Consumers and Consumption

Abstract

Consumers and consumption are different when it comes to food compared with many other products. Some very specific conditions apply to food consumers and food consumption. The role of income is relatively clear: The consumption of animal-based foods—of which meat accounts for a significant share—increases in line with economic income, while the consumption of vegetable products is almost constant. The share of vegetable-based food will decline in line with increasing income. However, vegans, vegetarians and flexitarians belong to a small but rapidly growing population group in major parts of the world. Convenience, including takeaway food, eating out and catering, is becoming increasingly important with regards to food demand. Market shares for discount stores are also increasing in many countries. The prevalence of the political consumer is increasing, also driven by increasing income.

8.1 Introduction

Consumers and consumption are different when it comes to food compared with many other products. The markets, the products and the business conditions are different, some of which have already been discussed elsewhere in this book. Some very specific conditions apply to food consumers and food consumption:

• Food is a basic necessity, which means that opportunities for substitution and the scope for differentiation are very limited. Everyone demands and consumes food daily.

• Consumption and demand is rather constant and less affected by economic recession and economic booms. Demand growth in volume is quite low.

• Food is a fast-moving consumer good (FMCG), i.e., a product that sells quickly at a relatively low cost. FMCGs have a short shelf life because of high consumer demand or because they are perishable.

• Structural trends affect food demand: More women on the labor market, smaller households, preferences for more leisure time, etc., change food demand.

• The products food and water are on the lowest level of Maslow’s hierarchy of needs. They are the only consumer products at this level.

A specific focus on consumption and consumers is, therefore, relevant from a food perspective.

Consumers and customers are the last link in the value chain and are positioned downstream. Fundamentally, consumers are the central players as all activities in the agricultural and food sectors are aimed toward fulfilling consumer needs. The position and role of consumers in the entire value chain is changing: For decades, agriculture and food production was based on what was possible technically, biologically and economically. Today, a paradigm shift is occurring from traditional production-driven agriculture toward market and consumer-driven agriculture, so that the value chain “from field to forkˮ is increasingly becoming “from fork to fieldˮ.

This change has been reinforced by a power shift in the value chain. Consumers have become more powerful and critical and this power shift has been supported by media attention on consumer interests. Furthermore, food consumption has gained a new dimension as a result of the climate discussion in that consumers are more aware of the negative effects of their consumption on the environment. The industrialization of agriculture has also created new forms of production which create awareness and debate right down to the consumer level.

8.2 Demand for Animal-based Products

The consumption of animal foods and the consumption trend are both important and interesting. Animal foods are more resource-demanding and have a greater impact on the climate than vegetable foods. However, animal-based foods have nutritional benefits. In addition, the consumption of animal foods—hereafter based on meat consumption—follows consistent global patterns that are relatively easy to explain and predict.

An example of the consistent global patterns is presented in Fig. 8.1.

Fig. 8.1

(Note Consumption is calculated as “meat supply” for each country and region. Two different methods of calculation were used for 1961–2013 and 2010–2021. Source Own presentation based on statistical data from FAO)

Meat consumption in selected regions, 1961–2021

As can be seen, meat consumption increased significantly in Asia compared to Africa, in particular, during the period. This change parallels an increase in incomes, which have improved more in Asia than they have in Africa.

The global increase in meat consumption is due to both rising incomes and a growing population. At the global level, the correlation between income and meat consumption is very clear—see Fig. 8.2.

Fig. 8.2

(Note Consumption is calculated as “meat supply” for each country and region. Source Own presentation based on statistical data from FAO)

Meat consumption in all countries as a function of income (2020)

Figure 8.2 presents economic income (GDP per capita—the horizontal logarithmic axis) and meat consumption (kg per capita per year—the vertical axis) for all the countries in the world. The countries furthest to the left are the poorest, and here meat consumption is below 20 kg per year. As we move to the right, countries' economic welfare and income increase, and at the same time meat consumption also increases to over 100 kg. The connection is relatively clear: the richer the country, the more meat that is eaten.

The richest countries such as the USA, Switzerland, Norway and Australia are located on the far right. Here, there is no clear connection between income and meat consumption: Meat consumption does not seem to increase when the income per population exceeds approx. US$45,000 per person.

For the countries with an average GDP of over US$45,000 (marked by a vertical dashed line in the graph), there is thus a small negative correlation between income and meat consumption. Meat consumption increases with rising income but only up to a certain threshold, after which point it tends to fall.

The stagnation in the growth in meat consumption at very high incomes is also illustrated in Fig. 8.3.

Fig. 8.3

(Note The 38 countries are selected by OECD and FAO and they cover a wide range of countries. Source Own presentation based on OECD and FAO [2022])

Meat consumption in 38 countries in relation to their income in 1990, 1995, 2000, 2005, 2010, 2015 and 2020

The figure shows several different features: Each line represents one country and it shows the meat consumption for seven years, namely 1990, 1995, 2000, 2005, 2010, 2015 and 2020. The figure illustrates that meat consumption in the countries with the highest incomes has remained at an almost constant level. In contrast, meat consumption in low-income countries has increased sharply. The figure allows both a static and dynamic interpretation to be made: The current differences in consumption among the countries can largely be explained by the level of income. In recent decades, meat consumption has risen sharply in the low-income countries, while it has remained at a fairly constant level in the high-income countries.

