As the global food industry witnesses a change of guard as demand shifts further east, the words of James bear ‘food is our common ground, a universal experience’ has never rung truer.
Global demand for food and beverages has continued to grow in spite of economic woes and Asia Pacific has led this growth by far. In 2012, the Asia Pacific food industry accounted US$2.75 trillion or 40 percent of global retail food sales, making it the largest food market in the world.
The Asia Pacific food market is still largely dominated by primary raw materials and major agricultural contradictions. While on one hand, India and China have huge agricultural resources and have established themselves as global forces in agricultural exports, others, such as Singapore and Hong Kong, are facing huge shortages of agricultural land and are highly import dependent.
The market for food products in Asia pacific is today split between cereals (18 percent), dairy (14 percent), fruit and vegetables (26 percent), meat (29 percent), fats and oils (six percent), and sugars (seven percent).
The focus in the region is therefore to establish smaller countries as secondary processors in an increasingly sophisticated food industry to cater to increasingly cosmopolitan Asian consumers.
Megatrends Impacting Demands
Asia’s key megatrends have a strong impact on the overall consumer behavioural patterns and thereby, food demands in the region.
The two primary megatrends causing this demand spurt are:
As Asian economies emerge from the economic cocoons of the last decade, there has been a huge migration of population into the urban areas.
This trend has grown from strength to strength in Asia where as of 2011, 44 percent of the population live in urban areas with the second fastest urban population growth rate, at an average of 2.4 percent per annum (2005-2011).
According to WHO projections, Asian cities are growing rapidly with this percentage shifting to over 50 percent in the next 15 years. It is expected that cities will merge together to create urban settlements such as mega-regions, urban corridors and city-regions.
For example, it is estimated that Japan’s Tokyo-Nagoya-Osaka-Kyoto-Kobe mega-region will have a population of 60 million by 2015. The city region of Bangkok in Thailand will expand another 200 km from its current centre by 2020.
This expansion will have a direct impact on changing food consumption as busy lifestyles and lesser space will encourage increased purchasing of processed and semi cooked meals.
This rising urbanisation and aspirational living has given rise to the demand for convenience on the go food such as ready meals and semi-cooked product demand. One of the key industries that has benefitted from this is that of instant noodles, which has one of its largest growth rates in Asia Pacific.
The convenience food market in Asia pacific is expected to continue to grow at six to eight percent year on year in the near future.
b) Health and Wellness:
In a region still tied very strongly to its cultural ties, the trend towards healthy foods has emerged as a huge consumer puller. With strong local awareness on natural extracts, the trend towards functional foods and beverages has been a huge revenue generator in Asia with consumers willing to pay for extra value.
In 2012, the Asia pacific functional food market is evaluated at approximately US$40 billion and growing at an overall rate of seven percent year on year.
With strong governmental initiatives towards increasing concerns, such as micronutrient deficiencies and malnutrition, the demand for fortified food will continue to increase.
In addition, the presence of Japan in the region, which is traditionally a beacon for nutraceutical trends, will ensure the continued demand for these products in Asia pacific.
THE CONVENIENCE FOOD MARKET IN ASIA PACIFIC IS EXPECTED TO GROW AT SIX TO EIGHT PERCENT.
As the role of beverages in nutrition continues to grow as a favoured mode of delivery, the beverage industry is witnessing growing demand.
Contrary to the West where beverage growth is within the alcoholic and carbonated soft drink area, in Asia, key growth is in the non-alcoholic and fortified beverage sectors.
For instance, Indonesia, with a global beverage market of over US$7 billion in 2012, is witnessing most growth in its ready to drink tea market.
Asian manufacturers are thus focussing on the commercialisation of local ingredients such as green tea to ensure consumers identify with the products.
Key growth areas within beverages will be ready to drink tea/coffee, juices and bottled water. The latter will continue to grow with the introduction of premium segments as Asia battles with increasing water pollution and scarcity.
A traditionally mostly non-dairy consuming population with the exception of India, the Asian region has witnessed explosive growth in demand for dairy products over the last two decades.
China is the forerunner in this demand as its younger population increasingly incorporates dairy into its daily diet. India is the world’s largest producer of milk, though most of its production is used domestically due to South Asians being traditional dairy consumers.
Key demand growth within dairy will be within the skim milk powder markets, especially for infant nutrition in Thailand, China and Singapore, as well as the growing sophisticated markets for cheese, particularly in South Korea and Japan.
Dairy based beverages and dairy fortified foods are also key emerging product opportunities which will see demand in the more developed countries such as China and Singapore.
According to the 2012 Micronutrient Report In the developing world, more than 40 percent of women are anaemic, nearly 20 percent of the population suffers from iodine deficiency disorders (IDDs), and about 25 percent of children have subclinical vitamin A deficiency.
In 2012, over 35 percent of the Asia Pacific population has a micronutrient deficiency second only to Africa. With increasing concerns on poverty and malnutrition within the Asian region, initiatives to fortify basic commodities will be a key focus for governments over the next few years.
The key three major micronutrient deficiencies of iron, iodine and vitamin A will be the focus on fortification in the Asia region. This is apparent with existing government aims at fortification that will only increase demand for such foods.
The market for fortified commodities such as salt, wheat and cereals will be a key growth area in the immediate future.
Fortifying The FutureBelow is a list of key government initiatives in food fortification:
Philippines: Philippines has been fortifying rice since the 1980s. The technology involves the coating of ordinary rice with an alcoholic solution of ferrous sulfate and a suitable coating mixture to produce a premix, which is then mixed with ordinary rice at 1:199 dilutions to produce iron fortified rice.
Vietnam: The World Bank and then GAIN awarded the Government of Vietnam’s National Institute of Nutrition, in partnership with UNICEF and the National Fortification Alliance, US$3 million to fortify fish sauce with iron since 2010. Fish sauce is consumed by more than 80 percent of the total population
China: In November 2003, GAIN awarded the Food Fortification Office of the Chinese Centre for Disease Control and Prevention, in partnership with the National Fortification Alliance and the Chinese Condiment Association, US$3 million to fortify soy sauce with iron.
In May 2010, GAIN invested an additional US$1.5 million in the project. In China, soy sauce is an ideal food vehicle for fortification as it is consumed in small consistent quantities by over 70 percent of the total population.
India: All salt in India is mandatorily iodine fortified since 1988, though the deficiency is still prevalent in over 60 percent of the population. Iron and iodine deficiency affect over 50 percent of the Indian population due to low dietary intakes. To combat this, since 2010, additionally fortification of wheat and salt with both iron and iodine has begun.
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 ready to consume healthy foods.
Increasing awareness of healthy eating and growing levels of aspirational living will, result in branding becoming a key purchasing factor as global brands influence local consumers with promises of better quality.
Key growth will focus on market penetration into the rural markets for the volume based segment and quality focussed product differentiation at premium prices for the urban value based segment.
The Asia Pacific food industry is thus expected to grow from strength to strength as local demand and global multinational investment thrust it in to the spotlight as the blue eyed darling of the global food industry.