05 November 2024

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5 Food Trends

Luigi Campopiano

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The food sector could offer attractive opportunities for investors in the coming years. PGIM has conducted an in-depth study titled "Food for Thought," viewing food as a true megatrend amidst shifting consumption habits and preferences, such as the growing attention to healthier foods, sustainable packaging, and new potential food sources. The global food system is undergoing significant changes, which could have major impacts in the near future.

The transformation of the global food system may create appealing opportunities in public and private markets, particularly in areas such as cold storage and AgTech (technology applied to agriculture). However, there are also risks to consider, including overhyped trends like alternative meats and vertical farming. To understand the emerging opportunities and hidden risks, it’s essential to closely observe this transformation, starting with demand, or consumption: dietary habits and preferences are on the verge of a revolution.

According to PGIM, three fundamental shifts will impact the entire food system in the coming decades:

1. Alongside population growth, increasing wealth will reshape food demand. As wealth grows in various countries, diets will shift toward more resource-intensive foods (meat, fish, and processed foods).
2. Dietary patterns are converging globally. Rising incomes will support more resource-intensive eating habits, contributing to a shift toward a "Western diet" rich in meat, dairy, wheat, oils, and sugar.
3. Global consumer preferences are evolving in diverse ways. While many changes will turn out to be passing fads, others will persist. It’s crucial to understand these shifts, such as a trend toward healthier options, convenience, and takeout food. According to Fortune Business Insights, global demand for prepared foods and meals is expected to increase by 60%, reaching $250 billion by 2029.

These three major shifts will increasingly shape the food industry and have significant implications for investment portfolios. According to PGIM, those interested in evaluating investment opportunities and risks in this area should focus on five core themes:

1. Meat Producers Offer a Contrarian Opportunity as Plant-Based Meat Peaks
• Plant-based meats have made headlines, but the reality doesn’t match the hype: growth rates for this category have stabilized or peaked. Demand for alternative meat is declining, while global demand for animal-based meat is projected to grow by 14% by 2030.
2. Cold Storage and Transport Present Growth Opportunities
• With consumers seeking more fresh foods, online shopping options, and home delivery, expanding refrigerated warehouses has become essential. The need for cold storage facilities near urban centers presents opportunities for real estate investors. Investors should also consider logistics providers, especially in Southeast Asia and Latin America, which could benefit from a growing middle class and increased e-commerce adoption, as well as specialized transport companies offering both storage and long-haul transport services.
3. Packaging Provides Stable Cash Flows Independent of Food Trends
• Packaged foods and prepared meals require packaging, and established operators in the food packaging sector enable access to this growing market without relying on volatile consumer behavior or the latest food trends. A similar trend is seen with canned packaging, driven by increased demand for beer and energy drinks. Specialized machinery and equipment for food packaging could also offer opportunities, especially among large industry players with stable cash flows and a solid customer base.
4. Health and Wellness Drive Food Innovation
• Consumers are increasingly prioritizing wellness on their plates. In the U.S., some companies focus on producing alternatives to ingredients that raise health, environmental, or social concerns, also offering personalized meal services.
5. Convenience and Food Safety Fuel Opportunities in Emerging Markets
• Food safety concerns are boosting demand for recognizable brands. Investors should look to companies with a strong presence in food and beverage products with established brands and local logistics expertise. Beyond well-known supermarket chains in Europe and the U.S., there are privately held players in Southeast Asia and Latin America well-positioned to benefit from these shifts.

These trends suggest a future in which the transformation of the food system addresses increasingly complex global demand, opening promising opportunities for investments in areas such as AgTech, packaging, logistics, and wellness innovation.