Meat consumption is also affected by other factors including price, climate challenges, livestock diseases, income distribution, etc., so the relationship shown in the graph only illuminates one of many factors. In the high-income countries, climate issues will undoubtedly help limit meat consumption. In many other countries, rising incomes will be the main reason for increasing meat consumption.

As shown in Fig. 8.2, global meat consumption has increased significantly in recent decades. From 1961 to 2020, the average total meat consumption per capita worldwide increased from 23 to 43 kg. During this time, poultry meat, in particular, became increasingly important for consumption, cf. Fig. 8.4.

Fig. 8.4

(Source Own presentation based on statistical data from FAO)

Global meat consumption per capita 1961–2021

The increasing importance of pork is largely due to developments in China, which is home to almost half of the world’s pig population. Since the beginning of the 1960s, consumption of pork in China has increased from 2 to 62 kg per person per year.

Poultry meat is now the most important type of meat in terms of weight. In this case, it is important that poultry meat is relatively cheap, easy to produce and relatively low in fat.

8.3 Demand for Plant-based Food

In general, the consumption of calories from animal products—of which meat accounts for a significant share—rises in line with a country’s economic growth. However, the consumption of calories from vegetables remains almost unchanged, see Fig. 8.5.

Fig. 8.5

(Source Own presentation based on statistical data from FAO)

Consumption of calories from animal and vegetable products in relation to the level of economic growth (2020)

The figure illustrates that the poorest countries almost exclusively consume vegetable products. 1.500–2.500 calories per day come from vegetable products, while less than 500 calories come from animal products. The consumption of animal-based foods increases in line with economic growth, while the consumption of vegetable products is almost constant.

Therefore, the overall trend is constant demand for vegetable products and increasing demand for animal-based food during economic growth. The share of vegetable-based food will decline in line with increasing income, cf. Fig. 8.6.

Fig. 8.6

(Source Own presentation based on statistical data from FAO)

Consumption of vegetable calories as a percentage of all calories—for all countries as a function of the countries' income

The figure illustrates a very clear correlation—vegetable-based food accounts for a decreasing proportion of total food calculated in calories in line with increasing income in the countries.

Countries with a very low proportion of plant-based foods are thus rich countries but also countries with a relatively poor climate for plant production (the Nordic countries) and countries with large fish resources (for example Iceland).

There do not seem to be any indications that the rich countries are changing their behavior: In the last 10 years, consumption of animal-based foods per capita has increased in the rich countries at a faster rate than it has in the rest of the world. New trends, which are described elsewhere in this book, are emerging on a large or small scale, but so far they have not changed the overall picture.

Between 2010 and 2020, the growth in consumption of animal-based foods increased in line with increasing income. This means that countries with high incomes have experienced a relatively large increase in the consumption of animal-based foods in this time. Thus, there is no sign of a new vegetable-based trend.

In a global perspective, when income is such an important factor for consumers' choice between plant-based and animal-based foods, it is difficult to influence consumption. On average, income and living conditions worldwide are gradually improving, which results in a relatively large increase in the demand for animal products. This trend and correlation are at odds with the need for a more plant-based diet.

8.4 Convenience Food

There is no clear definition of the concept of “convenience food”. However, convenience food (also called tertiary processed food) is typically a full meal that is ready, or almost ready, to eat when it is bought and can be prepared quickly and easily by thawing or heating. Convenience food can be considered as the industry's solution for making the process of cooking easier for the user, so it often includes ready-to-eat dry products, frozen foods, shelf-stable foods and prepared mixes. Convenience also has a link to the food service (catering) market, which offers meals to the user.

Convenience is thus strongly associated with concepts such as catering, takeaway, fast food, ready-to-eat, etc. Several drivers reinforce the trend toward greater convenience such as a reduction in the size of households and time spent in the kitchen and an increase in the number of women in the workforce.

Convenience is becoming increasingly important with regard to food demand. In general, there is an increasing demand for more processed goods, which require less preparation in the home.

Convenience food as a global megatrend can be illustrated in several ways:

One way is to observe the drivers behind convenience. These drivers seem to follow a similar global tendency, which will push food convenience in a common direction:

Firstly, increasing incomes and economic welfare will lead directly to an increasing demand for food convenience.

Secondly, an increasing number of women will enter employment outside the home, which will increase the demand for convenience.

Thirdly, households are becoming increasingly small in line with economic growth. Despite cultural differences, etc., there is a very strong correlation. With increasingly small households, demand for convenience on the food market will, ceteris paribus, increase.

Fourthly, the demand for more leisure time reduces the time spent in the kitchen, which will also increase demand for more processed and “easy” food—and food convenience. The reduced time spent in the kitchen is a result of the supply of more processed food while it also stimulates demand for convenient food.

The time spent cooking in the kitchen has been studied by several sources. Figure 8.7 shows the long-term development from the UK.

Fig. 8.7

(Source Cawthray and Murphy [n.d.] and Kirkova [2013])

Time spent cooking dinner in the UK

The figure illustrates that the average time spent cooking dinner in the UK has decreased significantly in recent decades: From 100 minutes in 1960 to 27 minutes in 2016. The example from the UK reflects a rather clear global trend: With increasing income, citizens spend less time in kitchen—see Fig. 8.8.

