Food for Thought: Food & Beverage Sector in Asia Pacific

Says:

In recent years, the strong growth of the food and beverage (F&B) sector in the Asia-Pacific region has seen a rise in the trade of the F&B manufacturing, processing, retail, catering and supporting industries. The food and beverage industry is highly characterized by intensifying competition from a wide variety of food offerings, new entrants and lower cost manufacturing bases.

Existing and prospective F&B players can take advantage of the opportunities within the F&B industry through capitalising on firstly, the changing consumer profile with consumers wanting more innovative and differentiated products that suit their tastes and lifestyles, and, secondly, the rapidly growing middle-class in Asia which has created a demand for higher quality and higher value-added food and beverage products.

To meet the challenges of competition and costs, and to seek out new opportunities, F&B players have to create new value for consumers. Local food manufacturers need to firstly, upgrade their capabilities to meet export quality standards and secondly, to further build up their export capabilities and increase their sales through higher value and innovative products.

Key Trends and Observations In Asia-Pacific

The Asia-Pacific food and beverage market encompasses a diverse group of countries with varying levels of economic development, tastes and cultures.

Innovating product and business strategies – Innovation in executing business strategies forms one of the key drivers in the food and beverage market that takes on various forms in different markets. In the developed markets, product strategies focus on providing new tastes and experiences to the consumers. As the number of brands increases, consumers become more sophisticated and are better able to discern quality and assess value, independent of manufacturers' claims. Food manufacturers thus need to constantly innovate in the areas of product type and their packaging in order to increase market share. Innovations include developing personal, smaller or lighter sized packaging. They may also include developing food products with non-traditional flavours.

In less developed markets, the food producers focus their innovation efforts in packaging to increase the shelf life of products. This is to help address potential problems caused by distribution delays. There are also attempts to package food products that were not traditionally packaged thus far.

Health Consciousness – In recent years, increasing awareness and interest in healthy living through good diet have led to an increase in the consumption of healthier food in various ways across different markets. In developed markets, (eg. Singapore and Australia ), it appears that consumers are paying more attention to the contents or ingredients of packaged food and beverages, preferring fresher food that contain less sugar and additives. As a result, market share of carbonates and confectionery have declined while that of healthier choices like bottled water, 100% juices, juice-based drinks, herbal teas and nuts have increased. 

Driven by factors such as hygiene and an avoidance of spurious products, for developing markets like India and China , this trend of health consciousness is gradually shifting towards branded, packaged food, away from the generic, unpackaged food. The markets here are witnessing a growth in food products that do not necessarily have much value added, other than in their packaging.

Lifestyle - The demand for ready-to-eat or ready-to-cook food has risen across the region as the more developing markets urbanise and people in cities increasingly lead more hectic lives. As a result, the time available for cooking is reduced and the need for ready-made food becomes increasingly popular. Longer working hours and increasingly hectic urban lifestyles have led to higher demand for food that are easy to prepare and serve. In addition to the basic ingredients, today's consumers want more choices such as packaged set meals and ready-to-eat-meals. Products specifically designed for microwave cooking are also expected to proliferate. 

Ageing population - Currently, the proportion of the aged is increasing in countries like Japan , Singapore , Taiwan , South Korea and Hong Kong . Older consumers are more concerned with nutrition and weight maintenance. They also tend to have problems with food digestion and nutrient absorption. These factors may contribute to greater market potential for fortified drinks and low fat food in the Asia-Pacific region.

The Asia-Pacific market offers both opportunities and challenges to F&B companies. The market has shown good growth in the recent past and this growth is likely to continue in the future, driven by a number of factors including the large population base, growing affluence, increasingly hectic lifestyles and exposure to cross-cultural influences. However, as different markets are in various stages of development, the opportunities available in each are diverse.

 It is noted that China , India , Indonesia and Vietnam still have a large scope for sales growth in lower value-added food products, through the use of better packaging, and by selling products that are attuned to local preferences. More developed markets like Japan , Australia and Singapore are driven primarily by innovations in both packaging and tastes in high value-added food and beverage product categories.

Growth options: organic vs. non-organic - Global food companies often find it easier to enter different markets in Asia-Pacific through acquisitions of local players with market leading positions. These global companies often do not have a portfolio of products that cater to local preferences. Thus, acquisitions of local F&B companies can help to build product lines that are aligned with local preferences.

Examples: Global players acquired local players

•  Nestlé's acquisition of Powwow bottled water in China

•  Danone's acquisition of Wahaha bottled water in China , and