W
ith rising cost of living being one of the major consumer concerns all across the globe, one major ingredients supplier IMCD APAC has adopted ‘Affordability’ as a major theme for its latest campaign.
AFBR has the opportunity to interview Emmanuel Colette, APAC Business Group Director, IMCD Food & Nutrition to gain further insights on its latest campaign and to understand the importance of formulating food and beverage products to be more affordable especially in this region. The following are excerpts of the interview with him:
Why is ‘affordability’ a major theme or focus for IMCD in its latest campaign?
The rising inflation of food ingredients in Asia poses a significant concern for food and beverage consumers in the region – inflation primarily due to a combination of factors, such as supply chain disruptions caused by the pandemic, extreme weather events affecting agricultural production, escalating energy prices, and overall global economic uncertainties impacting market stability.
Higher prices of food products, combined with the limited purchasing power of Asian consumers led to a change in consumption habits and the need for more affordable finished goods.
Can you provide some market insights to prove that affordability is a major concern among consumers in this region?
An Innova report showed that food prices were expected to rise by 20% in 2022 and will start to ease in 2023. This has significantly affected consumer purchasing decisions with more than 62% of consumers noticing the rise in food prices. One in 3 Asian consumers feels the effects of inflation due to the price increase of food and beverage products.
In your opinion, which countries in Asia are ‘affordability’ a major concern and why?
Overall, affordability is a regional concern, and depending on the country, certain product categories could be more or less impacted by cost pressure.
Brands became conservative in launching new products due to the redefined consumer behaviour. Looking specifically at CAGR (%) per country for affordable products, Vietnam and South Korea has the highest rate of new product launches forecasted until 2023 with a clear claim related to affordability. Other countries observe more muted movements without any specific changes visible on the packaging.
Meanwhile, another example from a study by L’Oreal showed that three out of 4 Filipinos agree that to save money on food and beverage, consumers will switch to a store with lower prices, such as Dali, a hard discounter store from Germany. Dali opened upon the start of the pandemic and has now expanded to more than 200 stores in the Philippines in a short period of 3 years.
Specifically what can IMCD offer to its customers when formulating/ reformulating their F&B products with the view of making them affordable to end- consumers?
At IMCD, we tap on our technical expertise, deep understanding of the ingredients from our extensive portfolio, including their cost-in-use, and market knowledge to provide value-added solutions to help our customers overcome the challenge. We developed 3 approaches to reformulation namely Modification, Fortification, and Reduction.
Could the aim for affordability lead to a compromise on other aspects like taste and quality of ingredients, as an example ?
One way to reduce cost through reformulation is to use less expensive ingredients without significantly altering the product’s taste or texture. For example, substituting butter with vegetable oil can lower the cost of production for baked goods while maintaining the desired flavour and texture.
Reformulating food products by modifying ingredients to lower costs can be a complex process that requires careful planning and evaluation. We recommend the following steps to reduce costs without compromising your product’s taste, quality, and nutritional value:
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Evaluate the current recipe and identify ingredients with fluctuating costs
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Consider the ingredient substitution with lower costs but similar or better functionality
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Use additives and preservatives to extend shelf life
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Improve production efficiency by reducing waste, minimising production time and maximising use of raw materials.
Apart from affordability, what are the other concerns which could be intertwined with affordability ?
While affordability will likely remain a major concern, consumers’ priorities can evolve over time. Factors such as health concerns may gain prominence, leading to shifts in consumer preferences.
In summary, do you think ‘affordability’ will remain a major long term concern among consumers in this region ?
Yes it will remain a major concern as countries in this region are at differing stages of economic development.
Consumers in developing countries, especially will continue to prioritise on basic necessities. The rising middle class also tends to be price sensitive and looks for value-for-money products. Meanwhile, inflation has also led to higher cost of living and lower disposable income.
Lastly, growing competition with more options available combined with larger adoption of digital platforms and e-commerce have led to enhanced price transparency in the region.