The $1 trillion Global Health Food Market Offers New Opportunities for Sri Lankan SMEs (‘Smart Future’ Article #6)

This article is the 6th in the ‘Smart Future’ series, and originally appears in the Daily Mirror Business of 18th March 2015

 

Globally, consumer trends towards healthy and more natural foods are beginning to offer lucrative new markets for producers. The global healthy foods market set to hit $1 trillion by 2017, according to industry forecasts. The World Consumer Rights Day 2015, marked this weekend (15th March), was on the theme of ‘Healthy Diets’, and it is interesting to look at how the heightened focus on eating healthier and ‘eating natural’ is influencing the emergence of new opportunities for products that cater to these shifting preferences.

Concerned Consumers

Consumers are increasingly concerned about foods that have been treated with antibiotics or hormones, produce that has had heavy application of poisonous chemical fertilisers, pesticides and weedicides, and foods that contain artificial ingredients including numerous ‘E-number’ preservatives. There’s also a heightened consciousness around the health consequences of transfats, which are in hydrogenated vegetable oils used in many processed foods. All these have stimulated demand for healthier foods, to accompany healthier lifestyles.

A big driving force of the changes in consumer preferences around food, globally but particularly in the West, is the demographic shift that is taking place. Both the large ‘baby boomer’ cohort of the population and the growing ‘millennial’ generation are, for different reasons, undergoing a serious rethink of their health and dietary choices. The baby boomers are looking to extend their youthfulness and vigor as they age, and the millennials are keen to be smarter about what they eat and how it is grown or made.

Growing Trend, Lucrative Market

According to the ‘Global Health and Wellness Survey’ by market research firm Nielsen, half of all consumers that were surveyed around the world say they are actively trying to lose weight, and 75% of them said they plan to achieve that goal by changing their diet. Over the last two years, Nielsen found that foods that are ‘all natural’ (43%), made from fruits/vegetables (40%) and ‘organic’ (33%) were among the most favored preferences among global consumers. This presents a huge new market opportunity.

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Over the last five years, the consumer segments of ‘organic beverages’, ‘organic packaged food’, and ‘naturally healthy’ each grew at over 6%. In the US alone, sales of natural, organic and ‘better-for-you’ products grew at close to 8%. Interestingly, though, this trend is seen not only in Western markets. Much of the recent growth (between 2012-2014) in the healthy food category has been driven by demand from developing countries. Over this period, demand from the Middle East grew at 20%, in Latin America at 16% and in Asia Pacific at 15%. The growing middle class in these regions, particularly in Asia, affords more and more people the space to be more ‘picky’ about their food choices.

Opportunity for Lankan SMEs

The heightened global awareness on healthy diets and demand for health and wellness food products globally opens a great opportunity for producers from Sri Lanka. With a heritage of Ayurveda and wellness, and indigenous knowledge of all-natural agriculture, we ought to be well placed to cater to this growing consumer segment; a segment that values authenticity and all-natural produce. But the question is – will Sri Lankan producers latch on?

Already, new producers are emerging among the SMEs sector, catering to this trend. A great example is The Good Market, which operates events twice a week in two locations in the city, and has now opened a permanent outlet as well. In just two years it has become the launching pad for many of Sri Lanka’s small entrepreneurs who embody an ethos of natural and ethical produce and previously did not have a wide enough consumer base. This offers them a marketplace to reach out to conscious consumers, and vice versa. Several of the small producers that started off as market stalls have quickly grown up. Saaraketha, a leading organic foods retailer, recently opened its first physical store I the heart of the city.

Re-orienting Support

These are examples of new opportunities, locally, for SMEs catering to consumer concerned about healthy foods, and it certainly makes a case for elevating them globally. Across Sri Lanka, the top industrial activity in every district is the food and beverages production sub-sector. This indicates that there are some inherent competencies on food processing that is already present. The majority of these firms are SMEs, and most of them cater to the local market. However, breaching international markets with these products isn’t easy. A strong private-public partnership effort is needed to help SMEs track the trends in these markets, figure out how best to latch on, and meet the quality and standards that are required to be successful. To grow this sector, producers must be helped to gain access to technology and know-how through public or private institutions locally, or international partnerships globally. It is time for export promotion institutions like the EDB, and standards and testing institutions like SLSI and ITI to embrace these new trends, and help producers breach international markets with these new product categories, beyond our traditional ones that are struggling to maintain margins and market share.

 

 

This is the 6th article in the ‘Smart Future’ column that advances ideas on economic reforms, innovation, and competitiveness.

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