Fig. 8.8

(Note All respondents = includes people not participating in cooking. Participants = Participating in cooking. GDP per capita in 2011. Source Own calculations based on OECD [2011] and statistical data from World Bank)

Average minutes spent cooking and washing up per day per person all survey respondents and respondents participating in cooking

The figures illustrate a very significant correlation and trend: People are spending less time cooking and are demanding more convenience.

Based on several inputs from many stakeholders, UBS (2018) asks the question: Is the kitchen dead? The authors present a likely scenario for 2030, when “most meals currently cooked at home are instead ordered online and delivered by either restaurants or central kitchens”. Ordering food online is considered to be part of a megatrend, and that global online food ordering will increase from $35 billion in 2018 to $365 in 2030—an annual growth of more than 20 percent.

So, what is driving this potential growth (UBS, 2018):

• Lower meal production costs thanks to economies of scale in mass production, large purchases, automation, etc.

• Improved logistics (drones and droids) will reduce costs further in the future.

• Demographic trends. Millennials are 3 times more likely to order take away than their parents. As this generation matures, home cooking may disappear altogether.

Catering is an indicator of food convenience, or catering can be described as a proxy or part of food convenience.

Catering can be defined as the business of providing food or food services for customers through, e.g., canteens, hotels, hospitals, aircrafts, companies, etc. This also indicates that food catering and food convenience are strongly connected.

Catering is a growing business in many countries. Although food demand is growing slowly, demand for food catering services is increasing relatively rapidly. Comparing households’ expenditures on catering with households’ expenditures on all food (including catering) reveals a long-term increasing market share for catering in developed countries, cf. Fig. 8.9.

Fig. 8.9

(Note For selected countries with available data. Total: Food, beverages and catering. Source Own presentation based on statistical data from OECD)

Households’ long-term expenditures: Catering as a share of total food expenditures for selected countries

The figure illustrates the increasing importance and market shares of food catering compared to the total demand for food including catering. Figure 8.9 only includes a few examples, but data from all developed countries (cf. Fig. 8.10) supports the assertion that demand for catering increases with increasing income. As can be seen, catering’s share of total food expenditures is increasing for households in several countries, cf. Fig. 8.10.

Fig. 8.10

(Note Total: Food, beverages and catering. Source Own presentation based on statistical data from OECD and World Bank)

Households’ expenditures: Catering as a share of total food expenditures as GDP per capita (2017)

8.5 Takeaway and Eating Out

Takeaway and eating out is a direct consequence of the increasing demand for convenience. As part of the wave of convenience and well-being and in line with the increasing participation in the labor force, an increasing proportion of consumption will take place outside the home.

Eating out is especially dependent on income and thus sensitive to economic conditions. Therefore, eating out will increase in parallel with economic growth.

Almost half of the food consumed in the USA, which is often a trend setter in this area, is consumed outside the home, see Fig. 8.11.

Fig. 8.11

(Note USA: Food consumed outside the home as a percentage of total food expenditure. Canada: Food purchased from restaurants as a percentage of total food consumption. U.K.: Eating out as a percentage of total expenditure on food and beverages. Denmark: Consumption in restaurants, canteens, etc., as a percentage of total food and beverage consumption. Source Author’s calculations based on statistical data from Department for Environment, Food & Rural Affairs [UK], Statistics Canada, Statistics Denmark and USDA)

Eating out as a percentage of the total

The figure illustrates the value of eating out as a percentage of total food consumption. The figure shows a clear international trend toward more eating out.

In the USA, USDA statistics tells that food consumed outside the home as a percentage of total food expenditure increased from 20 to 53 percent in the years 1930–2000. However, a similar but faster development is also currently emerging in several less developed countries. In urban China, total expenditure on food consumed outside the home increased from 10 to 23 percent between 1995 and 2006, cf. Fig. 8.12.

Fig. 8.12

(Source Own presentation based on FAO and The World Bank [2018])

Urban China: Eating out as a percentage of total food expenditure

Other middle-income countries have exhibited very similar growth in terms of eating out: In Egypt and India, the number of meals eaten outside the home almost doubled in less than 20 years (FAO & The World Bank, 2018).

Eating out and takeaway are two almost identical trends with the same drivers. In practice, it is also impossible to separate the two trends in terms of their extent and prevalence. For this reason, they are discussed together.

The convenience trend toward more takeaway, eating out and fast food is also evident when the number of outlets is mapped, cf. Fig. 8.13.

Fig. 8.13

(Source Own production and presentation based on ReferenceForBusiness [n.d.] and DMR [n.d.])

Global number of some fast food- and takeaway outlets

As the figure illustrates, growth has been significant in the time period with strong growth in the number of stores, outlets and coffee shops for the 4 selected companies all of whom are front runners in their business area.

Focusing on takeaway, information about consumer expenditure in the UK is used to illustrate the trends. The examples from the UK, more specifically London, are presented in Figs. 8.14 and 8.15.

Fig. 8.14

(Source Own presentation based on statistical data from Office for National Statistic [UK])

Household expenditure on takeaways in the UK

Fig. 8.15

(Source Own presentation based on statistical data from Office for National Statistic [UK])

Number of “take away food shops and mobile food stands” in London 2001 to 2020

Figure 8.14 illustrates a steady increase in household expenditure on takeaways. An average annual nominal increase of 8 percent from 2009 to 2016 is quite significant. The trend after 2016 is a future projection.

