The food industry has had a reputation for being a stable, if unexciting, industry, but on closer inspection, there have been a lot of changes taking place. Ultimately these affect food companies themselves and their growth prospects. Looking at the consumer first, there have been dramatic changes in eating habits in the West over the past decade, driven by the pressures on modern living. Among these are time pressures, which mean the consumer today wants to spend only 20 minutes preparing dinner compared with as much as two hours in the 1950s.
Typically, consumers are wealthier and able to pay for higher value products, such as those that save time in preparation - be they ready meals or simply eating out more often.
Also today, people are more health conscious and opt for "light" options, be they low calorie or low fat products. Side by side with this, paradoxically, is rising demand for indulgence foods like tasty snacks.
Higher growth food companies are adept at reading these trends and adjusting their product portfolios accordingly.
Looking at some of the larger players, Heinz has had success with the Weight Watchers brand and has expanded in the fast growing segments of the frozen foods market. French company Danone has introduced innovative "health" products like the dairy drink Actimel and "light" biscuits. Pepsico's food subsidiary, Fritolay, has continued to focus on the snack foods market.
One other feature of the food industry in the past decade has been the relentless drive to reduce costs against a background of pricing pressure from the retail sector. Companies have been focusing on core products while divesting secondary brands or products.
Irish companies have not escaped these trends. Among the quoted companies, Kerry Group has been to the forefront in the food ingredients market in supplying larger multinational food producers of convenience products. IAWS has been very successful with Cuisine de France, which provides food on the go for the busy consumer.
Greencore has acquired Hazlewood Foods in the UK, the largest supplier of sandwiches (still the most popular lunch in Britain) in the world and market leader in the UK in chilled pizzas, speciality sauces and certain speciality breads. Golden Vale is the leading supplier of sliced cheese to hamburger companies in Europe and is also expanding into the frozen ready meals business.
Other players like Glanbia and Fyffes are leading suppliers of traditional products (dairy and fruit respectively) internationally.
Ultimately, the success of any company is down to the ability of its management to identify growth trends and the financial and operational talent within the company to exploit the opportunities available.
Liam Igoe is an equity analyst at Goodbody Stockbrokers
