Processed meat – what is the new Euromonitor data telling us?

Italian salami is gaining in popularity at the expense of traditional pork sausages
Italian salami is gaining in popularity at the expense of traditional pork sausages

Related tags Meat Pork

Processed meat is continuing to see a steady performance in 2014, growing at a rate of 3% in volume terms, which is above the review period (2009-2014) compound annual growth rate (CAGR) of 2%.

This is primarily driven by Asia-Pacific, which accounted for 63% of the volume growth generated during 2009-2014. Asia-Pacific is not only the world’s fastest-growing region, but it is also the biggest.

With retail sales approaching six billion tonnes in 2014, Asian consumers eat as much processed meat as consumers in the Americas (North and Latin America combined), and the region is forecast to overtake the Americas by this time next year.

Predictably, China accounts for the lion’s share of sales in Asia-Pacific and, perhaps somewhat surprisingly, it is expected to overtake the US by 2015 to be the biggest processed meat market in the world. What is driving China’s growth appetite for meat? And how does this impact the competitive landscape?

Processed Meat Retail Volume Sales by Region:

US consumers remain health driven

With retail sales totalling 4.4 billion in 2014, the US is still the world’s biggest processed meat market; however, the nation’s processed meat consumption has being stagnating over the past decade, hovering at 13.7kg per person since 2002. Economic constraints are surely at play.

Soaring prices of red meat in the country have led some consumers to switch either to cheaper meat variants, such as poultry or less expensive cuts, or reduce their weekly consumption of meat. Health concerns have also played a role. Products with low-fat, natural, grass-fed and organic labelling have enjoyed growing consumer attention, particularly since 2010.

Frozen meat, which was straddled with an unfortunate ‘junk food’ label, has started to be seen as a healthier alternative to other types of meat, growing by 4% in volume terms both in 2013 and 2014, in contrast to canned processed meat’s 1% volume decline in 2014.

However, frozen meat still accounts for just 14% of overall volume sales of processed meat in 2014, so larger trends within the category are being driven by chilled processed meat, which commands over three-quarters of processed meat volumes but is gradually being abandoned for fresh and frozen variants due to negative consumer perceptions.

China turns to chilled processed meat

While convenience, price, cut of meat and the rising popularity of a vegetarian-based diet all affect the amount and type of meat that US consumers eat, the most pressing factor influencing which and how much meat the Chinese put on their fork is quality.

Recent scares about chicken feed and the dead pigs found in Huangpu river have prompted Chinese consumers to seek safer and higher-quality options, resulting in growing demand for chilled processed meat, which Chinese consumers (unlike their US counterparts) perceive as healthier and more nutritious than frozen or canned processed types.

Chilled processed meat showed a staggering volume CAGR of 8% over 2009-2014, well above the CAGRs registered by both fresh and frozen processed meat, growing at 4% and 3%, respectively, over the same period. Within chilled processed meat, demand for types is on the rise, with higher-end bacon, starch-free ham and Italian salami gaining in popularity at the expense of traditional pork sausages. The category is also benefiting from the ongoing development of cold chain systems in retailing and the growing household penetration of refrigerators, which rose from 52% in 2004 to 88% in 2014.

Shineway consolidates its position

With a population of over 1.3 billion, which is rapidly switching from a vegetarian and rice-based diet to a meat-based one, China is struggling to feed its own population through purely domestic means.

The country’s production is considered both inefficient and costly, with small, family-style farms, logistical bottlenecks and inadequate production and processing facilities. However, Shineway Group’s recent acquisition of Smithfield Foods, the world’s largest hog farmer and pork processor (and once the fifth-biggest processed meat player), may underpin the beginning of the end of China’s struggle.

The deal not only marks the largest Chinese takeover of a US company to date, but also secures Shineway’s position as leader in the world’s processed meat market. With retail sales totalling US$7.5bn expected in 2014, Shineway Group is able to sell 80% more processed meat than its closest competitor, Kraft Foods Group, which used to be the processed meat leader prior to its demerger from Kraft Foods Inc in 2012.

Retail Value Sales and %CAGRs of the World's Top 10 Processed Meat Companies:

Asia-Pacific’s triumph is likely to continue in the next five years, with the region expected to add a further three billion tonnes to the global processed meat market by 2019, while North America will continue to fade in importance, with merely 0.3 billion tonnes added – a scene that is also being mirrored in the global competitive landscape.

Among the world’s top 10 processed meat players, the value share of those based in Asia-Pacific increased from 20% in 2009 to 38% in 2014, while North American companies’ value share fell from 63% to 47% over the same period. The future is likely to evolve in Asia-Pacific’s favour.

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