Rising food prices are headline news in Israel. The latest spike was in the price of tomatoes, which reached record highs just ahead of Sukkot. Previously, sweet potatoes and cucumbers have commanded prices typical of exotic fauna shipped across oceans.
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Israel isn’t the only country perturbed by food prices. A recent report by Goldman Sachs finds that international trading prices for foodstuffs have gone up 20 percent in the last three months. Volatile weather is a factor in this trend. The American Midwest is experiencing the worst drought in 100 years and countries like Argentina, Brazil, Kazakhstan and Ukraine have seen crop yields dented by climatic extremes this year.
But weather is actually a relatively minor driver of food prices. Far more important, is the change in the distribution of global food demand due to increasing standards of living in giant countries like China, India, Indonesia and Brazil, as well as less-populous countries like Malaysia, Vietnam and Thailand.
As people in these developing countries move from poverty to the middle-class or from rural agricultural villages to booming industrial towns, they are changing their traditional food consumption patterns. When a farmer from northern China moves with his family to one of the industrial cities along China's coast, he starts buying processed or prepared foods rather than cooking his own meals. On lunch breaks, he will either go out to eat or dine in the cafeteria of the factory where he works. At home, his children will likely eat processed food warmed up in a toaster oven or microwave.
These changes, which will continue for many years, aren’t going unnoticed by executives at giant multinational food corporations and fast food chains. When they look at developing countries, they see dollar signs, as do investors who are driving up their stock prices on global exchanges. Here are six major trends in food consumption.
1. More meat, milk and dairy products
One of the first processes that occur in any human society that experiences an increase in wealth is a rise in the consumption of animal protein in place of plant-based proteins. In other words, people eat fewer legumes, chickpeas and nuts and more meat, cheeses and other dairy products.
Animal protein is more expensive than plant protein. Raising turkeys in a coop or keeping cattle in barns requires greater knowledge, consumes more space and energy and requires a system for feeding, sanitation and transport. Marketing and distributing the final products requires additional investment as well. All this investment only pays off if consumers have enough money to buy the final product.
Even cultures that for hundreds of years subsisted on largely plant-based diets, like Indians, are shifting towards consuming more animal-based products today. It's a process that will continue for many years, affecting billions of people living in Southeast Asia and eventually Africa. In Eastern Europe and Latin America, where eating meat is already part of the culture, there will also be a substantial but less dramatic increase.
Who will profit from this shift? Multinational dairy product manufacturers, such as Unilever, Nestle, Kraft Foods Group and the Dannon Company along with processed meat producers such as Tyson Foods and Brasil Foods, which is the biggest marketer of processed food to countries in East Asia and the Middle East.
2. More industrial processed food
Urbanization is occurring in all developing countries, with people moving from agriculture to industry and service. As they become more distant from their food and have less time to prepare it, they shift from consuming fresh food picked from a garden or nearby orchard to industrial processed food, which has a longer shelf life and can be stored in a pantry or refrigerator.
Who profits from this? Breakfast cereal manufacturers like the Kellogg Company and Nestle, pasta and dried food manufacturers, condiment manufacturers like Heinz, canned food producers like StarKist and instant food producers like the Campbell Soup Company. Companies that specialize in producing food packaging will also profit from this trend.
3. More fast food and food delivery
Forty years ago in Israel, pizza was rare enough to almost qualify as a prestige food. Similarly, when the first branch of McDonald's arrived in Israel less than 20 years ago, farmers competed for the privilege of providing the potatoes its local branches used for French fries. Nowadays, McDonald's outlets are found in nearly every mall and city in Israel.
Fast food is part of the Western lifestyle, where people always feel like they are short on time. This way of life, which is being adopted across Asia, Eastern Europe and the Middle East, has led to a major increase in the demand for fast food. The demand for McDonald's is so great that the franchise is set to open its first vegetarian outlet in India, in deference to local Hindu customs.
Who profits from this? Fast food chains like McDonald's and Subway, and especially those who deliver food to customers, like Domino's Pizza.
4. A shift to eating outside the home
Another hallmark of urban living is eating outside the home. Urban apartments usually aren't spacious, and preparing food takes too much time. When city dwellers have disposable cash and time is a valuable commodity, it's better to meet with friends for a meal at a restaurant, pub or café than to cook at home.
Sometimes, those who are too busy to cook a traditional meal at home will make do with a prepared meal purchased at the local supermarket, which can either be reheated quickly later or eaten sitting on a bench.
Who profits from this? Fast food chains, sweets and snacks manufacturers and suppliers of industrial kitchen machinery.
5. Consumption of soft drinks, alcohol and coffee
As societies transition to an urban and Western way of life, they also tend to consume significantly more soft drinks and alcohol.
The consumption of coffee in developing countries is also rising. While tea is the traditional drink of choice in India and China, cities in both countries now host international coffee chains, like Starbucks.
Who profits from this? Soft drink manufacturers like Coca Cola and PepsiCo and multinational brewing companies like Anheuser-Busch InBev, Carlsberg Group and Heineken, coffee producers and coffee chains.
6. Luxury food: snacks, sweets and ice cream
In developed societies, food becomes a luxury item. This doesn’t just mean eating out at high-end restaurants, but also snacking on sweets in between meals for pleasure rather than sustenance. Such treats include confectionary baked goods and ice creams.
An increase in the consumption of luxury and fast food along with meat and dairy leads to additional lifestyle changes, like exposure to what are often conceived of as particularly Western afflictions: obesity, diabetes and heart disease. These problems have already become more prevalent in developing countries and will lead to much higher morbidity rates in the future.
Who profits from this? Sweets and snack manufacturers like PepsiCo and the Hershey Company, ice cream manufacturers like Nestle and Ben & Jerry's and further in the future, pharmaceutical companies that produce drugs that treat diabetes and reduce cholesterol.