Consumers rule! (And what to do about it.)

“Consumer food purchases” was the hot topic at British Columbia’s FoodProWest event where I recently presented FCC’s economic outlook.

Food preferences are shifting with a renewed emphasis on:

·         Health and nutrition

·         Exclusion diets

·         Greater choice

·         Convenience

There’s no better time for manufacturers to think about product innovation and – not surprisingly - they abound in the Canadian food market to match the growth in consumers’ food inclinations.

While food demand is influenced by tastes, it’s also a function of demographics and income.

Demographics

In Canada, food purchasing patterns are changing as a direct response to changing demographics. For one thing, immigration continues to be a major source of population growth in Canada. Immigrants bring new consumer demands and help to spread the appeal of the foods they eat to new market segments.

The aging Canadian population is another demographic shift that impacts consumer demand.

Statistics Canada estimated that as of January 2015, 16 per cent of the Canadian population was over 65, but that by 2034, that cohort will comprise almost one-quarter of the population. As we age, we make different food choices, leading to (among other things) reduced meat consumption and overall, fewer calories. To learn more about this trend, see the FCC Ag Economics: 2015 Beef Sector Report (pdf).

Income

Strong purchasing power also helps increase demand.

Real household disposable income in Canada soared by 6.2% in the first quarter of 2015. This income growth is supportive of high-value food purchases. And inflation remains extremely low, generating expectations of stable and low interest rates for the remainder of 2015.

With projected strong demand in the domestic market and a growing global middle class gaining an appetite for western-based diets, the overall context to invest in the food sector is positive.

Evolving business environment

It all seems very promising. Sophisticated food preferences however aren’t an automatic ticket to large and stable returns.

Competition to supply both domestic and foreign markets is only getting more intense. Canadian producers are feeling – and will continue to feel – the effects of a demanding environment created, in part, by consolidation. A large hog and pork packing business in China bought US-based Smithfield, and is now a giant in the animal protein market. The Kraft and Heinz merger helped them become the fifth-largest food company in the world.

The point is…

These are opportunities for Canadian food businesses to leverage resources, innovate and position their products to meet consumers’ expectations.

Canadian processors have a competitive advantage in offering high-value and differentiated food products to discerning and financially able consumer markets. Those markets are now open for business, domestically and globally.

To capture the markets created by changing demographics, incomes and consumer demands, businesses must clearly define the market they target as well as identify the channels – such as direct-to-consumer sales, alliances, etc. – they’ll need to reach consumers.  

And understand that across the entire agri-food supply chain, consumers rule.

J.P. Gervais, Chief Agricultural Economist