25 June 2013 12:07 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS)--The results of an ICIS survey and extensive analysis have revealed just how important the food industry is to chemicals or, rather, how important chemicals are to food production.
Chemicals growth is usually closely linked to industrial production and to a lesser extent to consumer market trends. Sectors like automobiles and construction tend to dominate the chemicals demand debate.
But agriculture and food retail markets are hugely important to chemicals, and in many more ways than one.
“We estimate that chemical and plastics use in the world food industry, in the broadest context (including within agriculture, food processing and packaging) is about a US $250bn -$350bn/year market, depending on what you include (GMO seeds, for example, which are primarily made by chemical companies, can be counted in or out),” says Accenture’s Paul Bjacek.
“In addition, chemical use in this industry has been growing at 1.4 to 1.7 times the growth in food production, using the US as an example,” he says. The US market for chemicals used in food production and sales is worth $55bn - $57bn/year.
From the results of a survey undertaken with ICIS, and extensive patent research, Accenture has been able to demonstrate the wide interest companies have in applying chemicals and materials technology to food production and preservation.
Certainly, a great deal of research effort is being put into addressing one of the most critical global mega trends.
The ICIS survey showed that 75% of chemical industry professionals believe that technology will provide the answer to how a growing and, in some parts, an increasingly wealthy population will be fed. Bjacek wrote recently that Accenture research had shown that about half the patents in the global food industry are based on chemicals and packaging technology.
The survey showed how important plastics in agriculture and in food packaging are. It is a question of getting water and nutrients to crops in a more resource and cost-efficient way. Plastics packing, increasingly sophisticated in some instances, has a hugely important role to play in ensuring that less food is spoiled and wasted on its way from farm to fork.
The global challenges looking towards 2030 primarily will be related to how more staple crops can be grown more efficiently. But Bjacek said: “By our estimates, about 73% of new food consumption by 2030 will be related to income growth in developing regions and only 12% will be due to world populations growth.
This means that emerging markets, especially China and India, represent a significant opportunity for agricultural producers and food companies, as well as for their chemical and plastics suppliers.
The consultant’s research has highlighted the jostling for position in the global hierarchy by food companies and the chemical firms that want to supply them.
Chemical firms are buying into food-related businesses. Merger and acquisition (M&A) activity in the foods market is higher than in chemicals or other downstream markets from chemicals “The food industry also represents higher average margins than most chemical segments,” Bjacek says.
Just looking at packaging, the consultants believe that there are significant opportunities for chemicals suppliers.
“We estimate that about 25% of all thermoplastics use is in the food supply chain (from farmer to customer),” Bjacek says. “Therefore chemical and plastics producers should stay tuned to the final consumers’ needs.
“While emerging markets represent the most growth potential, producers in developed regions should not neglect the needs of their base volume and higher margin domestic customers, which have led in the development of packaging technologies. These technologies have been ultimately leveraged in emerging regions as well.”
The consultants’ suggestion for deeper penetration of fast growing food markets include increased “customer intimacy” across the food supply chain – a better understanding of the needs of retailers, food processors , and packaging companies.
Accenture suggests that chemical companies might establish alliances with research and educational institutions and well as food retailers across different parts of the world to help meet future food industry and food supply needs. It also believes chemical companies might work to raise their own brand awareness so that it becomes an asset to food processors “for achieving consumer preference”.
Chemicals, plastics and food don’t necessarily fit well together in the eye of the consumer but it would clearly benefit chemicals and polymer producers if they did.
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