How ingredients suppliers are responding to challenges and opportunities in speciality ingredients

The supply of speciality ingredients to the international food and drinks market presents varied opportunities and challenges. This report from Euromonitor International starts with an overview of the global market then assesses key consumer demands and supply issues and looks at the ways in which the ingredients industry is responding to these, using case studies to highlight specific strategies. It also summarises key trends in innovation and identifies future opportunities for ingredients R&D.

Speciality ingredients market grows to over 27 million tonnes in 2014
Global demand was up over 2% on the previous year and an average of over 3% between 2008 and 2013. Forecasts are for more than 2.5% to 2018, when volume demand will exceed 30 million tonnes.
Speciality ingredients accounted for almost 5% of the food and drink industry’s overall ingredient use. However, percentage growth rather than total volume provides a more accurate assessment of the market as many such products, need only be used in very small quantities in order to make a significant impact on the finished product. e.g. enzymes or high-intensity sweeteners.

Soft drinks is the largest single market for speciality ingredients
Of the 27+ million tonnes of speciality ingredients used in packaged food and beverages in 2014, 77% was used in food and 23% in beverages. The largest broad categories were soft drinks, which used just under 5 million tonnes.

Fastest growth in natural and healthy ingredients
Natural and healthy ingredients will outperform some of the more chemical stalwarts. Botanicals and bio-actives with natural extracts, should see strong growth over the forecast period, in an increasingly “clean label” industry.
Cultures, saccharides and proteins should all see over 3% growth, benefiting from rising demand for higher-quality processed foods and healthy probiotic, high-fibre and high-protein foods. Similarly, vitamins and minerals are cashing in on the ongoing drive towards healthier formulations.

Fast-growing ingredients categories are driven by emerging markets
For botanicals and bioactives, five countries are forecast CAGRs of more than 10% over 2013-2018, including Vietnam and Turkey. Just behind these are countries such as India, Indonesia, Pakistan, Thailand, Argentina, Colombia, Peru, Iran, Israel, Nigeria and Saudi Arabia. North America and Western Europe are forecast CAGRs of just under 2% and just over 1%, respectively.
RTD tea is a particularly important end-use market in terms of overall botanical volumes and it is already fairly established in the larger Asian markets meaning that this region is less dynamic than might be expected.

Middle East emerging as an important target
While Asia Pacific has long been both the largest and fastest growing market for food and beverage ingredients (accounting for 39% of global volume) it is set to be outpaced by the Middle East and Africa, which has a forecast CAGR of over 5% (compared to Asia Pacific’s 4%). Both regions will remain firmly on the radar of the major ingredients suppliers.
The markets of the developed world are far more static at 18% of total volume for Western Europe and 17% for North America. However, these regions remain the most innovative and are invariably the first to take on newer, more high-value ingredients as they emerge.

China drives growth in end-use markets but…
China continues to show best growth in both packaged food and alcoholic/soft drinks. However, it is clear that there are also significant opportunities in other Asian markets, e.g. India, Indonesia and Vietnam.
Egypt, Saudi Arabia, Iran and Algeria all feature in packaged food in package food and ingredients growth, while Nigeria, Saudi Arabia and South Africa show strong positive growth in drinks.

Demand: Beyond simple nutrition or hydration
Adding value is the key to growth in the global food and drinks industry. Products providing more in terms of taste and quality, health and wellness, naturalness, convenience and ethical positioning than simple nutrition or hydration, also highlight the most important trends and influences for ingredient manufacturers.

The ingredient source of the future?
Dwindling global resources mean, ingredients innovators have a vital role to play in helping to feed the populations, driving into new areas and exploiting untapped potential.
One such area is insects; entomological research is attracting more investment and is widely believed to be an important area for the future of both animal and human nutrition. While direct food use is unlikely for now, more highly-processed, value-added ingredients derived from insect proteins could soon find a place in processed food and drinks.


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