Furthermore, the number of “take away food shops and mobile food stands” in London is increasing significantly, thereby indicating a clear trend toward more takeaways (Fig. 8.15).

8.6 Household Size

The size of households is also an important—direct or indirect—parameter that has an impact on food markets and especially food demand. The composition of food demand is affected when the size of individual households changes in parallel with economic growth in a country.

Despite cultural differences, etc., a very strong correlation between economic development and household size can be observed. The global trend is driven by both economic growth and socio-economic factors.

One consequence of the increasingly small households—and more households with only one person—is that the demand for convenience, eating out, food service, catering, etc., increases. Therefore, the change in the size of households in the individual countries and in the individual markets is an important parameter in the market analysis performed by food companies.

Figure 8.16 illustrates the long-term trend in the share of households with only one person in selected countries.

Fig. 8.16

(Source UN [n.d.] and statistical data from Statistics Denmark)

Share of households with only one person

The trend toward more households with only one person is relatively clear and consistent. Such a development naturally occurs gradually, and no significant changes will occur in the short term.

Both geographical and age differences in the individual countries play a role: most households with only one person are located in the big cities and among older people.

Economic growth and economic welfare are important parameters in terms of the change in the size of households. This correlation is shown in Fig. 8.17.

Fig. 8.17

(Source Own calculations based on UN [n.d.] and statistical data from USDA)

Size of households during economic growth

The figure illustrates a decrease in the size of households with increasing income. Middle East (ME) countries are shown separately as cultural differences in these countries are supposed to have an influence on the change.

The figure also illustrates that the proportion of households with only one person is related to—and logically positively influenced by—the countries’ level of economic development.

The trend toward smaller households and more households with only one person will thus strengthen the existing development toward more convenience, food service, catering, etc.

The trend toward increasingly small households will also affect total food consumption. In a previous study, Deaton and Paxson (1998) found that per capita demand for food decreases with increasing household size. The increasing number of small households will thus—ceteris paribus—lead to an increase in food consumption.

Another characteristic of the change in household size and composition is that the proportion of three-generation households (households with three generations) falls with economic growth, cf. Fig. 8.18.

Fig. 8.18

(Note Three-generation households include households with three or more generations of related members. Exponential trendline included. Source Own calculations based on UN [n.d.] and statistical data from World Bank)

Share of three-generation households of total households during economic growth

As the figure suggests, the development is not linear, but rather asymptotic in relation to the X-axis. New examples from the USA, which lie far to the right of the figure, even indicate that there is an increasing trend. According to Pilkauskas (2018), the share of multigenerational households in the USA started to rise in the 1980s. The share of three-generation households increased from 4 to 9 percent from 1980 to 2015.

However, the overall development is smaller households and fewer three-generation households—a trend which will also affect the food market and demand and will further stimulate a trend toward more food convenience.

8.7 Female Labor Force

The food markets and the food value chain are affected by the fact that the proportion of women employed in the labor market outside the home increases in line with economic growth, which means that the demand for convenience, eating out, food service, catering, etc., increases. The reason is that an increasing number of meals are consumed at workplaces, etc., and that time spent in the kitchen at home declines.

The long-term change among the economically most developed countries illustrates a relatively clear trend: The number of women on the labor market increases in parallel with economic growth, cf. Fig. 8.19.

Fig. 8.19

(Note The calculation of the number of women in the workforce is not completely clear. Age, part-time and full-time employment, temporary unemployment, etc., may be decisive for the calculation methods. For a more detailed explanation, refer to the sources. Sources Ortiz-Ospina and Tzvetkova [2017] and statistical data from World Bank)

Long-term female labor force participation rates for selected countries

Economic development and welfare, on the one hand, and women's participation in the labor market, on the other, have a twin effect: When women play a greater role in the labor market, resources are freed up, which contributes to increasing overall economic welfare. At the same time, increasing economic welfare means that women’s opportunities to enter the labor market improve: High economic welfare also means, e.g., more public services, improved education, improved gender equality, etc. In this way, the development is self-reinforcing.

However, the trend toward more women in the labor market is not completely clear. As Fig. 8.19 illustrates, in recent years, the share of women in the labor market has stagnated. A possible explanation is that there may be a certain upper threshold in terms of women’s participation in the labor market, or that the economic development following the financial crisis may have had an impact.

In addition, the pattern looks somewhat different when all countries, including the least developed countries, are included in the analysis. In this case, women's participation in the labor market is highest in the poorest and in the richest countries, while it is lowest in the middle-income countries. The trend almost follows a “U” when labor market participation is plotted in relation to the countries' GDP per capita, cf. Fig. 8.20.

Fig. 8.20

(Source Own presentation based on statistical data from World Bank)

Participation in the labor force, 2018. Ratio of Females to males

The first figure illustrates the share of women in the labor force, while the second figure presents the share of women in the labor force as a percentage of the participation of men in the labor force. Both graphs indicate a U-shaped trend during increasing economic growth. When examining the group of countries with GDP per capita > approx. $7500, an upward trend emerges.

The conclusion is that the total number of women that participate in the workforce is influenced by economic, social and cultural factors, and the economic factor—income—may result in an increase or a decrease in the number of women participating.

