What is a food megatrend and what are the routes for investment

What is a food megatrend?

A food megatrend refers to a significant and long-lasting shift in consumer behaviour, preferences, or attitude towards food consumption. By staying aware of food megatrends, the food and agriculture industry - and those seeking exposure to it - can adapt in response to evolving consumer preferences. This ensures their business remains competitive and viable in the ever-changing food consumption landscape.

What are examples of food megatrends?

Any change in food consumption habits over time can be classified as a megatrend. The most general megatrend in food is arguably increased per-capita calorie consumption - or, put another way, the fact that the average person across the world is eating more food. In 1970 the average person globally ate 2,373 calories per day, however this had risen to 2,772 calories per day by 2010, and is forecast to increase to 3,200 by 2080. Animal protein is also playing a greater role in global diets - average annual meat consumption per capita was 34.1kg in 2010 but is forecast to increase to 55.4kg by 2080. Both of these megatrends have been driven by increasing global incomes, particularly in regions outside Western Europe and North America.

What is the health megatrend?

The health megatrend encompasses a widespread shift towards consumers prioritising health and wellbeing in their diets. This has driven consumer demand for food products that - through their nutritional value - support the consumer's physical, mental, and emotional wellbeing. These include lean proteins (such as fish and eggs), foods with high polyunsaturated fat content (such as olive oil, almonds and avocados) and foods with high antioxidant levels (such as blueberries and raspberries).

How can investors get exposure to food megatrends?

Investors can gain exposure by:

• buying tree crop orchards, particularly for those 'superfood' crops for which demand is growing in the long term.
• investing in companies operating in the supply chain for those products - processors, plant breeders, and owners of genetics.

Tree crop investments can offer - as well as exposure to this specific health megatrend - a markedly different return profile to standard farmland investments, with a far higher percentage of total return coming from annual cash yields. Annual cash yield can range from 6% (for leased olive orchards) to 14% or more (for operated avocado orchards).

Detailed examination of cash flows, business strengths and weaknesses, intellectual property rights, and management capabilities are essential if taking an equity position upstream or downstream in the supply chain.

What are the key risks and how can they be mitigated?

The main risk to tree crop orchards is water availability. This can be mitigated by:

• diversifying investment risk, investing both in locations with a current climatic advantage and those with a likely future advantage.
• diversifying crop risk, for instance mixing crops which might require larger quantities of water but produce a greater financial return (such as almonds and avocados) with crops with a lesser financial return but greater drought resistance (such as olives).

What other megatrends exist that might be worth studying?

The convenience megatrend for instance reflects consumers' increasing demand for convenient food options that require minimal preparation or effort, such as ready-to-eat meals, pre-cut vegetables, and on-the-go snacks. Convenience is a significant factor driving product innovation and shaping purchasing decisions in the food market - this will be examined in a future blog.

Further information

Contact Jonny Griffiths

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