- 28 February 2007 -

Market overview: Food and Beverage

 

Ken Sutherland takes an overview of the market, its main processes and players, and looks at the likely future for this filtration field.

The background

Equipment used for mechanical separations is critical in many of the operations of the food and beverage production sector, partly to keep harmful contaminants out of the materials in process, partly in the assurance of the required quality in a liquid product, whether this is a thick mayonnaise or a crystal clear drink, and increasingly in the recycling of wastes. There is a very wide range of manufacturing steps involving liquids in the food and beverage sector, some with quite high intrinsic values, offering scope for a wide range of filtration processes. Almost all the tasks for filtration in this sector involve the treatment of liquid suspensions, with the important requirement of sanitary operation, including clean-in-place and steam sterilisation capability.

In terms of the total market for filtration and other separation equipment, the food and beverage sector is one of the largest components. It is estimated that the market in 2007 for all kinds of such equipment, including sales of spares, throughout this sector will be just in excess of $3 billion which represents about 7.5% of the total equipment market.

In some parts of its production processes, this is quite a mature sector, with sector growth close to changes in GDP values, but there are some exciting developments as well. New and replacement production lines are regularly being installed in all regions of the world, with strong growth in Asia, especially as the large economies of India and China move quite rapidly towards higher standards of living.

The prime driver

People must eat and want to eat to an increasing standard, while populations (in most parts of the world, at least) continue to grow, so that the prime driver for the food and beverage industry is the demand thus created, at a rate keeping up with the general economic growth of the world. In many parts of the world, of course, simply getting out of starvation levels is all that matters, and this is more a problem of improved agriculture, but the food industry must be ready to support such improvements.

Another important market driver is product cost, with very little scope for variation in the price of basic foods, so that higher added value products are constantly being sought. Equally important is the continual search for higher standards of purity at all stages of manufacture, which is where filtration and related equipment has a very important part to play. The rise in popularity of organic farming and food production has been promoted by concerns over safety (with corresponding concern as to the reality of benefits with organic products).

Other developments that are affecting the whole food and beverage manufacturing sector are:

. he appearance of "functional" foods and "energy" drinks to meet perceived (or advertise-ment generated) needs for personal improvement;

. the growing realisation that cholesterol accumulation in the body is caused by an incorrect diet;

. the continuing concern over the undoubted presence of additives whose function is uncertain;

. the rapid growth in volume of convenience and snack foods;

. the equally rapid growth in concern in the marketplace over better diets, especially for children (and the other side of the coin, obesity) and the provision of foods to match; and

. the movement of many of the large retailers into food processing, and the
production of "own brand" foods by major retailers.

Whilst many of these concerns only exist in countries where a high standard of living is currently enjoyed, their development will dictate what paths manufacturers in less developed areas will follow.

What about GM?

In the long term, the arrival of genetically modified food products onto the market may be the largest development in food provision for some time (or its largest problem, depending upon one's point of view - science has some way to go yet to justify the wilder claims of either view).

Who's who in the marketplace?

The industry has a number of large companies, with a host of smaller ones. Nestlé is by far the largest of the food producers, the next largest being Unilever, closely followed by Cargill, the largest private company in the USA . This comparison of size is complicated by the other facets of business, as in the case of Unilever, which is also large in the household products business. This is also true of Altria, classified as a tobacco company, but about to hive off its largest component, Kraft Foods, to create another large separate food manufacturer. Apart from these companies, other leading members of the industry are Sysco, Archer-Daniels-Midland, Conagra, George Weston, Sara Lee, and Danone.

The leading beverage companies are Pepsico and Coca Cola, by some distance ahead of Diageo and Anheuser Busch, followed by the three Japanese breweries, Kirin, Asahi and Sapporo , and then Heineken and SAB Miller. Interbrew is moving up the list fast following the takeover of Bass Brewers, and then Beck's. The merger of Constellation Brands (of the USA ) with Hardy (of Australia ) has formed the world's largest wine company.

One of the fastest growing parts of the whole sector is the mineral water and soft drinks business, which has a sizeable requirement for fine filtration. There is a wide disparity of consumption rates among the major countries - the French drink about 105 litres per head annually, but the British drink only 10 litres per head, and the Japanese less than 5 litres. If all countries increased to the French level this would be a very exciting market for clarifying and polishing equipment.

Conflicts and carbon-neutrality

A problem that has only recently become apparent is the conflict between the demands for food and fuel crops as resources. This has come from the perceived need to find alternative energy sources to the fossil fuels now accepted as a prime cause of global warming.

Among the carbon-neutral systems (i.e. those consuming as much carbon from the atmosphere as will subsequently be released in energy generation), the most obvious is the growing of burnable "biomass" crops for energy production - on land which cannot then be used for food crops. Whilst this problem is currently still largely a matter of political consideration, it will eventually impact on the food sector, perhaps first in requiring better use of processing wastes as fuels.

Regulations around the world

Because of its vulnerability to microbial attack, and many other health issues, the food and beverage sector is subject to quite stringent regulation. There are national bodies, such as the Food Standards Agency in the UK and the Food and Drug Administration in the USA , with European standards deriving from EU Directives, as well as the Food Standards Programme of the UN's FAO/WHO. A major problem for the industry is the resultant plethora of standards, differing in minor (and sometimes major) details. There is a great need for globally applicable standards, and the sector's growth will be hindered until these become available.

At the present time, the food and beverage sector, in common with other industries, is mainly concerned with the implementation of the European Union's Integrated Pollution Prevention and Control Directive. This must be fully in place by October of this year, and although largely aimed at the waste discharges from manufacturing, has consequent impacts on the production processes inside the factory. Of similar importance is the Water Framework Directive, which is concerned with the whole water cycle - an important feature of most food and beverage manufacture. .