The global economy today is witnessing multiple challenges of inflation, recession and inconsistent recovery rates. As the world aims to cope with these worrying trends, demand for the proverbial ‘pot of gold’ is slowly moving from that of ‘black gold’, namely petroleum, to the more pressing concern of food shortage.
Indeed, the next global demand area is the world’s challenge to feed its growing populations, especially in the emerging Asia Pacific region. With such high expectations, food today is expected to be a one stop shop not only in nutrition, but also in preventive medication and it is this requirement that has led to the rise of interest in the food ingredients and additives market.
With increasing concerns about chemical side effects and the introduction of synthetic additives into foods, consumer demand for natural alternatives has increased dramatically. The industry responded to such demand by focusing on customisation of products to focus on natural alternatives for established variants.
While the trend towards natural has been defining the food ingredient market for over a decade now, the Asia Pacific market has been slower in embracing it. However, once done, it has steamed ahead and is today, a global leader in natural alternatives to synthetic food ingredients—a fact that is attested to by the large amounts of food ingredient manufacturers from BASF to Cargill entering and reiterating their commitment to the Asia Pacific Market.
The global food and beverage (F&B) sector, which comprises farming, food production, distribution, retail and catering was valued at US$6.3 trillion in 2012.
As economies emerge, food demand will continue to shift towards Asia in the upcoming decade. Buoyed by end use growth, the global food ingredients market was estimated to be worth around US$64 billion in 2012 and is growing at six to eight percent year on year.
Asia Pacific has emerged as a key market for these ingredients. As is the case globally, the major markets for food ingredients are split between the application sectors of bakery, dairy, confectionery, savoury, nutraceutical and others.
In terms of functionality, these ingredients are split as colours, preservatives, sweeteners, emulsifiers, enzymes, fortified food ingredients and others. While the individual application segments are growing considerably, it is the nutraceutical sector, buoyed by the fortified food ingredients products, that are driving demand in this market.
Key Growth Sectors
While food ingredient demand in Asia Pacific is on a growth trajectory due to its emerging nature, there are certain ingredients that are acting as the flag bearers of industry growth, purely due to their healthy image and ability to answer to the need of the hour. which is health and wellness.
These ingredients are the colours, preservatives and fortified ingredient markets. All three markets are based around the industry’s need to recreate its health reputation, and the resulting growth is testimony to such an initiative bearing fruit.
The global food colours market was estimated to be at around US$1.5 billion in 2012 and is growing at two to four percent. The market is broadly divided into synthetic and natural colours, and it is the latter that has revived this industry and turned it around to emerge as a potential goldmine.
Natural colours are typically more expensive than synthetic colours, but the industry and consumers have shown a willingness to pay for the natural label even in tough economic times such as the global recession.
The food colour industry in Asia Pacific was estimated at around US$450 million in 2012 and is growing at three to five percent. Natural colours account for 33 percent of this market and over 60 percent of products launched in Asia Pacific today contain natural colours.
This fact has been further established by the entry and investment into Asia by all major natural colour manufacturers such as Sensient, Chr Hansen and BASF.
Food preservatives or shelf-life extension ingredients are particularly relevant in Asia Pacific due to the tropical climate of a majority of its member countries.
In addition, most countries in the Asia Pacific region are plagued with a lack of infrastructure and refrigeration facilities that have caused manufacturers to invest even more in preservatives, to ensure the product remains fresh until it reaches the consumer.
The total shelf-life extension food additives market in Asia Pacific was estimated to be US$84 million in 2012, growing at a CAGR of 8.2 percent in revenue. In terms of consumption, the Asia Pacific represents the third biggest market, only after North America and Europe.
Preference for natural antioxidants is rising in spite of current higher consumption of synthetic antioxidants. Increasing interest in convenience foods and snacks is driving the overall antioxidants market.
Key subsectors include vitamin E (mixed tocopherols), herbal extracts (rosemary extracts), hindered phenols (butylated hydroxyanisole (BHA), butylated hydroxytoluene (BHT) and tertiary butyl hydroquinone (TBHQ)), ascorbyl palmitate (derivatives of vitamin C) and propyl gallates.
The antioxidant market in Asia Pacific is highly fragmented with a strong influx of local manufacturers who possess a significant market share. The market is diverse: developed countries (eg: South Korea and Japan) account for 40 percent of the market and consume non-genetically modified (GM) based antioxidants, while developing countries (eg: Singapore, Malaysia, Thailand, Taiwan, and Vietnam) consume more GM based antioxidants.
Globally, the nutraceutical ingredients act as the key purchase indicators for nutraceutical products. As consumer awareness on nutraceuticals grows, so does the demand for specific ingredients such as omega-3 and phytosterols.
In the Asia Pacific, these fortified food ingredients are key growth drivers accounting for over US$7 billion worth of revenue to the industry, or 38 percent of the global nutraceutical ingredient market.
The major fortified food ingredients in use in Asia Pacific are differentiated into the categories of heart health, digestive health, eye health and women’s health amongst others. These ingredients ranging from omega-3 to phytosterols are driving innovation and investment into this market, and are expected to continue to grow to be major growth areas for the overall food industry, due to their relatively low consumption norms in relation to high prices.
Countries such as Japan, Australia, South Korea and New Zealand have highly sophisticated local and export nutraceutical ingredient set ups, while China, India and ASEAN are moving from sourcing hubs to downstream processors and manufacturers of nutraceuticals at present.
As the Asia Pacific food consumer witnesses a rising income status, additional revenue will be allocated to sophisticated value added food demand. This scenario will result in increased demand for healthy ingredients and the rising awareness of ingredients.
Increasing awareness of healthy eating and growing levels of aspirational living will result in ingredient branding becoming a key purchasing factor, as global brands promise better quality. Key growth will focus on further market penetration into lesser known markets such as Vietnam and Myanmar for the volume based segment, and quality focussed product differentiation at premium prices for the urban value based segment.
The Asia Pacific food ingredient industry is expected to grow from strength to strength as local demand and global multinational investments thrust it into the spotlight as the favoured child of the global food ingredient industry.