Gary Fread looks at how changes in the global consumer market affect strategic planning
We’ve talked about innovation, productivity and sustainability, and positioned them all as critical to being competitive in the market place. Now, looking at the basics of strategic planning, the next thing we need to do is look at the market and understand what it needs/wants/demands. Because if we don’t respond to those things, we won’t be around long. Let’s start with consumers and then next time look at the distributor sector, our direct customers.
We hear a lot about what’s going on internationally as far as globalization, economics, demographics, climate change and other issues. Do we always listen to that news from the standpoint of how that affects our business? The successful do, believe me. So let’s look at some of those things.
Most of us understand the terms developed countries, developing countries and lesser-developed countries. Let’s look at them from a food marketing perspective. The developed markets are mostly North America, Western Europe, Australia/New Zealand, and Japan. Consumers here are used to getting pretty much whatever they want at a price they like, for example, 10 to 12 per cent of disposable income.
Then there are the developing countries like Brazil, Russia, India, China, Mexico and others. Not only are they developing domestically, they are starting to export to the developed markets. We are seeing more and more competition from businesses in those countries, which probably have lower commodity costs and lower labour costs, making them strong competition.
Finally, there are the lesser-developed countries that, over time, will emerge as viable players. Even now many of these are active in marketing their local commodities such as sugar and chocolate.
We know that the population will continue to grow for the next 40 to 50 years. Current projections are around nine billion to 9.5 billion people by 2050. That’s a growing market, especially as it increases in levels of disposable incomes. It’s always good to have a long-term growth market, and we do.
In developed countries, the populations are aging. This will bring about more focus on health and, as we’re beginning to see, healthier eating and a greater understanding of the interaction of diet and health. Today we have many chronic health problems like heart disease, cancers and obesity, and more dietary sensitivities like food allergies. Healthier foods – things that claim to be “low in…”, or “free of…” and “helps build better/stronger…” – will be a strong growth segment for a long time.
We will continue to see high-volume immigration to the developed countries, with Canada already being one of the most ethnically diverse countries in the world. This means the demand for global foods of all kinds will continue to increase in Canada, making it another growth niche for the food and beverage sector.
As the boomers retire and the echo boomers or more correctly, the millennial generation, replace them as consumers, I think we will see more interest in upscale, gourmet culinary products as well. Boomers are foodies, and when they retire they will have more time to cook and be creative, as well as dine out. And they have a great appreciation for the artisanal type of products like specialty cheeses and wines. This upscale niche will also be a growth market.
In developing countries, disposable incomes will rise fairly quickly. There will be more two-income families with both parents working. This will lead to growth in prepared foods, as time demands will mean people will increasingly choose to buy dinner rather than buying the ingredients to make the meal themselves – a good opportunity for exporting finished products to those markets rather than raw commodities. Oh, and that would mean more jobs and a boost to the economy in Canada, if we can be competitive.
Will climate change, increased oil prices, diminishing resources, all of those sustainability related issues, get in the way of both Canadian global exports and imports from developing countries? There is a debate about this, with some saying essentially that the world will “deglobalize,” while others believe it will continue to be global, but perhaps moving slightly slower in that direction. I tend to think the latter is the better prediction, but it means we will have to get smart about sustainability – including energy management, waste reduction, improved efficiencies, and reduced resource use – to make our foods. We must!
So there are some fairly sure types of opportunities: healthier products, ethnic products, upscale/artisanal products, and a greater focus on exports of finished products rather than just commodities.
Are we well positioned to take advantage of those opportunities? I say we are. There are things that need to happen, though, but we have a large and diverse agricultural base that produces many key commodities, and a marine industry that provides a wide variety of fish and seafood. They’re all here. We have a well-developed processing industry facing increased competition from developing markets, but as we’ve said, we need to have more focus on innovation, productivity and sustainability in order to ensure we are competitive. We have the service and supplier industries needed, like packaging and equipment manufacturers, logistics service providers, and all the others.
If exports become a key strategy, we need government to negotiate better trade agreements with many parts of the world. We need government to help us to harmonize regulations to overcome non-tariff barriers, as is happening in food safety with the Global Food Safety Initiative. What about faster processing of health claims? What about harmonization on nutritional labelling? And on and on. We as industry need to unite to get these messages through to government. And, of course, we must have stronger collaboration along the food value chain from agricultural inputs right through to consumers.
Gary Fread is president of Fread & Associates Ltd., consultants to the food industry. He has spent 25 years in management positions in the food processing industry, with a background in sales, logistics, purchasing and technical areas. He has worked with Procter & Gamble, Campbell Soup and Morrison Lamothe, and is the past president and CEO of the Guelph Food Technology Centre. He is active in many food industry associations and organizations, serving on the boards of several. Contact him at [email protected]