The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios, Rabobank, México
14 - 18 de Abril de 2008

The World

Eating while meeting a shrinking budget. With consumers feeling the effects of both higher food prices and a slowdown in economic growth we are seeing changes taking place in the way consumers spend on food and eating. According to a study by the NPD Group, consumers in the United States, in general terms, have changed their spending and eating habits along the following three lines: 1) preparing more meals at home; 2) “use up leftovers; and 3) stocking up when items are on sale.” As consumers prepare more meals at home the restaurant industry is reporting that organic growth in the U.S. was flat last year.

This shouldn’t come as much of a surprise since estimates have the cost of meals prepared at home at least a third less expensive than the cost of a meal outside the home. While costs are a key concern, consumers are also saying that “eating healthy is another reason to prepare their own meals.” Consumers are not only changing the place where they eat, i.e. eating at home, but also where they buy their food. There is a movement towards favoring purchases at discount retailers. We expect that as budget restraints are relaxed consumers will move back to eating out and buying prepared meals. Consumers, however, will tend to continue to shop more at discount retailers.

Merging to take on the big boys. One of the reasons that are becoming more important for considering a merger or acquisition is to see it as a strategic move in a consolidating and increasingly global market, especially when organic growth alone isn’t enough. That, according to the parties involved, is the reason that Royal FrieslandFoods and Campina gave for their recently announced merger. Apparently the specific catalyst for the merger was “last year’s takeover of Dutch Numico by French Danone.” The new €9 billion company, which will be called FrieslandCampina, will be able to compete aggressively on a global scale. They want to strengthen their participation in the health and wellness segment in the European market and enter that segment in Asia. Into the future they foresee “further consolidation in the European sector and [they] want to be well positioned”. Being well positioned, does not only mean being happy with what they have now, but also being positioned to look for more joint ventures and acquisitions to continue to grow the business.

Mexico

Rethinking downward the economy. Last week we were talking about the decision by Mexico’s leading businessmen to invest 23.7 billion dollars this year in an effort to stimulate the economy. Apparently this didn’t convenience the International Monetary Fund. Towards the end of last week the IMF lowered their projection for GDP growth to 2%, with inflation at 3.8%. This is in line with Rabobank’s projections for the Mexican economy this year, which were presented earlier this year. Essentially the revised GDP projection is related to their downbeat view of the U.S. economy, which the IMF projects will grow by 0.5% this year and only grow by 0.6% in 2009. Their outlook for 2008 places economic growth in Mexico below the 4.4% overall growth for Latin America. Looking to 2009, they are projecting only a modest increase in economic activity for Mexico, with the GDP projected to expand by 2.3%.