Industry trends food January 2025

Julkaisut

Production growth and decreasing food prices, but downside risks remain

14 Jan 2025

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We expect global food production and sales to increase by more than 3% annually in 2025 and 2026. Decreasing inflation, real wage growth, and monetary easing are key drivers behind this forecast, which should benefit a demand rebound for non-essential food products.
Adverse weather conditions remain a downside risk as they could disrupt global food supply, putting upward pressure on prices. A trade war between the US and other countries could have adverse effects on supply chains and raise the price of agricultural imports.

We expect US food and beverages output to increase by 1.4% in 2025 and by 2.0% next year. Consumer spending is underpinned by a tight labour market and growth of real wages.
That said, food price inflation will continue to put pressure on household budgets despite some easing in 2024. Consumers are seeking affordable options, and competition in the food sector is increasingly focused on price, which is creating margin pressure for food and beverages producers as well as retailers.

We expect Brazilian food output to level off in 2025, followed by a 1.9% increase in 2026. Household consumption is forecast to slow this year as high food prices weigh on disposable incomes.
Discount promotions by large retailers are likely to result in lower margins for food producers.

Food and drink spending in Mexico is expected to maintain robust outturn this year, despite a slowing economic environment.
With a growing population and middle-class there are opportunities for premiumisation as consumer increasingly opt for higher quality food products.

We expect Chinese food and beverages output to continue growing by about 5% annually in 2025 and 2026.
However, in the currently difficult environment with lower economic growth and subdued consumer confidence, demand for more expensive food and beverages items could weaken.
The market is highly competitive with numerous local and international players vying for market share. This can lead to price wars and slim profit margins.

After a 1% contraction in 2024, we expect Indian food production and sales to increase by more than 8% annually in 2025 and 2026. Growth will be driven by population growth and rising household incomes and living standards.
However, food price inflation is currently still high, as food producers have been affected by a sharp increase in costs for energy, fertilisers, packaging and transport. We expect only a slow inflation decrease in the coming months, further affecting discretionary spending.

In Indonesia, the food and beverages industry provides a significant contribution to economic growth and job creation. We expect production and sales to grow by about 3.5% annually in 2025 and 2026.
However, despite the expansion the food sector is facing some challenges, such as fierce competition in the retail segment, rising production costs, complex government regulations, and infrastructure/logistics issues.

After a 0.4% increase in 2024, food and beverages sales in the EU and UK are forecast to grow 0.1% in 2025 and 0.7% in 2026.
While easing inflation and lower interest rates should support sector growth, prices for food items remain above 2019 levels. Cost drivers in the industry have been higher energy, transport, labour and increased loan costs.
In many European markets the profit margins of food producing and processing businesses are structurally thin and under pressure. This is due to a fiercely competitive environment, in which the bargaining power of major retailers and discounters is very strong.
Consumers remain price-sensitive, which means that across Europe large discounters and private label products will remain very popular. Price wars will continue as food retailers compete for price conscious customers.

For more a more comprehensive assessment of the performance and credit risk of the food and beverages industry please download the report below.

Summary

We expect global food production and sales to show solid growth rates in 2025 and 2026. The expansion is mainly driven by the Asia Pacific region.
Despite a decrease in global food commodity prices, food price inflation remains elevated in some markets for the time being.
In the long-term, emerging markets will lead sectoral growth. As disposable incomes rise, consumers substitute low value-added staples with higher value-added goods.