8.8 Functional Foods

Functional foods (also known as nutraceuticals, food supplements or pharmafoods) are foods that have been developed or modified so that they have a scientifically documented beneficial effect on health. Therefore, foods are now playing more than just a nutritional role, cf. Fig. 8.21.

Fig. 8.21

(Source Own presentation)

Functional food: a combination of food and pharma

The ability to produce foods with beneficial health effects can be traced back several thousand years. Yogurt is an example of a food with such qualities. Japan has been a pioneer in developing and promoting the functional foods concept. According to Ichikawa (1994), functional food was supported by the Japanese government due to concerns about the country’s aging population and the associated costs for the healthcare system. However, functional foods have also become popular in Japan for cultural, historical and philosophical reasons.

Originating in Asia and Japan, the functional food wave has moved to the USA and subsequently Europe, albeit with a varying degree of success.

The following three examples of functional foods are often presented:

Probiotics are defined as live microorganisms—mostly bacteria—which confer health benefits.

Prebiotics promote the growth of bacteria that are beneficial to intestinal health and inhibit the growth of those that are potentially harmful in the large intestine.

Stanols and sterols are used to lower cholesterol levels.

Functional foods are considered to be the third generation of health foods:

The first generation started in the middle of the 1970s and consisted of healthy but also convenient foods such as fruit juice, yogurt, whole-meal bread.

The second generation came in the middle of the 1980s and was based on the concept of low-fat and low-sugar foods.

The third generation represents proper functional foods, which emerged partly as a result of technological progress within food science and partly thanks to consumer demand for foods that were beneficial to health.

One of the advantages of functional foods from a producer’s point of view is that it is now easier to differentiate the products and to add new features. New characteristics can be added to the foods, which makes them unique compared to other products on the market. The result is less price-elastic demand, which may increase both revenue and profit.

The market for functional foods is growing rapidly and in line with increasing income. Various sources have estimated and predicted the market growth:

Chrzan (2019) estimates that the global nutraceutical market will increase from $241 billion in 2019 to $373 billion in 2025, which equates to an annual average growth of 11.7 percent.

Food supplements, which are considered a subset of functional foods, also exhibit significant growth rates according to annual surveys by the Nutrition Business Journal, cf. Fig. 8.22.

Fig. 8.22

(Source Nutrition Business Journal [several issues])

Global market revenue for food supplements, 2008–2020

Annual surveys from Asia, which in general has been home to pioneers in functional foods, still reveal high growth rates. In Korea, the number of companies in the functional food sector and total sales of functional foods are increasing significantly, cf. Fig. 8.23.

Fig. 8.23

(Source Ministry of Food and Drug Safety of South Korea [2021])

Functional foods in Korea: Companies and sales

During the selected time period, total sales of functional foods on the domestic and export markets increased by, on average, 11 percent per year in Korea. Compared to total food sales, the growth rate for functional foods is significantly higher. During the same period (2005–2019), the average annual increase in expenditure on food and non-alcoholic beverages in Korea was 2 percent, so functional food is definitely a high-growth segment, which is exhibiting a rather consistent trend.

Exports account for around 5 percent of total sales, which is a remarkably high share: Korea is a significant net importer of agricultural and food products, so an export ratio of 5 percent may indicate a comparative advantage within functional foods.

The future supply and demand of functional foods is stimulated or hindered by several conditions:

• Consumer preferences for health, a healthy lifestyle, etc., will lead to increasing demand for functional foods.

• An aging population, which means that measures to ensure a healthy and active old age such as functional food are becoming more important.

• New technology and innovation will drive the market for functional foods. Enzyme technology is a potential driver of new food products that improve the health of consumers.

• Increasing health problems such as obesity and chronic lifestyle diseases resulting from the consumption of an increasing amount of processed foods, high-calorie ready meals, soft drinks and unhealthy snacks. This trend increases the demand for foods that may help to reduce weight. Low-fat products are regarded as a sub-category of functional foods (Tudoran et al., 2012).

• Food legislation to protect consumers from misleading health claims about the benefits of functional foods, which are often made, may be an important obstacle to the increasing consumption of functional foods.

8.9 Vegans, Vegetarians and Flexitarians

There is no doubt that vegans, vegetarians and flexitarians belong to a rapidly growing population group in large parts of the world. Lifestyle, ethics, health, religion and animal welfare are among the driving forces that are pushing this change. For several reasons, it is difficult to identify the extent of these consumer trends: the segments are not clearly defined and there are several subgroups. Box 8.1 presents some definitions and delimitations.

Box 8.1 Vegans, vegetarians, flexitarians and pescatarians: definitions

Vegetarians:

Vegetarians do not eat animal meat products such as beef, pork, lamb, fish or poultry. This can also include not eating animal by-products that are processed into food. Health, ethical, religious, economic and environmental reasons are typically behind the choice to become a vegetarian.

There are several sub-types of vegetarians:

• Lacto-ovo-vegetarians exclude meat but they include eggs and dairy products.

• Lacto-vegetarians exclude meat, fish and eggs but they include dairy products.

