The economic principle of demand and supply does not seem to work as simple as it sounds in our global food market. In the world of “income/expenditure divide”, the question is really an issue on how much one can afford! While the developing countries are spending over two thirds of their income on food, affluent countries are using only around 10% of their income on the same category. This income/expenditure divide phenomena, which leads to different spending patterns, is expected to continue in the next 2 decades.
When expressed in terms of absolute terms, the difference in per capita food consumption is as far as 15 times! A typical Indian spends US$200 per year while Western European spends US$3,000 per year on food. As affluence increases, the spending patterns changes. Food demand of a market also reflects the combined effects of growth in GDP as well as population size.
The rate of growth in global population is expected to decrease steadily with declining birth rates and death rates. This is particularly truth in affluent regions where population size is actually shrinking. In the next 20 years, majority of population growth will be found in developing countries. Demand for food, in terms of quantities, is therefore more severe in developing countries. Nevertheless, projected economic growth of these markets tends to be stronger than mature older markets. This therefore allows developing countries more spending choices on food.
On the other hand, any increase in household income of affluent market will only have a small marginal impact (if any) on their Per capita food expenditure (in terms of percentage change). These people are already able to afford all the food of the quality they need. As such an increase in household income is either saved or spent on more discretionary categories. What these markets call for is qualities rather than quantities.
Our latest report – Global Food Demand – provides detailed information on the pattern and growth of income and Food expenditure by households across 71 countries. Please refer to our web site for more information on this report.
