This month’s Market Review has a different format, looking at composite food markets and drawing on the whitepaper “Convergence with divergence: Consumer spending priorities in fast-growing emerging markets” which the EIU and Mintel published earlier this year. The paper looks at middle-class consumers in emerging markets, a group whose numbers are expected to swell by 3bn over the next two decades. To download the full verison and to learn more, visit: mintel.com/eiu Source: EIU/Mintel Global Market Sizes Global commodity prices and food markets Food Shocks The 2008 world price hike in food was a reminder that the supplies are not limitless even to cosseted first world consumers. This shock was ostensibly due to supply side factors, such as the impact of bad weather on particular harvests, although this can be overstated. Perhaps of more relevance is the increasing globalisation of the market and demand side factors. Growing and changing demand A global population of some 7 billion means that there is less ability to transfer global surpluses in one year or region to years of less abundance. Furthermore, many more of these additional mouths to feed are adopting diets which require more resources to feed; the greater consumption of meat is the most obvious example. Over the long term, advances in agriculture and bringing hitherto non-yielding land into production have broadly kept up with demand, but some agronomists suggest we are now in phase where demand is rising faster than supply. Globalisation a two-edged sword However, globalisation has a big impact. Comparative advantage economic theory would suggest that this would be beneficial, with surpluses in one area being more easily transferred to areas of shortages. Of course reality is different. The greater geo-political isolation of 20-30 years ago meant that crop failures or natural catastrophes were more contained. Some regimes, even if able, were reluctant to resort to buy on world markets. Any downturn in domestic output was more likely to be met by a shift in diet or just by eating less; any shock tremors were hardly felt in the first world. The 2008 shock felt everywhere Moreover, more globalisation has meant commodity speculation is more prevalent with the accompanying exacerbation of shortages and gluts. So, when there was a coincidence of several harvests falling short of expectations and growing demand in 2008, the impact was felt in many countries in many food markets. Changing diets As societies become better off, not only does food become less important proportionally in terms of household spend, but consumers trade up. In the graphics we can see that, by and large, prepared food markets are performing well. True, In China and India the forecast is marginally down on the past, but this is as much to do with starting from a higher base, than with any loss of appetite for these products among the populations. Even in the struggling mature UK market, prepared food is an area for a little optimism. This is not only because consumers have the financial ability to buy products which require less preparation, but, of course, also because these value added products are precisely what food companies are promoting. Supplier flexibility A major for manufacturers is that prepared foods allow more ability to absorb price rises. For suppliers of cheese, it is difficult for milk price rises not be reflected in the final price: for makers of cooking sauces, at least some of the dairy content can be substituted with other, less expensive ingredients. Future scenarios Working in collaboration Mintel and the EIU have created a model whereby the impact of various price shifts of food or any other commodity prices can be assessed at consumer market level. For more information go to www.mintel.com/eiu Getting Started with Mintel GMN Take a look at the New Reports section to see the latest GMN reports that have been published! If you’re new to Global Market Navigator, or need a refresher take a look at the ‘Help’ pages. There’s a short webinar taking you through the key features and a quick reference guide. Alternatively, we can arrange a group web training session. To book this simply contact your account director or email email@example.com You might also be interested in: No related posts.