Paradox in conflicting directions of global food business

by Josh Sosland
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Recent comments by Irene Rosenfeld, the chief executive officer of Kraft Foods, about how growth had stalled in the largest U.S. food categories were complemented interestingly by remarks by Kendall Powell, the c.e.o. of General Mills, Inc.

“Consumer trends are a tale of two worlds,” Mr. Powell said speaking Sept. 21 to investment analysts. “An increasing number of consumers in emerging markets are buying branded packaged foods as their income expands, but high unemployment, a soft housing market and concerns about the economy are pressuring consumer confidence and spending in developed markets.”

While clearly accurate, there is something truly jarring in Mr. Powell’s observations. The emergence of a middle class in developing economies has been anticipated for many years, prompting heavy investment by packaged foods companies, including General Mills. It was known that because of rising incomes and population increases, these markets had better growth potential than the United States and other developed nations where the food business is mature. Still, what could not have been foreseen was that at a moment when demand in the emerging nations would hit an important inflection point for many food companies, growth in more developed countries would stall due to economic weakness.

The current environment is a bit of a strange time in which the food business is lackluster in wealthy countries as consumers tighten their belts while the business is robust in poorer countries where consumers flex their newly-found spending capabilities. It is a reminder of the inevitability of change, positive, negative and unpredictable, for the food industry in the years to come.
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