Emerging markets losing luster for food makers
Even as they struggled to achieve top-line growth in the United States and other developed markets, many packaged foods companies for several years have used an expanding presence in emerging markets as a principal vehicle for growth. At the Consumer Analyst Group of New York annual conference in recent years, international exposure, especially in the developing world, often headlined presentations by executives seeking to gain favor from the financial community.
While long-term prospects may remain promising for parts of the world where the middle class has been rapidly expanding, business has slowed considerably in 2013. This situation was highlighted by a food sector outlook published last week by Fitch Ratings.
“This deceleration has occurred in a number of countries, including Brazil, India, Indonesia, South Africa, Turkey and Ukraine, where consumers are being hit by higher inflation and currency devaluation,” Fitch said. “This will likely continue to manifest its effect during 2014 and will reflect on companies both in terms of lower volume growth and lower hard currency-equivalent sales.”
Shutting off this earnings growth “escape hatch” likely will heighten attention to the challenging market conditions in North America for 2014. While input cost inflation has eased, demand is likely to be pressured by SNAP cutbacks. Looking for exciting, innovative ways to engage consumers in a fast changing marketplace will be key to success in the new year.