Leatherhead 2013 outlook report

Leatherhead on global food industry outlook for 2013

Leatherhead Food Research, a leading UK-based independent research organisation, has identified the key global issues that are likely to have an impact on the food and drink industry in the coming 12 months. “Global population change will continue to underpin many of these challenges and opportunities,” says Matthew Incles, Strategic Insights Manager, Leatherhead Food Research.

Mixed global economic outlook

Emerging markets will continue to gain more interest as the growth in population, life expectancy, urbanisation, economic output and consumer spending will continue to significantly outpace that of developed economies.

By now, we had rather hoped that the economic outlook for Europe would be much more positive than it is. However, recent OECD projections show that the economy will actually contract in Q1 before returning to very modest growth for the remainder of the year. The situation is made worse by the inability of households to pay down debt and the deterioration in consumer confidence, suggesting that consumer spending will continue to be be constrained.

 The outlook for the US is much more promising. The same OECD projections show growth in economic output rising at +2% per quarter throughout 2013, a reduction in household debt and rising consumer confidence, suggesting that consumer spending might also rise.

 As food represents a necessity item, the effects of the wider economic environment are not as keenly felt as compared to other industry sectors such as construction. However, factor in an expected rise in retail food prices (because of a poor northern hemisphere harvest for some key agricultural commodities), and we can expect that consumers will still feel the pinch at the checkout. There will be no let-up in the necessity to demonstrate good value for money in 2013.


Sustainability is embedded in the strategies of the world’s leading FMCG companies, encompassing a host of issues that includes energy use, raw material sourcing, the environment, human and animal welfare, waste, water usage, and so on.

Top of the agenda in 2013 and beyond will be evidencing the progress made by industry as a whole and individual businesses. Greatest progress will be made when commercial and sustainability objectives align (e.g. reducing energy usage and cost reduction).

Governance and regulation

Here, the greatest emphasis will be directed at creating a legislative framework that works in the interest of consumers and encourages positive dietary changes, particularly in regions of the world where governments prioritise public health issues (e.g. dealing with rising obesity levels).

Expect continued scrutiny of the use of salt, fat and sugar, as well as how ‘healthy’ foods are marketed. For example, 14 December 2012 heralded the enforcement of the much-anticipated EFSA article 13.1 health claims. Reviews of the PARNUTs framework in Europe and nutrition facts labelling in the USA can also be expected in 2013.

Innovation and consumers

The business environment looks pretty tough but let’s not get too downbeat. There’s plenty of opportunity too, especially for companies that are prepared to innovate. One of the biggest innovation areas to (continue to) focus on in 2013 will be health and wellness. As health and wellness encompasses so many different platforms, we have identified the stand-out ones for 2013.

Natural trend beds in

The march to all things natural is likely to persist for some time to come as consumers increasingly buy into the perceived healthiness of the additive-free/natural proposition. Leatherhead believes that manufacturers will continue to adopt a natural/clean label policy wherever beneficial.

The future of functional foods

There will be considerable interest in how the European functional food market performs in the wake of the enforcement of EFSA’s article 13.1 general health claims. Leatherhead feels that the legal enforcement of health claims will have little impact and that the market will continue to grow.

However, our research shows that consumers want to see proof, verified by independent science, that the product lives up to its promise. Achieving this is more likely to be critical to continued market growth.

‘Free From’ to build on success

‘Free From’ was the success story of 2012, and we expect the unbounded growth of ‘Free From’ foods to continue into 2013. Expect more activity from big brands wanting a piece of the action and, dare we say it, moving products off the ‘Free From’ aisle and putting them next to category competitors.

Salt, fat and sugar: pushing technological boundaries

Interest will not wane in the effort to reduce salt, fat and sugar. Incremental reduction will continue and compliment breakthrough technologies and processes to achieve step-change reductions.

Ageing population opportunities build

As the average age of the global population rises, manufacturers are looking for ways to more accurately satisfy the specific needs and wants of ‘older consumers’. One of the key opportunity areas is to develop products that help to ameliorate escalating health concerns.  But health is not the only focus, so too is packaging adaptation and segmented communications that appeal but don’t patronise.

Leatherhead also thinks the time is right to redefine age; for the most part ‘older consumers’ are defined as 55 and above but are then assumed to have the same needs and wants as those aged 75 and upwards – even though that clearly is not the case.

No compromise on ethics

Leatherhead research shows that throughout the global economic downturn, sales of Fairtrade foods have continued to rise and more and more kite marks are used to designate higher welfare standards, provenance, bio-diversity etc. This proves that, even though money is tight, consumers have not and will not compromise on ethical issues important to them.

Ingredients take centre stage

Additives and ingredients now have considerable recognition and importance to consumers. The presence of certain ingredients can transform the value proposition of the product, if the consumer perceives it, to deliver tangible benefits. It can equally damage the value proposition if a product contains an ingredient(s) they do not want to see.

Leatherhead  believes that how consumers perceive certain ingredients will have even greater influence on overall liking of the product than ever before and ingredients will take more of a centre stage.

For a more details on Leatherhead Food Research’s Global Industry Outlook 2013, visit www.leatherheadfood.com/global-industry-outlook-2013.