Export Q & A: Top Markets for the Future

Top Markets for the Future

Q: I own a small but active export company and am always on the lookout for new products. Obviously, those with high growth potential are a major consideration. Do you have any info on which product categories have grown the most over the last five years? And if so, how about the next five?    

A:  Thanks, a good question which many companies can benefit from learning about. It did take a “Paul Bunyanesque” (some may need to look that up) amount of tree opening in Euromonitor since there are so many packaged food categories which can get quite specific. The answer to both questions is quite interesting and different.

Back to the Future? 

According to Euromonitor the product category with the highest growth rate over the past five years was “Dinner Mixes”. If you are like me, you might have said “huh?” too since it sounds so dated and “Betty Crocker” like. But Euromonitor is a U.K. based operation and very much like the Harmonized System, HS, uses a different nomenclature in many cases. They very rarely use the term salsa as well, preferring instead “chili sauce” and refer to many chips as “crisps” among others. So yes, while Betty Crocker still plays for a global brand share you might be more familiar with the term “meal kit” or perhaps “recipe kit”.

The category definition used by Euromonitor for Dinner Mixes is “Dinner mixes are typically in a ready-to-cook/prepare format, in which all ingredients are included in the packaging, and typically require further preparation and cooking steps which are more extensive compared to products tracked in shelf stable, chilled and frozen ready meals which are generally ready-to-heat. Despite the name, dinner mixes are not necessarily limited to dinner time.”

They typically comprise a seasoning powder, in addition to an accompaniment of a carbohydrate such as pasta, rice, potato, tortillas or taco shells. Dinner mixes differ from dry sauces due to the addition of other ingredients in addition to the seasoning powder, although both are typically positioned as recipe mixes.

Meal kits include pre-portioned and partially prepared food ingredients and recipes to prepare home cooked meals. They are packaged as “deconstructed meals” and require some assembly and cooking steps. These are recently typically available through a subscription service via the internet retailing channel. Monthly subscription-based ready meals delivered with minimal cooking (e.g., requiring only the addition of seasoning and heating) are excluded and considered shelf-stable/chilled/frozen ready meals sold through internet retailing channel and are not dinner mixes.

Brand examples include Betty Crocker, Old El Paso, Stove Top Oven Classics, and Hamburger Helper. Meal kit companies launched in recent years include HelloFresh, Blue Apron, Plated, and meal kits products by store-based retailers like Lidl. So, what may have been a Betty Crocker Dinner Mix is now a meal kit from HelloFresh.

Historic Growth – 2016 to 2020

The growth in retail sales of dinner mixes reported during 2016 to 2020 was an astounding 87.1% which has a compound annual growth rate (CAGR) of 17% and a period dollar growth of almost $4.5 billion. Nearly 38% of that growth or more than twice the CAGR, $1.7 billion was between 2019 and 2020 so the “eat at home” mandate with most foodservice closed around the world certainly had an impact, especially in the developed nations.  Dinner Mixes also had the highest growth rate during that period.

Other high growth packaged foods which grew well between 2019 and 2020 were also indicative of increased home eating. They included frozen meat substitutes, dried pasta, and sunflower oil, ready to eat (RTE) cereals, dried ready meals, chilled lunch kits and frozen pizza. There is a good chance this may change in the forecast as more and more people are consuming food outside of the house moving forward.

Other high growth categories historically included some of the above because of the boost from increase grocery shopping as well as other cooking oils such as palm, rapeseed and other edible oils, chilled soup, oyster, chili and soy sauces, hot cereals, flat bread, bouillon, and rice.   

Top Markets and Brands for Dinner Mixes

The 2020 retail market size for dinner mixes was nearly $9.6 billion. The U.S. takes up nearly half that value at over $4.7 billion. Japan is the largest international market at $1.5 billion and the top ten is rounded out at less than $1 billion with Canada, U.K., Australia, Netherlands, Sweden, Germany, South Korea, New Zealand, and Norway. Interesting to note that dinner mixes in South Korea were not even being tracked in 2016 and by 2020 sales had reached $157.1 million, growth of over 12,000% or a CAGR of 400%.

Italy has the highest individual market growth at 407.3% but the dollar total was low which the case with enormous growth is often. It comes from such a low value that over 400% is only $4 million. Other high growth markets with solid period dollar growth included Australia, Canada, Germany, Austria, Netherlands, Belgium, and U.K. There are several markets which show no value which means the category is too small or not being researched yet. But like with South Korea, this will likely change in the future.

In the forecast which goes from 2021 to 2025 the retail sales growth in dinner mixes drops down about 20 spots. It is estimated by Euromonitor to reach by growing 30% and $3 billion in period dollar growth. In this case it is South Korea who shows the most growth in the forecast with a period total of 152.1% which is 26% CAGR and a dollar total of $366.7 million. Other high growth high dollar markets include Russia, Australia, Belgium, Italy, Ireland, and Canada.

