The evolution of consumer diets

investment viewpoints

The evolution of consumer diets

Arnaud Langlois - Portfolio Manager

Arnaud Langlois

Portfolio Manager

Large food and beverage companies have experienced a number of challenges over the past decade. We believe there are a number of fundamental issues at work here.

Management teams have spent a lot time over that period blaming the wider economy, currencies, commodities, inflation and retailers but there appears to have been very little in the form of a self-assessment as to why the packaged food and beverage industry is struggling.

There are several issues to consider. Firstly, barriers to entry in the industry have fallen dramatically over the past few years and historical industry behemoths are now truly challenged by small and agile businesses who are taking significant share.

Secondly, years of complacency and underinvestment in marketing and research and development capabilities have left many industry leaders struggling.

Finally, we think many operators have failed to address powerful social trends related to the desire of the consumer to live a healthier life and who is therefore buying more natural, organic, clean label products, for example.

These companies have also been slow to adapt to the fact that people’s diets are changing. The number of vegetarians, vegans and flexitarians is growing rapidly, especially in wealthier nations. In the UK, a recent study by research and training charity IGD in October 2018 revealed that more than half of British consumers are either following or are interested in a flexitarian diet, which emphasises plant-based foods.

This trend is even more marked amongst younger people, with 68% of 18 to 24-year-olds drawn to a vegan, vegetarian or flexitarian diet. Consumers are turning flexitarians for three main reasons: their own health, the environment and animal welfare.

The UK may well be ahead of the pack on this theme but the underlying drivers of consumers’ decisions should resonate with others – at least the younger generations.

Consumers appear increasingly inclined to incorporate sustainability into their diets. The larger food and beverage companies would be well advised to take note.

 

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