What factors will change the global demand for food in the coming years? There are four which are key: population, macroeconomics, prices, and “soft drivers”. With a firm grasp on all four, understanding large shifts in the food industry becomes much easier.
Population and demographics are the most predictable
The global population will add just over a billion people by 2040, creating significant additional demand for food that does not exist today. These new people will mostly be found in Africa or South Asia, driving global volumes in the coming years for many categories. Meanwhile, many developed countries can expect to see declining populations. Should this combine with widespread GLP-1 usage, a “calorie cliff” could occur for much of Europe and East Asia. An emphasis on premiumisation already underway will intensify under such conditions.
Volume challenges will hit hardest in child-orientated categories as global fertility rates continue to fall. This is not only the case in nearly the entire developed world but also major developing markets like China, Brazil, Russia, and Mexico. Emphasis in these key markets will increasingly shift to the needs of elderly populations as well as pets, both of which are growing in number.
The top 20 growth markets in pet care all currently have fertility rates of 2.0 children per woman or lower, showing where spending once going to children could end up in the future
Source: Euromonitor International
The Guardian reported in June that pet care sales are now more important to Mars than its human food sales. Mars is unlikely to be the last company to make this shift.
Economic growth matters everywhere, but not in the same way. In developed markets, GDP growth has a weak correlation to further food demand in volume terms. There, good economic times will move consumption outside the home, shift brand preferences, and lead to more seeking of value-added attributes, but not overly affect volumes. Meanwhile, in developing countries, there is a much stronger link to volumes, although factors like trading-up and shifting consumption outside the home play a role as well.
Throughout all levels of market development, similar categories face the most risk. Snack foods as a whole, and ice cream specifically, are the most responsive to changes in GDP of any categories of packaged food as they are non-essentials for most consumers and are tightly linked to leisure activities outside the home that are more popular during good economic times. Future recessions, therefore, pose a larger risk to snacks than to any other food industry. Staple categories like bread or rice, meanwhile, should ride out future economic trouble with comparatively little damage.
While inflation may be declining, the core issues behind food price growth (climate change, geopolitical disruption etc) are largely outside the control of central bank policy. That means food prices will not only not reset to their 2019 levels, but will, in fact, continue to grow long-term. According to Euromonitor International’s Industry Forecasting Model, this will pose the largest challenge for volumes in categories viewed as non-essentials like confectionery products or plant-based dairy.
It will also place pressure on the willingness of consumers to pay more for value-added attributes. One effect of this being seen is in the slowing rate of product innovation, where rates of new product launches have been falling since 2021.
New brand launches in packaged food globally in the first six months of 2024 were down 21% compared to the same period in 2023 and 50% against 2021
Source: Euromonitor International
“Soft drivers” are less predictable but follow general trend lines
A possible challenge at the heart of all of this is the shortening of the trend cycle under pressure from social media (especially TikTok). The consumer desires novelty at an accelerated pace. This will affect some aspects of the food industry but not the general patterns found above. While the specific flavours that will trend in 2027, for example, are nearly impossible to predict, we can know roughly who will be eating them and how much money they will have to spend buying them. Short-term trends are, of course, important in their own right, but they should not distract from the impact of the slower and larger demand drivers.
For more analysis on this topic, please read Unpacking the Drivers of Global Packaged Food Demand. And for more on this topic in a related industry, please see, Innovation in Soft Drinks: Fewer Launches, More Functional Focus.