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Food markets are set to be “highly dynamic” in the year ahead, as the ongoing effects of the global pandemic continue to be felt across supply chains and in consumer behaviour, Rabobank says in a recently released report.
In its New Zealand Agribusiness Outlook for 2022, the specialist global agribusiness bank says the rapid emergence and spread of the Omicron variant has had a profound impact on local and global food markets, resulting in supply chain issues, labour shortages and leading to increased inflationary pressures.
While vaccination programmes have been in full swing in the developed economies, many governments had reinstated containment measures, the report said. And for food and beverage companies, this had led to higher supply chain costs and challenges in keeping product moving through to consumers.
Report co-author Rabobank senior analyst Michael Harvey said these supply chain issues look set to continue to disrupt food markets in the first half of 2022.
“Food companies and retailers need to navigate supply chain vulnerabilities,” he said.
“Meanwhile consumer movement is voluntarily cautious, leading to reduced foot traffic. Over the course of 2022, the channel distortion we have seen should eventually return to pre-pandemic norms, but it will clearly not be as linear.”
Food prices inflation
Mr Harvey said food and beverages companies across all geographies were reporting margin pressure stemming from inflation in all parts of the business, including raw materials and distribution, and inflation is expected to remain high through much of 2022.
“As a result, companies are acting on retail pricing across a range of consumables.” he said.
Against this backdrop of food price inflation, the report says consumers are facing additional cost-of-living pressures and reduced income support.
“The impact of these cost pressures on consumer food purchases will vary significantly across geographies and categories,” Mr Harvey said, “For those in the food and agricultural sector, there will need to be a keen eye on potential demand destruction in emerging markets.”
Rapid and structural 'pace of change'
The report said a “rapid and structural pace of change” will continue in consumer behaviours and food innovation in 2022, partly driven by the impacts of the pandemic.
“There are some clear pandemic winners, including products catering to consumers who work (and eat more) at home and have a preference for home snacking and convenient meal preparation, while on the flipside on-the-go and foodservice products continue to be negatively impacted by reduced consumer mobility,” Mr Harvey said.
“This, of course, takes place against a backdrop of increasing consumer demand for natural, clean, fresh, and personalised food products. While e-commerce in the food system has enjoyed a transformational boost during the pandemic through the acquisition of new consumers.”
China
The report also warned of a need to watch China’s zero-tolerance Covid policy and its impact on consumer demand in the world’s largest importer of food and agricultural products.
“There is growing concern about the state of the economic recovery in China, which, combined with the strict lockdown policy, is impacting consumer markets there,” Mr Harvey said.
“There was a slowdown in total Chinese retail sales growth towards the end of 2021, and, while food retail posted double-digit growth in the most recent data, when adjusted for inflation, it was a more subdued picture.”
Rabobank New Zealand is a part of the global Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 120 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 40 countries, servicing the needs of about 10 million clients worldwide through a network of close to 1000 offices and branches. Rabobank New Zealand is one of the country's leading agricultural lenders and a significant provider of business and corporate banking and financial services to the New Zealand food and agribusiness sector. The bank has 32 offices throughout New Zealand.
Media contacts:
David Johnston
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Rabobank New Zealand
Phone: 04 819 2711 or 027 477 8153
Email: david.johnston@rabobank.com
Denise Shaw
Head of Media Relations
Rabobank Australia & New Zealand
Phone: +612 8115 2744 or +61 2 439 603 525
Email: denise.shaw@rabobank.com
