Food, pharma and beauty could be next big trend

By Rod Addy

- Last updated on GMT

Related tags: Investment

Food, pharma and beauty could be next big trend
The blending of food, pharma and beauty could be the next big trend in the global food market according to Sanford C Bernstein.

In a recent note on the industry, European Food: Deep Dive Introduction ... The Global Food Industry and the Global Food Sector, the US-based asset management firm stated: “... we believe that the next major development of food growth could be the blending of food, pharma and beauty (e.g. nutraceuticals and nutricosmetics)”.

The company, which invests in major food businesses across the world on behalf of its clients, said the global food industry exhibited average growth of 4.9% from 2006-2010. It predicted it would grow by 4.8% from 2011-2015.

But it added: “However, within that there is a wide variance between the fastest growing categories (double digit growth) and the slowest growing categories (negative growth) and between emerging markets (almost double digit growth) and the developed markets (very low single digit growth).”

It observed that its European Food Group portfolio had been able to outgrow the market and significantly outgrow its US Food Group portfolio over many years.

Biggest driver of profitability

“Commodities are the single biggest driver of profitability ... representing about 35% of sales of an average food company,”​ Sanford C Bernstein continued. “Commodities have clearly been very volatile in recent years, but the successful food companies are able to manage through this given a number of levers including cost savings, top-line leverage, pricing, etc.”

In particular, Nestle’s consistent and reliable growth had been rewarded by investors, the company said. It ranks Nestle as best in class for its management quality. However, it added that “the gap to Unilever has closed dramatically, particularly given better execution at Unilever”.

Sanford C Bernstein forecast slowing organic growth in its European Food Group from 2011-2015 as sales volumes failed to keep pace with price increases.

As far as investment was concerned, in 2012 Unilever would outperform the market, whereas Danone, AB Foods and Nestle would perform in line with market expectations, said the asset management firm.

Related topics: Market Trends

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