Outlook for the packaged foods industry

Posted by Daniel Palmer on 2nd July 2009

Despite the deterioration of the global economy, Euromonitor International believes the packaged food industry is well positioned to weather the storm.

Everyone has to eat, and with global food commodity prices now stabilising, the spectre of potentially catastrophic food inflation has been dispelled. “Even though commodity prices are slated to increase slightly during 2009 as consumer demand for eating at home increases, final retail prices should remain relatively stable,” Euromonitor advised. “Indeed, manufacturers are doing whatever they can to cut costs and pass those savings on to increasingly cash-strapped consumers. Retailers are … doing their part, by continuing to launch a variety of price promotions around the world. Private label offerings are also meeting consumer demand for value-minded packaged food offerings, with UK retailers like Tesco, Sainsbury’s, Asda, and even middle-class Waitrose all expanding the range and shelf-space of their budget own-label lines.”

Frozen processed food sales have performed well in a number of countries as consumers look for cheap, quick meals they can whip up at home, while lunchbox-friendly food has received a boost. Comfort foods have also proved popular, while supermarkets around the world have been focussing on providing alternatives to restaurant meals in a bid to lure the more frugal consumer.

Lower priced products have performed well but certain mid-tier and premium brands have taken a backward step. The premiumisation trend has faltered, although some premium brands have managed to buck the trend as more consumers seek ingredients of ‘restaurant quality’.


“Looking ahead, many of the same trends insulating the global packaged food market should continue to protect it from the full brunt of a prolonged economic downturn,” Euromonitor noted. “Retail prices should remain relatively stable as commodity speculation continues to wane and companies explore further ways to cut costs for cash-strapped consumers to maintain their margins.”

“Consumers should also continue to eat more at home rather than eating out, which should be a boon for both the industry at large and specific product categories like frozen processed food, canned/preserved food, pasta, noodles, rice, soup, ready meals, and sauces/dressings/condiments.”

Lee Linthicum, Packaged Food Industry Manager at Euromonitor International, advised that the health and wellness trend will continue to develop – presenting new opportunities to CPG manufacturers.

“At present, leading ingredients companies … remain very optimistic about their future growth prospects. They are continuing to develop new ingredients targeting weight management, brain/mental health, heart health, cholesterol/blood pressure reduction, digestive health and immune system support among others,” he said. “While organic food will likely remain flat, if not decline slightly, in the immediate future as consumers cut back on what they feel is superfluous expenditure (with the exception of baby food, likely to be more recession-proof as parents strive to offer their children the best), fortified/functional food should remain robust as an ounce of prevention is worth a pound of cure.”

Beauty foods, meanwhile, may have to wait until after the economic turnaround.