The brand shares globally reflect many of the old school products as well as the new players. HelloFresh now has a global brand share of 28.4% in dinner mixes. In Wikipedia the company is described as “HelloFresh SE is a German publicly traded meal-kit company based in Berlin, Germany. It is the largest meal-kit provider in the United States, and also has operations in Australia, Canada, Denmark, New Zealand, Sweden, and Western Europe (including the UK, Luxembourg, Germany, Belgium, France, the Netherlands).”

In Euromonitor they do show up in many of those markets such as Australia (60.9%), New Zealand (10.4%), Canada (30.2%), Austria (80.7%), Belgium (44.1%), Germany (89.9%), Netherlands (59.8%) and U.K. (54.6%). New Zealand is dominated by a company called “My Food Bag” who has a commanding market share of 82.2%.

The rest of that market and many others as well include a market share for Old El Paso, who has a global brand share of 5.7%. Strong market shares exist even in some countries where HelloFresh dominates such as Australia, New Zealand, U.K., and Belgium but they are stronger where HelloFresh has yet to enter or at least grow a considerable share. Old El Paso is dominant in France (58.5%), Greece (95.3%), Portugal (66.9%), Ireland (48.9%), and Spain (48.5%). They also lead in Colombia with a share of 40.1%.

And what about Betty Crocker? Truth be told they like Old El Paso are both owned by General Mills. Betty Crocker is more well known for “dessert mixes” or “baking mixes” than meal kits. That is where their global brand shows up as well as in categories such as fruit snacks, baked goods, and staple foods.

Forming a Strategy

It does not appear that this category is highly exportable despite its growth. It is being operated on a multinational basis which means as close or within the market as possible. This is especially true when there is a “center plate” or “protein” involved such as a type of meat. They would likely be very fragile in shipping with a relatively short shelf life in many cases and may also in other cases need temperature management.

Many of the top markets are also well known for rather strict regulations on animal proteins and especially in the EU with its “composite product” requirements which are essentially a trade barrier to keep meats and dairy out of the market. Researching export data is also difficult as the HS codes and Schedule B numbers are complex and based on essential character of the dominant ingredient and very hard to separate out from finished ready to eat products. In addition, the market is waning a bit since many global consumers are (slowly) returning to their prior lifestyles and eating out more often. Because of these factors and the brand dominance of some of the players it does not appear to be a good decision for a small company, especially one that does not itself manufacture.

Edible Oils

You may have noticed in the mention of high growth in edible oils as well including sunflower, rapeseed, and others. Retail sales of edible oils reached nearly $97 billion in 2020, which is period growth of 38.4% or a CAGR of 8.5% and nearly $27 billion in period dollar growth.  Because it is consolidated, “Other Edible Oils” represents the largest share of the total with $21.2 billion, or about 22%. This includes vegetable and seed oil such as coconut oil, grapeseed oil, groundnut oil, sesame oil and walnut oil, as well as blended oils which contain less than 50% of any single type of oils broken down into the researched oil categories. This is followed by sunflower, olive, soy, palm, rapeseed, and corn.

The forecast for growth in edible oils is a bit higher than dinner mixes, and most other categories as well. It also has a much higher dollar volume and nearly every country in the world is a potential market. By 2025 Euromonitor predicts that retail sales will reach $134.5 billion globally, period growth of 31.2% with a CAGR of 7% and $32 billion in period growth. The top markets include India, China, Turkey, Brazil, Russia, Italy, Spain, Indonesia, Bangladesh, and Iran. In the forecast the high growth markets are topped by Sudan, South Sudan, Argentina, Zimbabwe, Angola, Liberia, Congo, and Haiti. Not all of course are good U.S. markets and there is one more step to take to match the U.S. exports and compare where they fit here.

U.S. Exports of Fats and Oils

The U.S. exports of these products are extremely strong and growing well. Aggregated they reached over $2.5 billion in 2020, the most since 2015, and 16% of the agricultural total. Through June of 2021 the exports have grown 11% to over $1.4 billion. This may have greater potential for you to export in the future if you don’t already. The U.S. has a core competence in producing most of these oils, with a few exceptions such as palm which we do not grow. It is also great freight to handle, very dense and not fragile, long shelf life, easy to source and obviously very popular. The best thing about exporting oils is the top markets from the U.S. which don’t match those Euromonitor markets for retail. That is often the case because of low price pressures, higher duties and taxes, draconian regulations, and local and regional competition.

Eight of the top 10 destinations by value are in Free Trade Agreements (FTAs) with the U.S. This means the products mostly enter duty free if not on a tariff elimination schedule already. They include Mexico, South Korea, Canada, Singapore, Dominican Republic, Colombia, Guatemala, and Morocco. The other top destinations are Netherlands and Egypt. Some of the top markets from Euromonitor are in the top 50 but much farther down. They include India, China, Sudan, and Yemen. There are 22 destinations with over $20 million in exports and about 140 destinations active overall.

So, thanks again for the question; it was a good example for all companies to go through when searching for markets for new high growth products.  While one segment such as meal kits might appear dynamic with high potential, it may not be from the U.S. for a myriad of reasons. Sometimes great export opportunities come from more modest categories and as an intermediary such as you, create good opportunities for export growth.  You might look into sources and also advise your current and future customers if you decide to move forward.