Following a year of strong inflationary pressures driven by the global energy crisis, shortages of raw materials, and high labour and transport costs, staple food producers may have hoped for an easier time in 2023. However, over the last year, they were forced to navigate an industry further challenged by weakened consumer purchasing power, trade restrictions, stricter health regulations and rising concerns on climate change.
Inflation stays high amid geopolitical tension and trade restrictions
Although global commodity and energy prices are lower than in 2022, staple food price inflation remains high. Among the most important factors driving inflationary pressures is the tight supply of grain, a key ingredient for baked goods, breakfast cereals and pasta. Reduced supply since Russia’s invasion of Ukraine has been exacerbated since July 2023 by the collapse of the Black Sea corridor deal which posed further delays to global grain supplies. In addition, export bans among large staple food producing countries, such as India and Indonesia, are exerting additional pressure in the supply chain crisis. And in December 2023, Russia itself banned durum wheat exports, until at least June 2024.
Protein sales face severe cost-of-living challenge
Processed meat and seafood remains one of the least dynamic categories in the staple foods industry and is projected to maintain a negative sales trajectory in 2023 as the energy crisis and the impact of animal diseases (primarily such as avian flu and African swine fever) have contributed to high production costs. Alongside strong price increases, the category is further challenged by the general rise of plant-based diets in some key markets.
Alternatives to meat, however, have also seen their growth slowing down as consumers have shifted to cheaper protein options, especially in developed economies
Source: Euromonitor International
In North America and Western Europe, the poor performance of the category has led several players to exit the industry or to rationalise their portfolio. In the UK, for example, the largest meat and seafood substitutes market in Western Europe, plant-based meat producer VBites went into administration in 2023. Earlier the same year, Nestlé withdrew its Garden Gourmet brand from the British and Irish markets.
Regulation promotes healthier nutrition; need for permissible indulgence grows
The staple foods industry is becoming increasingly regulated as governments around the world aim to promote healthier nutrition habits. Baked goods, breakfast cereals, and processed meat, seafood and alternatives to meat are among the categories most challenged from such regulations due to their high levels of sugar, fat and salt. As manufacturers are heavily reformulating their recipes to make their products comply with regulations, they need to ensure that updated recipes deliver on taste as the desire for indulgence persists – especially in times of high economic uncertainty.
Out-of-home recovery drives convenience innovation
As out-of-home mobility recovered and with China also easing its last set of COVID-19-related restrictions in early 2023, competition with foodservice outlets has returned.
Staple foods manufacturers are trying to leverage demand for convenience by adjusting their packages into portable formats
Source: Euromonitor International
In addition, as the cost-of-living crisis has forced consumers to cut their discretionary spending, including the frequency of eating out, producers have invested in restaurant-inspired recipes that can help elevate at-home eating occasions.
Increasing sustainability awareness brings attention to food waste and packaging
The global supply chain crisis has shed light on the vulnerability of food supply to trade disruptions, adverse weather conditions and animal diseases, raising concerns regarding global food security. Retailers and manufacturers are partnering, with a focus on the adoption of sustainable practices to help prevent food waste and significantly reduce packaging. Besides the positive environmental impact, such initiatives also allow consumers to save money and consequently tackle the cost of living.
To learn more about global staple foods sales and the top trends shaping the industry, see Euromonitor’s report, World Market for Staple Foods.