to our emerging markets question allowed readers to specify which other countries thay viewed with optimism this year. Markets from Colombia to Turkey to Vietnam were offered up. Combine that with the 57% of readers who said their businesses will spend more money this year trying to increase their presence outside their domestic market and it is clear that, even in tough trading conditions, building an international business remains a priority for many in the industry.
And, finally, some thoughts on sustainability.
There could be a survey conducted on this issue alone (sustainability can look at issues from carbon to Fairtrade) but, in our confidence survey, we focused on one area – companies’ investment in reducing their impact on the environment.
And it appears that, even in such challenging trading conditions, the food industry is keen to target spending on alleviating its impact on the environment.
Interestingly, a third of respondents said they would increase their investment in this area.
This is roughly the same proportion of those in our survey who said they would increase their investment in R&D this year.
Despite operating in some of the most challenging trading conditions for a generation, industry still appears to be ready to look at how it can reduce, for example, its carbon footprint or water usage.
This could be a sign of the underlying optimism outlined elsewhere in the survey that trading conditions will improve and allow investment in such initiatives – but, it is just as likely manufacturers and retailers see the business benefit of investing in this way.
Cutting energy use and making distribution more efficient can be lauded as sustainability initiatives but are also effective ways of reducing cost and bolstering profits at a time when sales are under pressure.
Of course, over time, as companies move more deeply into their supply chains and seek greater impact reduction across the board, the challenges become tougher and the need for significant long-term investment increases.
In other words, the true commitment of companies to the sustainability agenda – and not merely to business efficiency – will be increasingly tested.
