Consumer trends in Europe shift

Andy MacFarlane

01-08-2008 | Not Specified

Guilt-free food is a major trend amongst consumers in wealthier nations, says Ashburton based farm consultant Andy Macfarlane.

He told 350 delegates to the ASB Agribusiness Conference in Wellington recently that shoppers in the United Kingdom are bombarded with messages and posters advertising guilt-free food.

"You can't miss them."

In Marks and Spencers supermarkets posters all around the walls were covered in messages such as "we never use antibiotics for growth promotion" or "since 2002: we have only used free range in absolutely all our food".

Macfarlane, who has travelled to Europe three times in the past three years, was very pleased to see Anchor butter branded with the words "free range".

He notes that even though the European Union is GM free there were 210,000ha of GM crops in the EU this year, and GM-derived stock feed is imported.

While most of the world can only afford cheap food, New Zealand companies need to be selling higher quality and higher value products-which is where the guilt-free food comes in.

He says global food supply and demand dynamics have some implications there for our food chain models.

In the short term high commodity prices might outweigh the value added margins, so commodities could be the smart thing to be into, especially as the world has to produce more food.

But to Macfarlane it represents an opportunity to use that window of profit to invest for more sustainable profit for the inevitable cyclical downturn in commodity prices.

It was 1973 when food prices last peaked.

Macfarlane quoted Leon Platt from Hewlett Packard who said whatever has made you successful in the past is no guarantee of success in the future.

That's very much the case with our agricultural companies and co-operatives, he says.

Macfarlane has noticed a massive change in mindset in Europe as consumers there are much more concerned about food and food security.

But food security has been an ongoing issue for some time, he says.

World Bank figures suggest world food stocks post World War II were 350-400 days, in 2003 were 133 days, in 2007 were 57 days and in 2008 were 40 days.

That most recent drop has really alerted people's attention, and some EU people have suggested the comfort zone where planners would prefer to see world food stocks is 70-90 days.

As well, there is more uncertainty about droughts in Australia and China for example, and markets don't like uncertainty.

Don't underestimate the effect of land tenure on food supply, he says. For example in Zimbabwe, which has one of the most agriculturally rich soils in the world, the agricultural industry there is on its knees, and there is no security of land tenure.

They could grow a lot more food in Africa if they had security of land tenure, he says.

As land tenure in Eastern Europe becomes more secure, production is flooding back. He gave the example of one farmer who in the past 12 months has begun growing grain on 9000ha of land which has seen no cropping for the past 13 years.

About 50% of the increase in food demand is coming from increasing population, the other 50% from economic growth.

The key issue is how many of those low income consumers are lifted out of poverty, as that will be a major determinant of global food demand.

As affluent consumers in the western world we can't deny those people the right to eat well.

The World Bank estimates that the number of people in those developing countries living in households with incomes above $16,000 a year will rise from 352 million to 2.1 billion, and that's a lot of people eating a lot more food, and more "value add" food.

There are 1.25 billion people living on less than $1/day, three quarters of whom are suffering malnutrition.

Another three billion people live on less than $2/day. That is about the sum where hunger ceases and some discretionary food spending commences.

Between $2-10/day is where people start to eat protein and that is a big factor for NZ and the world.

Macfarlane says this last category is where some of the global demand for protein is coming from. Leading that demand has been milk products, which are the most easily available form of protein in the world.

Assuming the population dynamic projections play out as predicted, the world needs to double food production by 2050 on less water, energy, carbon, fertiliser and chemicals. That's quite a challenge, he says.

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