• Ovo-vegetarians exclude meat, fish and dairy products but include eggs

Vegans:

Vegans do not consume red meat, fish, poultry, eggs, dairy products, insects, or any other animal by-products such as honey, rennet, gelatin, collagen or other types of animal protein and fats derived from animals. Veganism as an ideology and concept includes more than just the consumption of animal products. Ideally, vegans also avoid any product that directly or indirectly involves the human exploitation of animals including leather goods, wool, silk, beeswax, cosmetics tested on animals, latex products that contain casein etc.

Flexitarians:

Flexitarians (semi-vegetarians or demi-vegetarians) mostly eat plant food, but occasionally eat meat. There is no clear definition as to how much meat a flexitarian can eat during the week. Health, animal welfare, and environmental reasons are typically behind the choice to become a flexitarian.

Pescatarian:

Pescatarians do not consume any kind of meat except fish. A pescatarian is like a vegetarian except they also eat fish and other seafood such as shrimps, mussels, salmon, crabs and lobsters.

In addition, there is a number of minor and more or less associated consumer segments based on political or ideological attitudes. A group of consumers prefers unprocessed or less processed food attempting to obtain a more simplistic or a healthier lifestyle. Another segment searches for originality in an attempt to get back to basics.

Source Based on McRae (2019)

The segment “flexitarians” in particular is difficult to quantify as the definitions are imprecise and fluid. The foods cannot be directly linked to the individual segments either as plant-based foods are consumed by all types of consumers—more or less. If the size and development of the market is to be quantified, it is necessary to start by examining the consumers rather than the products.

Several authors have attempted to estimate the size of the vegan/vegetarian consumer segment. According to Euromonitor International (2020), consumers following strict vegan or vegetarian diets represent a small group of the population, whereas those restricting their intake of animal-based foods accounted for over 40 percent of global consumers in 2020, which indicates that flexitarians are driving the plant-based trend.

Buchholz (2022a) notes that vegetarianism is increasing gradually in several developed economies around the world such as Europe and the USA. However, vegetarianism is in decline in other parts of the world, e.g., India, where traditional vegetarian diets are being increasingly substituted by an omnivorous approach to eating. While in 2018/19, around a third of urban Indians said they were vegetarians, only about a quarter gave the same answer in 2021/22. Vegetarianism is also declining in China.

Figure 8.24 presents the change in the number of vegetarians in selected countries as a function of the average income per capita.

Fig. 8.24

(Note Change in percent points. Source Own presentation based on Buchholz (2022a, 2022b])

Change in number of respondents who said they followed a vegetarian diet (2018/19–2021/22)

The figure illustrates a fairly clear correlation: Relatively few vegetarians in low-income countries and a relatively high number in high-income countries.

In several low-income or middle-income countries, increasing income will mean increasing demand for animal-based food. Demand for such products is income elastic in these countries. Consuming animal-based food is a welfare good.

In high-income countries, the demand for plant-based food is increasing due to other driving forces such as lifestyle, health, animal welfare and climate considerations. Different drivers in countries with varying levels of income lead to diverse demand patterns.

8.10 Responsible Consumption and the Political Consumer

Responsible consumption means that buyers (private individuals, public institutions or private companies) of both goods and services make decisions regarding their consumption that take into account the impacts on the environment. The profile of responsible consumption has increased recently as it is one of the UN’s Sustainable Development Goals (SDGs). SDG 12 is titled “responsible consumption and production”, and food plays an important role in this connection. The FAO (2011) supports SDG 12 by highlighting the fact that food loss and food waste are responsible for a major share of global greenhouse gas emissions.

Political consumerism refers to the deliberate purchase or avoidance of products, goods or services for political reasons. A political consumer is characterized by having specific consumer preferences that are not directly related to the fulfillment of basic personal needs.

A political consumer expresses conscious attitudes or values which are socially oriented when choosing producers or products. Demand is often based on the consumer’s political position. In the 1980s and 1990s, the typical political consumer was left-wing, well-educated and had very clear opinions and attitudes on many issues. Subsequently, political consumers have become more broadly represented in terms of political beliefs and social classes. Political consumption was first recognized as a form of political participation in the mid-1990s in connection with the Brent Spar campaign against Shell.

According to Micheletti and Boström (2014), there are four types of political consumerism:

Boycotts (or negative shopping decisions) are defined as a deliberate choice not to purchase a commodity, brand, or even a good from a particular country.

Buycott (or positive purchasing decisions) is the practice of deliberately purchasing certain goods over others. The goods are typically preferred because they are more environmentally friendly, ethically superior, etc. Buycotted goods may also be preferred because of better conditions for workers or because they are healthier.

Discursive political consumerism does not directly include consumption but is more an attempt to influence public opinion.

Finally, lifestyle politics is defined by de Moor (2017) as “the politicization of everyday life, including ethical, moral or politically inspired decisions”. Lifestyle politics means that everyday decisions are considered political statements. Vegans may fall into this category. Downsizers (buying less, used goods and green products) and freegans (collecting food waste from waste containers, etc.) may belong to this category. Freegans are often critical of the conventional food sector.

There are several examples of political consumerism in relation to the food sector including:

• The consumer boycott of French goods, especially wine, in protest against French nuclear testing.

• In 2005, a Danish newspaper published 12 cartoons of the Prophet Muhammad, which led to strong reactions within Islamic countries followed by a boycott in most Arab countries to which Denmark had significant exports of mainly dairy products, but also meat and other products.

