Food & Beverage Industry Review Q3-2008; McGladrey Capital Markets

Key Trends

Growing Functional Foods Market

Consumers are increasingly interested in products, typically called nutraceuticals or functional foods, that have specific benefits beyond nutrition, such as safety, enhanced beauty, immunity, digestive health and cognitive enhancement. Therefore, sales and new-product introductions in functional foods are increasing at a rapid rate. U.S. consumers spent close to $27 billion on functional foods in 2007 and are expected to spend $36.7 billion in 2012. Consumers, who are increasingly concerned about health and wellness, are choosing products boasting healthful ingredients. (Source: Food Institute Report, July 2008)

Shifting Consumer Trends

Consumer taste is shifting from simple grains to healthier foods such as vegetables, fruits, meats and dairy. The U.S. food industry has undergone significant changes because of shifting consumer trends, particularly the growing preference for products providing health, convenience and indulgence. Increasing awareness about the link between certain foods and diseases, such as cancer and heart disease, has resulted in much greater awareness about the importance of high-fiber diets, thus encouraging consumption of wholemeal and mixed-grain breads. Additionally, new product innovations, such as omega-3 fatty acids, are being introduced and targeted to health-conscious consumers. On a long-term basis, living standards and consumer preferences are expected to change with increasing education levels globally. Variety will become increasingly important to consumers, and retailers will reward product differentiation and innovation as new products offer the best growth opportunities. As a result, manufacturers can become more competitive through innovation and new product introductions. Key consumer drivers include convenience, health/nutrition, affordability, taste/freshness, functionality and availability. (Source: “An Appetite for Change- Food and Beverage 2012,” Deloitte and Foodbusinessnews.net)

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