Packaged Food: Quarterly Statement Q1 2018

Strategy Briefing

About This Report

Mar 2018

With GDP forecasts for 2018 revised upwards in most developed markets, notably Germany and the US, packaged food sales see an upgrade globally. Among emerging markets, Brazil sees a strong upgrade benefiting from a firmer economic recovery. However, many of the largest packaged food players are seeing stagnating sales in developed markets as they are losing share to niche brands with a natural and healthier positioning, and are under increased pressure to change their category focus.

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Packaged Food: Quarterly Statement Q1 2018

Packaged Food: GDP GROWTH HIGHLIGHTS

US

Stronger than expected growth at theend of 2017 and passage of theRepublicans’ long-awaited tax cuts haveled us to raise US GDP growth forecast to2.3% in 2018 and 2.2% in 2019.

Eurozone

The Eurozone economy outperformed in2017 with private sector optimism closeto levels of the early 2000s. GDP growthwill remain significantly above the trend,reaching 2.2% in 2018 and 1.9% in 2019.

UK

Brexit uncertainty is expected to weighon investments, while low income growthand consumer confidence should depressspending growth. UK GDP is forecast togrow by 1.4% in 2018 and 1.3% in 2019.

Japan

Economic growth in Japan is backed byrobust investment and export demand.However, wage growth remains weakhindering spending. We expect GDP togrow by 1.2% in 2018 and 0.9% in 2019.

China

Strong public investment, robustconsumption growth and improvingforeign demand support growth in China.We have lifted real GDP growth forecastto 6.5% in 2018 and 6.3% in 2019.

Brazil

Low inflation and interest rates, alongwith falling unemployment, supportconsumer spending in Brazil. GDP growthhas finally turned positive, and is likely toreach 2.4% in 2018 and 2.5% in 2019.

Russia

Russia’s economic rebound has turnedsofter than expected, despite the steadyincrease in oil prices. Real GDP growthforecast has been downgraded to 1.3% in2018 and 1.7% in 2019.

India

India’s economy has started to lift upfrom the joint disruption ofdemonetisation and GST reforms. Furtherstrengthening is likely with GDP growthof 7.4% in 2018 and 7.5% in 2019.

Scope
Executive summary
Real GDP growth forecasts: Revisions over last quarter
Global risk scenarios
Major macro risks for the packaged food industry
Key findings

Forecast Update

Upgrade in developed markets led by the US and Germany
Highest forecast upgrades are seen in snacks and baby food
R ecovery in Brazil across packaged food strongly driven by snacks
K ey categories see contrasts in upgrades based on market maturity
Developed markets upgrade boosts prospects and minimises risks

Growth Strategies of Key Players

Multinationals challenged by premiumisation and price polarisation
Nestlé: Declining sales in developed markets hit by polarisation
Nestlé: Strategic options remain open, may pursue more M&A
Large players adjust to stagnation in core categories in the US
General Mills seeks growth in natural food and enters pet food
Large players pursuing three main strategies to offset stagnation

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