What is the New Packaged Food Data Telling Us?
In 2017, packaged food continues to look to Asia Pacific and the Middle East and Africa for global growth, with these two regions posting retail value growth of 4% and 12%, respectively, over 2016 to 2017. Combined, these two regions have now increased their share of overall packaged food sales from 33% in 2012 to 36% in 2017. This shift is also noticeable in global brand rankings where three of the top five global packaged food brands are Chinese brands. To reflect the reliance on both regions for growth, Euromonitor has now extended its direct researched country coverage by 20 markets of which the vast majority are from Middle East, Africa and Asia Pacific. Conversely, developed regions remained stagnant, with Western Europe and North America seeing an outright decline in packaged food sales between 2016 and 2017.
Of the different food types, dairy has been one of the largest contributors to global growth with the vast majority of sales coming from Asia Pacific. China, unsurprisingly, drives this growth with a strong uptick in yoghurt sales and soy milk drinks, resulting in consumers moving away from, a previously favoured drink, other milk alternatives (e.g. peanut, almond and walnut milk drinks).
Globally, dairy companies continue to increase their importance in relation to other foods which is reflected in global company rankings, with Danone and Lactalis strengthening their overall position.
China’s booming demand for other milk alternatives goes sour whilst soy milk drinks benefit
After a long period of success for other milk alternatives in China, other milk alternatives has seen a strong decline over the last few years (-10, -8% RSP 2016, 2107) as it is considered overly processed by consumers, due to its long ingredients list. Furthermore, limited product innovation resulted in consumers’ lacking excitement for the drink.
Soy milk on the other hand (+7% RSP CAGR 2012-2017), is a traditional drink for Chinese people, consequently the product acceptance is relatively high. Dou Ben Dou, a new soy milk product launched by Dali in 2017 for example, claims to have no additives at all. Two ingredient lists are shown below for comparison.
Similarly, the previous high growth of walnut drinks (other milk alternatives) was mostly attributed to the concept of it enhancing brain health and improving memory, which was exposed to be exaggerated by Yangyuan which is the major producer of walnut drinks in 2015. From a taste perspective, Chinese people do not deem walnut drinks to be any better than soy drinks.
Top 10 food players: Dairy and savoury snacks gain over sweet snacks players
Among the top 10 packaged food companies, two players present mostly in dairy, Danone and Lactalis, outperformed most of their peers between 2012 and 2017, and for their rankings both benefited from acquisitions. Following the purchase of the milk alternatives specialist WhiteWave in early 2017, Danone is predicted to leapfrog Kraft Heinz as the fifth largest global packaged food company, while Lactalis saw its ranking move up through a spate of smaller scale acquisitions in several emerging markets ranging from Brazil to India.
Danone is also increasingly within reach of surpassing Unilever, which has seen modest growth in 2012-2017, undermined by stagnant sales and a declining share in margarines and spreads. As Unilever currently seeks a buyer for its butter and margarine unit and may reach a deal by the end of 2017, this increases the likelihood of the group falling behind Danone.
Benefiting from its strong presence in savoury snacks, PepsiCo outperformed those present mostly in confectionery, such as Mars and Mondelez. However, just outside the top 10, ranking 11, one chocolate confectionery specialist, Ferrero, steadily made gains through focusing on the more dynamic premium end of the category and by rapidly boosting its presence in emerging markets including China. This could lead Ferrero to overtake General Mills, which has suffered from steadily declining breakfast cereal sales in the US and has lost ground to rivals in yoghurt.
Another uncertainty in how the pecking order of the top 10 food players might be reshaped lies in the appetite of Kraft Heinz for acquisitions. Since its inception in 2015 through the merger of Heinz and Kraft, sales of Kraft Heinz have stagnated, hindered notably by the poor performance of its cheese and processed meat legacy brands in North America. As the group struggles to achieve organic growth, its private equity backer 3G Capital will be increasingly itching to make another bold move for a large food company allowing it to generate further group synergies.
Packaged Food Top 10 Company Actual Sales USD million 2012-2017 and CAGR growth
Note: (1) Kraft Food Group for the years 2012-2014
Asian brands gain prominence in the global packaged food scene
2017 has seen the continued dominance of Asian brands in the global scene. Of the top five packaged food brands, three (Yili, Mengniu and Arawana) come from China. However, the slowdown in the Chinese dairy market as opposed to the steady increase in size and penetration of the global snacks markets, has meant that PepsiCo’s Lay’s is expected to overtake Yili by the end of 2017. Yili’s sales are projected to contract by 1%, whilst Lay’s is to up its value growth by 4% in 2017.
Similar to overall packaged food, also in sweet biscuits Asian brands have started to become more visible in the global market. Of the top five leading sweet biscuits brands in 2017, two have come from Asia Pacific. Britannia, which is the leading biscuit brand in India, overtook Chips Ahoy!, the flagship US cookie brand, to be the world’s third biggest brand in 2016. Similarly, Parle, another Indian brand, now sells more than both Kellogg’s Keebler and PepsiCo’s Gamesa. Pocky, the leading Japanese biscuit sticks brand, with a similar shape and taste to Mondelez’s Mikado has jumped up five places over 2011-2017 and now ranks among the world’s top 10 sweet biscuit brands.
New researched markets differ substantially in spending patterns
The latest edition of Packaged Food research expanded the number of researched countries from 80 to 100. The newly added 20 markets are shown above, sorted from the largest total market value size, Iraq, to the smallest market, Cote d’Ivoire. When grouping all packaged food categories into the four types, staples, cooking ingredients and meals, dairy and alternatives, and snacks, it becomes obvious that the types of packaged food consumers spend their money on varies quite strongly between the countries. However, it illustrates that in the majority of these countries staple foods and dairy account for more than half of total packaged food value sales. Cooking ingredients and meals as well as snacks tend to account for smaller proportions of the share of wallet for consumers in these countries.
In Ghana, dairy products and alternatives stands out for generating a very large proportion of packaged food sales. Sales for this category are projected to amount to USD2.8 billion for 2017. Around three quarters of this is generated by drinking milk products, of which powder milk accounts for the lion’s share (more than two thirds). A lack of refrigeration – either in the supply chain, the retailers or at home – remains a stumbling block in many less developed countries and is the main reason for powder milk’s strong position within drinking milk products in these countries.
Ethiopia stands out for generating a large proportion of sales of cooking ingredients and meals. The majority (77%) of these sales can be attributed to sauces, dressings and condiments and within this, almost half of sales come from stock cubes and powders.
In Côte d’Ivoire, sales of staple foods account for more than 50% of total packaged food value sales. Within staples, most sales stem from baked goods which are traditionally of high importance in consumers’ diets and generate more than 80% of all staples sales – which is the equivalent of more than 40% of total packaged food sales in the country.
Further details on these additional 20 markets can be found in the country reports which will be published from October 2017 onwards.