Behind the boom: Trends driving Europe’s future ingredients market
The $335.3bn global food ingredients market is expected to boom in the years to 2027, with the Middle East and Africa hitting the highest CAGR of 5.1%, followed by Asia Pacific (+3.9%), Latin America (+2.6%) and then Australasia (+2%).
Eastern and Western Europe would grow at 1.8% and 1% respectively, and North America at 0.6%.
Categories with the highest growth trajectories include carotenoids (+26.5%), phytoestrogens (+18.1%) and enzyme stabilisers (+16.1%), says Oghma Partners European Food Ingredients Market and MA Overview report.
Leading the key food ingredients trends was an increasing consumer desire for more functional foods, even in treat and indulgent products. Reducing sugar and calories and promoting health in other areas of life – including environmental – were also among the top trends set to drive up various ingredients sales.
Seven key trends are driving food ingredients growth:Functional ingredients – sugar-reducing, but clean ingredients are top consumer desiresSustainability – reducing food waste and regenerative agriculture are key wantsProactive health – products containing prebiotics, adaptogens and botanicals are winningValue engineering – fortified foods are the new premium productsGlobal tastes – flavours from Korea, Asia and India are rising in interestPlant-based products – mock meats are out and authenticity is inFunctional indulgence – high protein, low sugar and essential vitamins are winning“Formulators in the food and beverage industry face increasing challenges in meeting evolving consumer demands,” says partner at Oghma Partners, Mark Lynch.
“The global economic environment, paired with shifting preferences towards functional benefits, clean-label claims, and sustainability, requires companies to adapt quickly.”
To see growth, suppliers and formulators must navigate the complexities of reformulating products, while maintaining optimised value and staying attuned to consumer needs, he says.
Many already large food and drink ingredient segments, such as fats and oils, flours and sweeteners, would continue to build sales volumes in the years ahead. Smaller, new and emerging segments would also see solid gains, showing there is little room for decline across many segments.
Which food ingredients categories will grow most? Ingredient
2020 market vol (‘000t)
2020-27 % growth
Acidulants
301.3
7.5
Antimicrobials
33.2
7.6
Botanicals
324.4
12.2
Carotenoids
1.3
26.5
Cultures
419.8
7.7
Emulsifiers and co-emulsifiers
445.6
7.2
Enzymes
37.8
8.2
Enzyme stabilisers
23.3
16.1
Humectants
356.7
7.1
Phytoestrogens
0.0
18.1
Preservatives/Antioxidants
110.4
5.8
Proteins
878.9
7.5
Thickeners/Structurants
30.4
4.3
Colours
191.6
11.4
Flavours
240
7.8
Flavour enhancers
99.6
8.2
Minerals
63
9.2
Modified flour
238.6
7.5
pH control/Salts
2,481.4
6
Polysaccharides and Oligosaccharides
1,061.7
7.9
Raising agents
1,268.8
3.1
Reducing agents
1.8
7.2
Vitamins and Derivatives
27.3
11.9
Cocoa liquor
587.5
6.7
Sweeteners
19,630.3
7.4
Cocoa powder
271.9
4.9
Fats and Oils
19,630.3
7.4
Flours
46,363.2
5
Milk
64,341.1
2.5
Commodities
316,494.7
11.3
These sales gains, however, won’t be limited to a small number of companies but will be distributed across a large and fragmented market.
The report highlights leading companies with sales over £750m, including ADM, AAK, Cargill, and Ingredion. Mid-sized players, with sales under £400m, include Treatt, Ceamssa, and Palsgaard, while smaller companies like Bionap, ITS, and BDF fall under the £30m mark.
Global ingredients companies landscape. Source/Oghma PartnersThe fractured nature of the market, though, was creating significant M&A opportunities for big M&A activity in the years to 2027, claims the report.
Between 2019 and last year, 236 transactions occurred at a combined value of £70.2bn, with 2021–2023 showing the highest volume at over 50 transactions each. This year already, transactions are predicted to shoot past the reporting period’s high of 52 in a single year, coming close to 60.
“The fragmented nature of the ingredients market, where speciality players coexist with commodity processors, creates opportunities for consolidation,” says Lynch.
Food ingredients M&A activity“Larger companies continue to acquire smaller, innovative firms offering natural, sustainable products to align with market demands,” he continues.
The trend was reinforced by M&A activity, especially within Europe, which was driven by the need for geographic growth and enhanced sustainability practices.
Europe’s food ingredients M&A activity focused mostly on businesses worth between £1m – £50m. Though some transactions in the past six years exceeded the £1bn mark.
European food ingredients M&A activity. Source/Oghma Partners“Despite recent dips in market valuations, Oghma Partners anticipates stabilisation as the earnings outlook improves, reflecting a renewed confidence in the future of this dynamic industry,” says Lynch.
European food ingredients business M&A activity focused mostly on expanding distribution, with many acquisitions allowing companies to reach new markets through logistical buyouts.
Notable distribution acquisitions for the period included Cinven and Barentz, Dairygold and Vita, and Acomo and Tradin Organic.
However, additives was a close second and accounted for near 17% of deal volume between 2019 and the year to date.
Biggest ingredients companies M&A activityBig additives transactions included DSM and Vestkorn, Kerry and Pevesa Biotech, and Bene and Meatless.
Blends and flavours also tracked highly at a joint 9.3% of M&A activity, down mostly to the fact the market remains one of the more fragmented within the industry.
ADM’s acquisition of FDL was a notable flavours acquisition, as was THG’s Claremont takeover.
Companies prolific in the M&A space include Orkla at 14, Solina at eight and Nactarome at eight. The larger players, such as DSM, Kerry, AAK and ADM completed on between three and five acquisitions for the 2019–2024 period.
The market would continue to remain lively as businesses continue to buy their way into opportunities and fill gaps within their portfolios or structures.
