The Asia Pacific food ingredients market: you are what you eat

The global economy today is witnessing increased focus on feeding its population. As the world aims to cope with the worrying multiple challenges of inflation, recession and inconsistent recovery rates, demand for the proverbial pot of gold is slowly moving from that of black gold; namely petroleum – to the more pressing concern of food shortage. Indeed the next global demand area is the world’s challenge to feed its growing populations, especially in the emerging Asia Pacific region that has led to the rise of interest in the food ingredients and additives market.

By Natasha Telles D’Costa, Research Manager, New Zealand GIC, Frost & Sullivan

Food ingredients – going natural

While the trend towards natural has been defining the food ingredient market for over a decade now, the Asia Pacific market had been slower in embracing it. However, once done it has steamed ahead and is today a global leader in natural alternatives to synthetic food ingredients – a fact that is attested to by the large number of food ingredient manufacturers from BASF to Cargill entering and reiterating their commitment to the Asia Pacific Market.

The food ingredient market – a quick snapshot

Buoyed by end user growth, the global food ingredients market was estimated at around US$65 million in 2013 and is growing at six-eight percent year on year. As economies emerge, food demand will continue to shift towards Asia in the upcoming decade. Asia Pacific has emerged as a key market for these ingredients. APAC’s major markets for food ingredients are split between the application sectors of bakery, dairy, confectionary, savoury, nutraceutical and others. In terms of functionality, these ingredients are split as colours, preservatives, sweeteners, emulsifiers, enzymes, fortified food ingredients and others. While the individual application segments are growing considerably, it is the nutraceutical sector buoyed by the fortified food ingredients products that are driving demand in this market.

Ingredient watch – key growth sectors

While the demand for food ingredients in Asia Pacific is on a growth trajectory due to its emerging nature, there are certain ingredients that are acting as the flag bearers of industry growth. These ingredients are the colours, preservatives and fortified ingredient markets. All three markets are based around the industry’s need to recreate its health reputation and the resulting growth is testimony to such an initiative bearing fruit. In the following segment we will deal in detail with sub-sectors within these markets that are buoying growth.

Food colours market: The global food colours market was estimated at around US$1.5 billion in 2012 and is growing annually at two-four percent. The food colour industry in Asia Pacific was estimated at around US$450 million in 2013 and growing annually at three-five percent.  Natural colours account for 33 percent of this market and over 60 percent of products launched in Asia Pacific today contain natural colours. This fact has been further established by the entry and investment into Asia by all major natural colour manufacturers such as Sensient, Chr. Hansen, BASF etc.

Food preservatives market: Food preservatives or shelf-life extension ingredients are particularly relevant in Asia Pacific due to the tropical climate of a majority of its member countries. In addition, most countries in the Asia Pacific region are plagued with a lack of infrastructure and refrigeration facilities that have caused manufacturers to invest even more in preservatives to ensure the product remains fresh until it reaches the consumer. The total shelf-life extension food additives market in Asia-Pacific was estimated to be $84 million in 2012, growing at a CAGR of 8.2 percent in revenue. In terms of consumption, Asia-Pacific represents the third-biggest market only after North America and Europe. Preference for natural antioxidants is rising in spite of current higher consumption of synthetic antioxidants. Increasing interest in convenience foods and snacks drives the overall antioxidants market. Key subsectors include vitamin E (mixed tocopherols), herbal extracts (rosemary extracts), hindered phenols (butylated hydroxyanisole, BHA; butylated hydroxytoluene, BHT; and tertiary butyl hydroquinone, TBHQ), ascorbyl palmitate (derivatives of vitamin C) and propyl gallates. The antioxidant market in Asia-Pacific is highly fragmented with a strong influx of local manufacturers who possess a significant market share. The market in Asia-Pacific is diverse; developed countries (e.g., South Korea and Japan) account for 40 per cent of the market and consume non-genetically modified (GM)-based antioxidants, while developing countries (e.g., Singapore, Malaysia, Thailand, Taiwan, and Vietnam) consuming more GM-based antioxidants.

Fortified Food ingredient Market: Globally, the nutraceutical ingredients trends act as the key purchase indicator for nutraceutical products. As consumer awareness on nutraceuticals grow, so does the demand for specific ingredients such as Omega-3 and phytosterols. In Asia Pacific these fortified food ingredients are key growth drivers;  accounting for over US$7 billion worth of revenues to the industry or 38 percent of the global nutraceutical ingredient market. The major fortified food ingredients in use in Asia pacific are differentiated into the categories of heart health, digestive health, eye health and women’s health amongst others. These ingredients, ranging from Omega-3 to phytosterols are driving innovation and investment into this market and are expected to continue to grow to be major growth areas for the overall food industry due to their relatively low consumption norms in relation to high prices. Countries such as Japan, Australia, Korea and New Zealand have highly sophisticated local and export nutraceutical ingredient set-ups, while China, India and ASEAN countries are moving from sourcing hubs to downstream processors and manufacturers of nutraceuticals at present.

Conclusion

As the Asia Pacific food consumer witnesses a rising income status, additional revenue will be allocated to sophisticated value added food demand. Increasing awareness of healthy eating and growing levels of aspirational living will result in ingredient branding becoming a key purchasing factor – as global brands promise better quality.  This scenario will result in increased demand for healthy ingredients and rising awareness of ingredients. The Asia Pacific food ingredient industry is thus expected to grow from strength to strength as local demand and global multinational investment thrust it into the spotlight as the favoured child of the global food ingredient industry.

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