• Animal welfare: Consumers actively boycotting (negative shopping decisions) products due to poor animal welfare, e.g., cage eggs, fur garments, etc., which is a global phenomenon.

• Preferences for organic food are driven by considerations regarding the environment, animal welfare and health.

• Climate change has created a whole new segment of political consumerism. People are changing their consumption habits and preferences in order to reduce their climate impact. Demand for oat milk, soy milk and in general more plant-based food and less animal-based food are examples of political consumerism resulting from climate change.

Several factors indicate that the prevalence of responsible consumption and the political consumer will increase in the future, although the number of empirical and international studies is limited:

Precise comparisons between countries are difficult as the motives, scope and significance may vary greatly between countries and cases. In addition, it is difficult to quantify and calculate political consumerism. Calculation may be based on people’s perceptions of and attitudes toward companies, products or countries, but this always involves a certain degree of uncertainty.

Despite these difficulties, Copeland and Boulianne (2022) have collected and compared data, which is included in Fig. 8.25, from various studies.

Fig. 8.25

Prevalence of political consumerism in selected countries/regions and level of income (Source Own presentation based on Copeland and Boulianne [2022] and statistical data from World Bank)

The figure includes data on various forms of political consumerism as a percent of total population.

The prevalence of political consumerism is presented in relation to the countries’ average income per capita. As can be seen, there is a clear correlation between political consumerism and income per capita. With increasing income, increasing political consumerism can be expected.

This is also in line with the analysis by Copeland and Boulianne (2022), who find that high income and high education are associated with increased participation in political consumerism.

Animal welfare is one of the issues behind political consumerism. The authors of a study on animal welfare labelling in Europe mapped and assessed consumers’ awareness of animal welfare standards and their demand for additional information (European Commission, 2022). Data from this mapping can be used to indicate a possible trend regarding political consumerism, assuming that the level of awareness is correlated with—or is a proxy for—political consumerism. As Fig. 8.26 illustrates, the average level of awareness across member states is correlated with the countries' income per capita.

Fig. 8.26

(Source Own presentation based on European Commission [2022] and statistical data from World Bank)

Average level of awareness of animal farming practices in EU member states (score out of 11)

As can be seen, the level of awareness of animal welfare standards increases with increasing income. Assuming that, in general, incomes and economic welfare will increase in the world, interest in political consumerism can also be expected to increase.

Finally, several additional indicators also suggest that political consumerism is on the increase globally and can be considered a megatrend: Corporate Social Responsibility (CSR) is increasing in importance and is a proxy for political consumerism. Furthermore, the stakeholder value trend is also in a parallel context and development with political consumerism.

8.11 Differentiation and Segmentation

At the global level, the nature of the food industry is changing as it is moving away from mass production and mass marketing toward greater segmentation and an orientation toward niche markets.

Differentiation (or product differentiation) involves distinguishing a product or service from the others on the market. By differentiating their products, companies can offer something which is different to the other products or services and which is more attractive to a particular target market.

Segmentation (or market segmentation) involves dividing the marketplace into smaller categories, or segments, which are definable, homogeneous and share similar characteristics.

The principle behind increased differentiation and segmentation in the agri-food value chain is outlined in Fig. 8.27.

Fig. 8.27

(Source Own production)

From mass production to segmentation in the agri-food value chain

As the figure illustrates, several individual consumer segments are identified. The raw material basis is basically the same, but in order to be able to separate the segments and differentiate the products down to the consumer level, the raw materials must also be differentiated to a certain extent.

The potential benefits of differentiation and segmentation are not unlimited, and the trend is also limited in scope. Endless growth is by no means guaranteed as the following prerequisites must be met:

• Real demand and a market must exist for the differentiated product or it must be possible to create them, while a willingness to pay for the product among consumers must also be present.

• The processing and logistics functions must be able to manage and separate the products, which may require a larger setup including traceability and control.

• Market access is also a crucial prerequisite. Some supermarkets may prefer to limit the assortment or to protect their own private labels, and thereby limiting access to new or more differentiated products.

• It must be possible to differentiate the raw materials, so that there are documentable differences.

The scope and meaning of differentiation and segmentation change over time. We are currently in a period of increasing differentiation and segmentation, but the development in the past was characterized by phases or waves:

In the first phase—until around the 1970s—production was locally oriented. Local or national markets were limited and opportunities for economies of scale were also relatively limited. Food was primarily produced for and distributed to segments in close proximity to the site of production.

In the next wave, local production and local markets were replaced by mass-produced products for mass markets. This shift was driven by increasing globalization, which included the expansion of national retail stores, efficient global value chains and generally increasing international trade, as well as the utilization of economies of scale and the international spread of mass media. Offshoring and outsourcing also often requires some degree of standardization and mass production to secure the full benefits. Mass production means that companies decide to ignore differences in market segments and target the entire market with one product.

In the third wave, which has been especially widespread in this century, mass production and mass markets have gradually been replaced by, or supplemented by, differentiation, niches and segmentation. Unlike previously, segmentation can now be cross-border. New technology has made it possible and relatively inexpensive to produce small quantities, while production equipment has become more flexible, so that it can meet specific requirements. At the same time, many additional individual consumer preferences have emerged, while the mainstream preference has declined in importance. Consumers are demanding niche brands and products that meet their distinct personal, cultural and situational requirements, thereby solving personal needs. Consumers will pay a higher price for products that have been created specifically for them.

