Few industries are more vast, dynamic and rich in opportunity for Thai producers than the food and beverage sector. Revenues of this industry worldwide totalled some $6.5 trillion in 2012, about 8% of global gross domestic product. The industry is growing continuously, and is being transformed by changing demographics and consumer behavior.
People around the world, especially in urbanising Asia, are buying different types of food as lifestyles change, work hours increase, traffic worsens and more women work outside the home. Thai food companies need to keep ahead of the trends and competition.
Instant foods and ready-to-eat meals are a segment bound to grow, especially in emerging markets. Globalisation and urbanisation are modernising lifestyles around the world. Speed and convenience are increasing priorities for busy consumers short on time to cook, driving sales of instant foods. Global sales of instant noodles, for example, are expected to double by 2022.
As more and more women work and the average size of families declines, pre-cooked meals find growing acceptance. (In Asia, households shrank from an average of 4.3 people between 1995 and 2000 to 3.8 people in 2000-10.) Shrinking family size also generates demand for products packaged in smaller quantities.
Rising incomes, health problems and education levels are generating steady growth in sales of health and wellness food products. More consumers are opting for premium products viewed as healthy such as organic fruits and vegetables, 100% fruit juices, energy drinks, low-fat foods, low-calorie snacks and products made from natural ingredients.
The growth of health and wellness foods began in the United States in response to diet-related health problems such as cancer, diabetes and cardiovascuar illnesses. Around one-third of Americans suffer from overweight and obesity today, and this proportion is expected to increase to around 40% by 2030. So American consumers have been spending heavily on health and wellness products since 2000, sales of which are around 1% of US GDP, almost twice the average of 0.6% of GDP in emerging markets.
Demand for beauty and wellness foods is growing in Asia’s emerging markets. The region is consuming more and more diet products and foods perceived to slow aging (so called anti-ageing products or super foods). Examples include weight-control coffee and antioxidant-rich fruits such as pomegranate, mangosteen, and goji berry.
The Asia-Pacific region leads the way in rapid growth of the market for beauty drinks, accounting for 65% of world market volume as well as in terms of product innovation within the category. There is also increasing consumption of “functional” foods that help strengthen the body and maintain wellness. Sales of healthy foods and drinks have grown by around 14% per year in the BRIC countries (Brazil, Russia, India and China) during the past five years and by 10% in Asean.
The outlook for special food and beverages for elderly people is bright. This consumer segment has high purchasing power, and the number of seniors will grow continuously. Many countries are fast becoming so-called ageing societies. In Japan, 23% of the population is aged 65 or over, or around 30 million people. By 2020, that ratio will rise to around 33%. Taiwan, too, has one of the world’s lowest birth rates and an increasing elderly population profile.
The business of developing and selling foods wanted by senior citizens is sure to boom. The types of food needed are those that are easy to chew and digest, or that increase vitality or appetite. Elderly people tend to consume less per meal, so companies need to develop products with small serving sizes, in easy-to-open packages.
The Mekong countries offer clear opportunities, especially in convenience foods. Consumers in the fast-growing economies of Cambodia, Laos, Myanmar and Vietnam, or the CLMV countries, have tastes and consumption patterns similar to those in Thailand. That means Thai companies are well positioned to expand their markets through exports.
GDP per capita is growing fast in these countries: up 19% per year in Vietnam, 16% in Myanmar, 11% in Laos, and 9% in Cambodia. These societies are urbanising fast, reflected in an urbanisation rate of 3.5% per annum that is far above Asean’s average of 2% per year. Laos, in particular, is urbanising at a rate of 5% per year. As happened in Thailand in decades past, young people in Laos are eating differently compared to their parents, consuming more packaged foods and imported ones.
Indonesia’s food and beverage market is huge, driven by growth in GDP per capita of 15% per year, among the highest rates in Asia. Indonesia is the fourth biggest market for Thai food and beverage exports, after Japan, the US and China.
Thailand’s main exports to Indonesia are raw sugar and fresh fruits, categories expected to see continuous growth. Indonesians are increasing their consumption of packaged foods, particularly dry instant foods, a category that has grown by 12% in the last five years.
New opportunities present new challenges. Thai food companies should focus more on developing and marketing value-added products such as ready-to-eat foods, healthy foods and drinks, antioxidant-rich foods, and foods for niche groups such as the elderly. Manufacturers should produce foods that truly stand out in terms of integrity and quality, with the consumer’s health and well-being in mind.
Young, affluent urbanites are increasingly particular in terms of their lifestyle choices and are focusing on premium foods and beverages. Companies that respond effectively to these consumer needs will flourish.
EIC, a unit of Siam Commercial Bank Public Company Limited, offers in-depth macroeconomic outlook and sectoral impact analyses. For more information, please visit www.scbeic.com or contact eic@scb.co.th