Why is this the right time to invest in agrifood?
You have plans to invest in the agrifood industry and you are wondering whether to move quickly.
If you are asking yourself this question, you are bound to take the following factors into consideration:
- To what extent has the global health crisis impacted the agrifood industry?
- Is demand still buoyant?
- Are the latest consumer trends and regulatory obligations more of a hindrance or an opportunity for my project?
We can end the suspense right now. Yes, the global agrifood market trend remains positive. Yes, there are opportunities. Let us explain why.
Agrifood industry, global economic powerhouse
Weighting of the agri-food industry globally.
Globally speaking, the agrifood industry is an economic powerhouse. In 2021, the global food market is expected to be worth $8 trillion. The market is expected to grow at an annual rate of 3.14% during the 2021 – 2025 period.
Agrifood accounts for between 25% and 30% of global employment.
In 2019, the most prolific segment was confectionery and snacks, accounting for 17% of overall revenue. Meat ranked 2nd (15%) with bread and cereal products finishing third (14%).
Generally speaking, the agrifood sector has weathered the health crisis fairly well. The decline in volumes is a quarter to a third that of other businesses. However, there are major differences between segments.
Frozen and canned vegetables have seen solid growth, boosted by a series of lockdowns and widespread teleworking. Conversely, the beverage and potato segments have suffered from the closure of cafés-hotels-restaurants.
Agrifood industry in the European Union
At the European level, the food industry is still the biggest manufacturing industry.
- sales of 1.2 trillion euros
- € 266bn of added value
- 20.7% of European household spending
Agrifood is also the top employer in the EU. 4.82% of Europeans work in the food industry, in 291,000 companies, i. e. 14% of European industrial employment.
The agrifood industry is largely geared towards the European market, which accounts for 91% of sales. Nevertheless, in 2020, export sales of the European agri-food industry totaled €184.3bn, up 1.4% compared to 2019, despite the health crisis. For 2020, the trade balance of the European agrifood industry showed a surplus of € 62bn, an increase of 3% compared to 2019.
Again, the trend varies from segment to segment. Growth in European exports was driven by exports of pork, petfood, rapeseed and sunflower oils as well as pasta and pastry. Conversely, exports of liquor/spirits and wine have been hit hard by the COVID-19 pandemic.
In terms of sales, France ranks second in Europe behind Germany. It is the fourth biggest exporter globally, with 21% of sales generated by exports. Agrifood is the sector that employs the most people in France (429,079 employees in 2017). France has not only world leaders (Danone, Lactalis, etc.) but also a very dense network of SMEs and innovative startups.
Demand still strong
While the global economy was dealt a blow by the health crisis, growth in the agrifood industry continued in 2020 and 2021. Projections out to 2025 would seem to confirm this trend.
Admittedly, the pandemic has had some impact on the manufacture and supply of food products. Nevertheless, the health situation has had little impact on global consumption.
Indeed, the growth of the agrifood sector stems largely from the increase in the world population, which is predicted to grow from 7.7 billion people today to 9.7 billion in 2050. The agrifood industry therefore plays not only an economic but also a social role. It has a responsibility to find solutions, in terms of productivity or product innovation, to feed an additional 2 billion people in the next 30 years.
In any case, compared to other sectors, the food industry has no demand problems. Food is a basic need. Demand is inherently inelastic. For investors, the main issue is to predict or even anticipate trends to answer the question “how will humans feed themselves in 10, 20, 30 or 50 years?”.
At the same time, increasing urbanization and the development of a new middle class in emerging countries are also changing eating habits. The supply will therefore have to address both strictly nutritional issues (getting enough food on plates to feed a hungry planet) and “gastronomic” issues (offering products that appeal to the tastes and values of a wider population).
Another issue is the environmental impact of the food industry. On a global scale, agriculture is responsible for around a quarter of greenhouse gas emissions
A constantly evolving sector
Changing food needs
Food consumption is changing constantly. Globalization has tended to standardize the habits of the middle and upper classes. Conversely, in areas that are more rural or with a strong cultural identity, traditional food continues to prevail.
While food is solely a basic need for most of the world’s population, for others it is a pleasure or even a symbol of identity.
This is evident from the organic, back-to-local and vegan trends. In these markets, food consumption patterns are becoming increasingly fragmented, and the food industry must respond.
Productivity gains to be made
Over the last 50 years, the agrifood industry has enjoyed significant productivity gains. Until 2015, undernourishment in the world had largely declined for several decades. It is on the rise again, mainly due to growth in the world population.
Food industry players need to find new sources of productivity to curb this trend.
These productivity gains can be achieved by automating production lines.
Therefore, companies face an additional recruitment and training challenge.
Hauts-de-France has two major assets in this respect: a strong recruitment potential and a range of training programs dedicated to the food industry.
Or maybe companies can generate productivity gains by exploiting new trends.
For example, against the backdrop of the struggle against global warming and the scarcity of certain resources (land, water, etc.), this could be achieved by developing new approaches to food production:
- Developing vegetable proteins, as pioneered by Roquette
- Insect-based food for animal feed
- Cultured meat
- Cultivation of edible algae
The agrifood industry is a key economic, social and environmental sector. It boasts very strong demand and continuous growth.
The prospects for investors are excellent. Admittedly, the industry faces many tricky challenges: food safety, environmental and climate issues, etc. Yet these offer numerous opportunities for players of all sizes: large groups but also innovative companies.
Do you have an agrifood project? Our white paper provides a complete overview of the trends in the French food market and the relevance it can have for your business.