Food markets will remain “highly dynamic” for the year ahead as supply chains continue to feel the effects of the pandemic, Rabobank’s latest outlook report says.
In its Australian Agribusiness Outlook for 2022, Rabobank says Omicron had a “profound” impact on local and global food markets, causing supply chain issues, labour shortages and increased inflationary pressure.
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.
Despite higher vaccination rates, containment measures were still common and that was putting pressure on food and beverage companies with higher supply chain costs and the challenge of keeping product moving to meet consumer demand.
Harvey said, “Food companies and retailers need to navigate supply chain vulnerabilities, while 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.”
Inflation and food prices
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, Harvey said.
“Inflation is expected to remain high through much of 2022 and as a result, companies are acting on retail pricing across a range of consumables.”
The report found that with the backdrop of food price inflation 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. For those in the food and agricultural sector, there will need to be a keen eye on potential demand destruction in emerging markets,” Harvey said.
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,” Harvey said.
“This, of course, takes place against a backdrop of increasing consumer demand for natural, clean, fresh, and personalised food products. While ecommerce 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.
“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.”