The increase in differentiation and segmentation and the underlying driving forces are outlined in Fig. 8.28.

Fig. 8.28

(Source Own presentation)

Differentiation and segmentation: trends and drivers

When companies pursue a differentiation and segmentation strategy, the aim is often to move from a market with strong price competition, cannibalism and relatively low market growth to a market with reduced price sensitivity and price competition, higher market growth and reduced mass marketing. This means that a company aims to move from an existing red ocean market, which is characterized by many competitors, to a blue ocean market with no competitors via what is known as a Blue Ocean Strategy.

The aim of the Blue Ocean Strategy is to make the company unique on the market (Kim & Mauborgne, 2005). Instead of focusing on the traditional competitive parameters such as price, Blue Ocean companies seek to create market advantages through creativity and innovation, so that they become a "big fish in a small pond".

The Blue Ocean Strategy may be a source of significant inspiration for many food companies as agricultural and food products often belong to a homogeneous group, where product differentiation and innovation is limited and price is an important competitive parameter.

Such strategic shifts from mass production to differentiation and segmentation are difficult to quantify, although examples can be used to illustrate the development:

The market for specialty beer, which is basically differentiated beer, has increased very significantly in recent years, and clear global trends can be identified. As an example, Fig. 8.29 presents the number of new Danish beers launched on the Danish market since the beginning of the 2000s.

Fig. 8.29

(Sources Own presentations based on information from Danish Brewers’ Association)

Number of new Danish beers launched in Denmark, 2000–2023

Furthermore, the number of microbreweries has also been increasing for a long time, cf. Fig. 8.30.

Fig. 8.30

(Sources Own presentations based on The Brewers of Europe [n.d.] and Brewers Association [n.d.])

Number of breweries in Europe, EU-28 and the USA

The changes witnessed in the brewing sector in recent years are very different from the general trend, which is characterized by consolidation and thus fewer companies. The increase can only be explained by the establishment of new microbreweries.

The competitiveness of microbreweries is closely linked to their production of specialty beer. From the beginning, specialty beer was considered to be differentiated because both the product and the brewery were different. The beer was not mainstream, and it was typically produced by a microbrewery with an alternative narrative.

8.12 Discount

Consumers' preference for cheap food manifests itself in several ways. For example, the growing prevalence of discount stores is a clear result of consumers' price awareness and demand for cheap food.

A discount store is simply a store that sells products at lower prices than normal. Furthermore the range of products offered, the level of service, the shopping experience, location, etc., also differ to that offered by more traditional retail outlets. However, in recent decades, the difference between discount stores and other retail stores has decreased. Discount stores may have widened their range and upgraded their store facilities.

The long-term trend toward an increase in the number of discount stores began to gain traction in the 1990s, especially in Germany with the Aldi and Lidl brands. The winning formula back then was to offer low prices on a targeted range of mostly private label products. During and after the financial crisis in 2008, discount stores again gained momentum.

Once the financial crisis and economic recessions were over and purchasing power had increased, the demand for food became less price elastic, which meant that discount stores’ market share was under threat. Their response was to upgrade their stores with a broader range of products of higher quality and improve the shopping experience. The previous hard discount philosophy was in many cases redefined without reducing the price difference.

The result was that, in the 2000s, discount stores gained significant market shares in many Western countries, cf. Fig. 8.31.

Fig. 8.31

(Source Own presentation based on information from Boston Consulting Group [BCG])

Market shares for discount stores 2000 and 2015 in selected countries

The figure illustrates significant increases in market shares during the period. However, there are large differences between the countries, and both waves and trends characterize the changes in this period.

The longer-term trends and waves are made clarified in Fig. 8.32.

Fig. 8.32

(Note 4. order polynomial trend curve included. Source Own presentation based on information from Boston Consulting Group [BCG])

Market shares for discount stores in 2000 and 2015 in selected countries

The figure presents market shares for discount stores in several countries, which are positioned in relation to the share (percent) of total square footage of sales area controlled by discounters. The countries can be divided into three groups: nascent, expanding and mature.

In some countries, the market share is 40–50 percent, and here the markets are apparently saturated. Other countries are in a phase of expansion with a rapidly increasing market share. Finally, there is a group in which the market share is relatively small—typically below 15 percent. In this group, the probability of expansion in the future is high assuming that the normal global pattern is followed.

From 2015 onwards, the development seems to continue. While there are large differences in the growth rates between countries and between continents, discount stores are increasing their global market share (Hodgson, 2019). The continued growth of discount stores is presented in Fig. 8.33.

Fig. 8.33

(Note CAGR: Compound annual growth rate. Source Own calculations based on Deloitte [several issues])

FY2015–2020 retail revenue CAGR among 250 largest retail stores in the world

Figure 8.33 is based on data from the world's top 250 retailers of which approx. 90 are termed super/hypermarkets and 20 are discount stores. The figure shows that the average annual growth between 2015 and 2020 was almost twice as high for discount stores as it was for super/hypermarkets. Discount stores' relatively rapid growth and increasing market share has occurred in a period of relatively favorable economic conditions. This suggests that purchasing power and economic conditions are not the only driving forces behind the growth of discount stores.