The volume challenges of recent years are becoming long-term problems for the food and beverage industry. Pressures such as high prices, slow population growth and GLP-1 usage mean that developed markets are on the verge of entering a period of consistent volume declines. There is still plenty of potential for growth, but it will not be in the ways that companies have historically operated.
Delivery
This report comes in PPT.
Key findings
The peak of food and beverage volumes in developed markets is rapidly approaching
Demographic issues, high prices and GLP-1s mean that developed markets as a collective whole are approaching a point that could be called “Peak Calorie” when aggregate food and beverage consumption will enter a period of consistent decline. This will necessitate a major shift in how the food and beverage industry operates.
A tough demographic outlook has become more sharply negative in recent years
Fertility rates, already low, continue to fall, while political trends are turning against migration. This points to slower population growth and eventual outright population declines in most developed markets. Without population growth to boost volumes, the industry will become much more reliant on pricing for growth even as consumers signal they are fed up with price increases.
Prices, GLP-1s and possibly AI will serve to suppress demand
Food prices are high now and with the threat from climate change, trade barriers and geopolitical conflict, they are likely to continue to rise. At the same time, expanding GLP-1 usage is leading millions to eat less. There is also the wild card possibility of major economic disruption from the transition to AI, which could skyrocket unemployment in the coming years.
Pivoting to developing markets is a possible solution, though harder than in the past
While significant volume growth potential undoubtedly remains in developing markets, this growth will be harder to access than in the past as globalisation moves into reverse and the world retreats into economic and political blocs. Finding markets with expanding middle classes and lower geopolitical risk will be the priority in this environment.
Most companies will focus on new approaches looking at value or targeted demographic groups
Companies for whom developing markets are not a realistic option are likely to focus on alternative strategies to mitigate against Peak Calorie such as focusing on premiumisation, entering pet care, or targeting smaller demographic cohorts who still are expanding in number (older consumers for example).
Key findings
What happens when calorie consumption peaks and goes into long-term decline?
Total calorie consumption will begin to fall soon in developed markets
Volume growth potential nearly entirely exists now in developing markets
Map: Unmet market potential is shrinking in most of the developed world
What is causing Peak Calorie?
High food prices are the most immediate driver of the industry’s volume problems
Fertility declines pose a slow, but massive challenge to volume growth
Migration levels could shift the volume question dramatically
GLP-1 usage will reduce how many calories the average person is consuming
A fifth horseman? The AI transition and the threat of mass unemployment
Putting it all together
Could the US have already hit Peak Calorie?
What about developing markets?
Who is going to face the most risk from Peak Calorie?
How to respond to a long-term negative volume outlook
Developing markets in a more turbulent global economy
Unilever orientates itself towards emerging markets
Premiumisation potential rises are social inequality grows
Cult grocer Erewhon expands its high-end smoothies to New York City
Pet populations are growing and their owners are aiming for more human-like food
Post Holdings enters into pet food as cereals struggle
Target the demographic groups that are expanding
Penny Italia launches products aimed at the older consumer
Smaller, affordable units will be a way to mitigate against volume decline
Knorr shrinks the size of its ready meals
Key findings
The transition from slow volume growth to no volume growth
Questions we are asking
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