No sector is without its challenges, but these challenges can also be viewed as opportunities, delegates at the most recent International Egg Commission (IEC) Business Conference were told.
Looking at the changing retail sector, Jessica Moulton, partner with McKinsey and Co., examined the disruptions facing the consumer goods industry.
Jessica Moulton, partner with McKinsey and Company, noted that changes in the retail sector are resulting in grocers becoming tougher trading partners, stepping up their game in procurement. | IEC
She noted that the sector had been unusually stable over the past 60 years, following the same successful model, but that the field is now increasingly changing, and retailers are having to react.
Recent years have seen lower growth rates and slimmer margins for the sector, with several factors affecting the established model.
Among these are the oft-cited digital-savvy millennials, but there has also been an explosion in smaller brands and better-for-you health trends. Traditional grocery outlets are also feeling the pressure from e-commence and from the rise of discounters. All of these factors are causing them to react.
Millennials are seeking out what they view as new, different and authentic, which is not a good fit for the traditional consumer goods model, and they are two and a half times more likely to shop at independent stores rather than from larger retailers. This trend continues even once they have formed their own families. Additionally, this group is four times more likely than boomers to avoid products from “the big companies.”
It is now the small brands, rather than traditional household names, that are driving margins for retailers, along with better-for-you claims and organic and fresh, all of which are growing above trend.
This is generating a significant squeeze for mass merchants, who are becoming much tougher trading partners, and are increasingly stepping up their game in procurement.
Despite concerns, broader outlook is promising
A similarly mixed, albeit more optimistic, picture was painted by Professor Trevor Williams, former chief economist at Lloyds Bank, who looked more broadly at the global economy. He noted that while there were numerous geopolitical risks on the horizon, market perception of risk is low.
Although this mismatch could represent a shock to markets, he noted that, since the last economic downturn, the global economy has grown on average by 2.5-3 percent per year, and more income per head has been generated, which feeds through into higher consumption.
Despite the geopolitical risk, expectations for growth in the short term continue to rise in most parts of the world, along with consumer confidence.
A synchronized global economic recovery is taking place, across a broad range of countries, and none are experiencing negative growth.
The pace of growth is stronger in some than in others, and contributions of each vary to overall global gross domestic product, but the widespread nature of the recovery is what makes it sustainable.
He cautioned that the pace of growth may slow, but it is expected to continue upward, unlike inflation, where no significant increases are expected, and this will help to keep interest rates low. Even where inflation rises, it will be low by long-term standards.
The pace of growth, however, may slow. The global economy will continue growing, but the pace may slow.
Egg industry in action
Despite this synchronized recovery in the global economy, there remain numerous parts of the world where hunger is an issue and Tim Lambert, IEC chairman, relayed to delegates the work being carried out by the International Egg Foundation.
The foundation was established in 2014 with its first project taking place in Swaziland. Since then, it has fed more than 3 million children in the country.
The work of the foundation has grown. For example, a project has been started in Mozambique, which is working with a college school that teaches students how to produce eggs via a teaching farm. They are allowed to keep 50 percent of the money generated by the farm, which can then be invested in their own egg business once training is complete.
The industry’s charitable initiatives are not only the right thing to do but raise the sector’s profile with global organizations and ultimately consumers, said Tim Lambert, IEC chairman. | IEC
Lambert noted that the work of the foundation was “the right thing to do.” He continued that the foundation demonstrates the industry’s commitment, engagement and dedication to give back to society and to help to make the world a better place.
Additionally, he noted, creating a more positive pitch for the industry with leading international decisionmakers elevated the sector in the eyes of these global players and, by extension, with consumers.
Consumers increasingly want to know more about where their food comes from, that animals are used humanely, they have environmental concerns, and they want to know that the day-to-day practices followed by the industry are contributing to the world. They want to know, and are demanding to know, that companies are doing more than simply maximizing profits.
To address these concerns, various initiatives are being developed under the Global Initiative for the Sustainable Egg.
Animal welfare
Kevin Lovell, IEC scientific adviser, updated attendees on progress being made by the World Organization for Animal Health (OIE) on first global standards for layer welfare.
The first meeting to develop these standards, which will follow similar standards for other species, was held toward the end of 2016, but approval of the final standards is not expected before 2020.
They will be outcomes-based and not overly prescriptive, and will be a minimum for OIE member countries to follow.
Continuing with the theme of welfare, Peter van Horne, IEC economic analyst, said the IEC has created a new database bringing together animal welfare legislation from around the world.
The online resource details general animal welfare legislation and any legislation or codes of practice on laying hens, which can vary greatly from one country to another.
He reminded delegates, however, that what the market demands can be above what is required by law, particularly when supplying supermarkets or food service, and so, within the European Union, the situation can vary greatly from country to country despite EU rules and regulations. In the U.S. and Australia, there is variation from state to state.
IEC conference offers positive outlook
