By Srisant Chitvaranund, Managing Director, The Abraaj Group
The other ‘clean eating’ movement (and this one is being taken seriously)
The ‘clean eating’ movement in developed economies usually consists of cutting out processed foods and avoiding gluten, dairy and excess sugar.
In growth economies, clean eating is much more straightforward and is acquiring increasing relevance as cities and markets evolve. As urbanisation brings increased wealth and a growing middle class to the fore, consumers are keen to move away from traditional street vendors to the formal dining sector to ensure food safety standards.
Food safety is a major concern with street foods. These items are generally prepared and sold under unhygienic conditions, with limited access to safe water, sanitary services, or garbage disposal facilities. Hence street food has long posed a high risk of food poisoning due to microbial contamination, as well as improper use of food additives, adulteration and environmental contamination.
In growth markets, ‘clean food’ is exactly what it says it is and demand for it is soaring.
In the early stages of urbanisation, street vendors tend to experience significant growth in trade. As wealth increases, though, we are seeing those growth rates fall well behind the formal dining sector as it becomes more affordable for the mass market to eat at formal establishments.
Growth markets are expected to see foodservice grow at an annual CAGR of 8% from 2015-2019, an annual rate almost 4x that of developed markets. Total foodservice sales will increase from sales of US$ 400 billion in 2015 to US$ 550 billion in 2019, an absolute increase of US$ 150 billion, of which US$ 20 billion alone will be driven from food service chains.
The Quick Service Restaurant (QSR) segment is the most affordable level of the formal dining sector. Customers typically place an order at the counter and pick up the food when ready with the ticket prices averaging around US$7 per person. QSRs often target office workers and are usually family destinations too.
The expansion in this sector is significant. QSR is rapidly capturing market share from informal street stalls/kiosks and self-service cafeterias, with a c. 3x increase from 2010-2019 in QSR sales.
Growth markets may not be interested in the developed market ‘clean food’ fad, but there are indications that ‘healthful’ foods are growing in popularity.
While growth markets are still experiencing a rise in demand for so-called ‘indulgent’ foods such as carbonated soft drinks, chips, chocolate and biscuits, the demand for healthful foods and beverages like vegetables and yoghurt and ‘semi-healthful’ foods such as cereals is rising much faster.
This indicates that although demand for indulgent foods is still on the up, growth markets may avoid the levels of excess which have plagued developed markets.
Meanwhile multinational chains such as McDonalds are boosting their range of healthful foods which is also likely to positively affect consumer choices in growth markets.
Different venue, different food
Growth markets are experiencing a dramatic change in consumer demand. People who would, a few years ago, have been used to eating at street stands now look to shopping malls and other venues as a place to access formal dining outlets.
The types of food being eaten are different too, with burgers and other meals associated with developed markets taking hold. As in so many growth market sectors, the dining sector shows signs of ‘leapfrogging’ developed markets by moving to healthful foods much earlier in the growth cycle and thereby reducing many of the problems associated with traditional fast food.
Abraaj is working with our partner companies who understand the evolving tastes within their market and are able to respond well to changing customer expectations. The robust growth in this sector is set to continue for many years to come and we are exceptionally well placed to play a key role within it.