Managing consumer demand in the food, beverage and consumer products sector
With revenues declining and costs going up, food, beverage and consumer products companies have spent the past few years operating in an unpredictable environment. For many organizations, the economic crisis and shifting consumer demand created unforeseen forecasting and operational challenges.
Food and beverage weathered the storm better than other sectors because of several key factors: continued consumption, a resurgence in home dining and growth in developing markets. As the global recovery takes hold, consumption of food outside the home will pick up, and the food service sector will resume growth.
Consumer products were hit especially hard during the recession, with shoppers holding back on big-ticket items. As the economy recovers, pent-up demand will lead some shoppers to pull out their credit cards and boost sales with aspirational buying.
Top trends shaping the market
The ability to quickly research products on the Internet or, increasingly, on mobile phones, is enabling consumers to make more informed choices in real time. Blogs, Facebook and Twitter are playing an increasingly important role before and during the shopping experience.
KPMG’s most recent Consumers and Convergence Survey reports that consumer acceptance of mobile commerce is on the rise; almost half (46 per cent) of global consumers surveyed use mobile devices to shop. But while acceptance of mobile commerce is growing, consumer businesses need to ensure an optimal balance of service, value, privacy and security, says Willy Kruh, Global Chairman, Consumer Markets, KPMG.
Private label foods continue to be popular as cost-conscious consumers choose to eat at home, and “trade down” to less-expensive food options. With growing concerns over health and wellness, especially among older people, consumers have also become more selective, choosing organic or naturally raised options where possible.
Sebastian Distefano National Industry Leader, Food, Beverage and Consumer Products, KPMG
“Consumers are looking for more variety and excitement in the selection of products,” says Sebastian Distefano, National Industry Leader, Food, Beverage and Consumer Products, KPMG. “Food and beverages from different regions and cultures, with exotic or new ingredients, will continue to be in demand. In the consumer products sector, new products that allow consumers to customize their purchases or make a personal statement will also continue to be a key trend.”
Sustainability is now part and parcel of new product offerings, as consumers demand information that gives them a more personal connection to products and helps validate their purchases.
“From tracking a company’s environmental performance to focusing on green products, sustainability not only is top of mind for consumers but also will be an increasingly important part of business strategy,” says Distefano.
M&A and emerging markets: Key growth strategies
Following a year in which both the number and the value of mergers and acquisitions (M&A) were down significantly, it’s unclear what form M&A activity will take over the next 18 months.
Significant M&A deals – such as Kraft Foods’ 2010 acquisition of U.K. confectionery maker Cadbury – highlight a key strategy, both for growth and market entry. “More M&A may be needed to achieve further economies of scale,” says Distefano. “Mid-size players can’t survive in the state they’re in.”
The other path to growth will come from emerging markets such as China and India which will represent more than 50 per cent of the world’s GDP within the next five years. By 2025, Asia Pacific and China will contribute about 1.1 billion new consumers to the world market – as much as all of North America’s and Europe’s populations combined.
Whether providing products or sourcing materials, emerging markets will be a key growth driver for many Canadian food, beverage and consumer businesses in coming years.
