Whilst pasta’s growth is not particularly phenomenal – globally achieving a volume sales CAGR of just 1% between 2011 and 2016 – this performance must be put in the context of a global packaged food market that achieved similarly meagre growth over the past five years (2% volume sales CAGR). Like most food products, pasta has suffered from a severe slowdown in growth in Western markets due to their saturation. Yet, that said, opportunities exist both within the West and elsewhere that will further cement the product’s position as a global food item.
Where do opportunities lie?
With regards to saturation, the situation is stark in Italy, pasta’s iconic market. Consumption per capita is 25kg – if the average serving size of pasta is 100g, this means that Italians consume pasta on two out of every three days. It is simply impossible to increase consumption in Italy, and, given the influx of competition from other grains as well as the decline of set mealtimes, consumption actually declined slightly between 2011 and 2016.
Volume Sales of Pasta in Italy and its Growth Drivers 2014-2021 (%)
Whilst the problem is most acute in Italy, Germany and France – the fifth and sixth largest markets with regards to volume sales – also have ceilings to how much further they can grow. Beyond the 2% volume sales CAGR rise anticipated in France between 2016 and 2021, there is limited additional potential for growth; German volume consumption will remain flat over the same period.
The main opportunities with regards to volume growth will be in the Middle East and Africa, as well as in small pockets within Asia Pacific. Turkey (considered a Western European market here but geographically in the area) Iran and Egypt are particularly appealing markets, as volume sales are already extremely high (combined volume sales totalled 1.6 million tonnes in 2016?) and are anticipated to rise at a 4% CAGR between 2016 and 2021. Pasta is a locally produced staple in these countries and an important contributor to food security. It has grown in popularity in Iran (and, indeed, Russia) in the past five years as sanctions have increased prices or prevented goods from being imported.
Volume Sales of Pasta in Egypt and its Growth Drivers 2014-2021 (%)
Yet whilst the affordability of pasta in these markets is a significant advantage, Euromonitor International’s industry demand model highlights that it is population growth and habit persistence that will have a stronger bearing on how these markets perform in the next five years. Put simply, pasta could fill the gap – and stomachs – of increased populations in these countries. In Egypt, where pasta is expected to grow at a 5% volume CAGR over the next five years, over two percentage points of this growth will stem from population growth; habit persistence – the cumulative lag effect of growth drivers from previous years – will contribute a further two percentage points as pasta becomes even more embedded.
Who could benefit and how will they?
As with many products, then, strategies for manufacturers can be split between achieving value growth in countries such as Italy and focusing on volume growth in unsaturated markets such as Iran, Turkey, Egypt and Brazil. Yet, in the majority of these markets, international manufacturers are unlikely to enjoy the benefits as local manufacturers with close relationships to producers dominate these markets. The likes of Barilla, Pastificio Rana and Ebro would be unaffordable to most consumers, barring exorbitant investment to set up local production on the part of these manufacturers.
International pasta manufacturers should focus far more on value-oriented growth markets. Given that private label has significantly increased its share in most Western markets over the past five years (private label’s value share stood at 33% in Western Europe, for example, in 2016), manufacturers will need to leverage marketing options as well as their genuinely superior quality to private label counterparts. One such example of this success has been seen in France, where Ebro achieved a 3% value sales CAGR over the past five years, rising to over USD500 million, as a direct result of the improved performance and positioning of its Panzani range as a premium product.
Pasta manufacturers would also be wise to see how consumption habits are evolving and how this is affecting pasta’s main consumers. People who choose to grocery shop online are likely to spend more on the food they purchase, and there could be overlap opportunities for premium pasta manufacturers here. Those who value high-quality pasta could be more likely to prefer scratch cooking (buying all necessary ingredients), and so positioning pasta at the perimeter of shops, next to fresh produce, could cultivate this premium image further. All in all, the future is optimistic for pasta if manufacturers can tap in to these trends.