Complex and niche: Fragmentation in the global ingredients market
Speaking to FoodNavigator, Rice said that the biggest ingredients market in 2012 was flavours and flavouring materials, with an estimated value of $19bn globally. RTS values the entire global market for flavours, ingredients and additives at $51.6bn.
But the fastest growing markets are colours – growing at 8.9% a year – and healthy ingredients, like sweeteners, salt replacers and fat replacers – growing at about 11% per year.
“There are some very high growth ingredients but they are starting from a very small base,”he said, adding that the total value of the global colours market was $0.9bn last year, with natural colours and colouring foodstuffs, like fruit and vegetable powders, accounting for about $0.6bn of that. “The total ingredient market is becoming a lot more fragmented, a lot more complex, and a lot more niche.”
In colours, growth has been driven by manufacturers switching synthetic colours for natural ones, on the back of consumer demand. Natural colours on the whole are more expensive than synthetic ones and often larger amounts are required to achieve the desired colour. Rice said that the quantity of colouring in itself is driving a large part of the growth in this market.
“The cost per colour is a lot, lot higher, so that does by default grow the market,” he said.
BRICs and beyond
As for regions, Rice said: “Asia Pacific and South America are the ones to watch, but there are some good growth markets in Eastern Europe still – but some of those countries in Eastern Europe are flat.”
And manufacturers increasingly are targeting different products to different regions, necessitating local knowledge from suppliers.
“Our word of caution is that it is becoming more and more fragmented and you need to be specialised to do well,” he said.
“We see an industry where food manufacturers need to respond to consumer trends but they don’t necessarily have the equipment. They are being a lot more relied on to provide some of these specialised ingredients.
“…Firms are increasingly realising that taste works very much on a country by country basis.”
He said that Nestlé was one example of a major company looking to appeal to local market preferences more than ever before.
“Big companies are realising that there are differences. Taste profile, acceptance of ingredients, and acceptance of branding varies from country to country,” he said.
“If you are a small company, you have to be very, very good at what you do, and if you are a large company, you have to be very aware of the niche companies that may be attacking your market.”
Shift toward processed foods
On a global basis, other growth areas include sauces, marinades and dressings, and coatings, like batters and breadcrumbs.
“A lot of it is down to urbanisation. As we become more urbanised we tend to look more towards processed foods, which is a big driver for what we would call industrial ingredients,” he said.
“…There is a lot of growth in things like fat replacement and salt replacement and that is down to reformulation and making products healthier for consumers.”
RTS aims to present an overview of the size of different global ingredient markets and the opportunities they offer suppliers at the FIE conference on Tuesday, November 19.
