• Global sugar volumes hold despite obesity concerns, however commodity prices fall sharply

• Natural claims become more prominent in condiment and seasoning categories

• Kraft-Heinz post-merger focus on supply-side costs and have yet to significantly impact consumer markets

Though the rising body of evidence that links sugar consumption to obesity is impacting many retail markets, table-top sugar and sweetener volumes are largely holding up, at least at a global level.

Regionally, there are distinct trends emerging; North and Latin American markets are in decline, many European markets are either largely static or in slight decline, while Asian and African markets are largely responsible for holding market volumes.

However, the issue for sweetener consumption in Western markets isn’t just limited to sugar. A drive for naturalness, particularly among under-35s, is also impacting alternative sweetener markets, with ingredients such as saccharin, sucralose and aspartame struggling at the expense of “natural” sugar substitutes such as agave, stevia and (in markets where it is approved for retail sale) monk-fruit.

Another key issue for sugar markets has been the continued decline of commodity sugar prices. Exceptionally low oil prices have reduced demand for bio-fuels, encouraging the largest global producer of cane, Brazil, to switch processing from fuels to sugar. Falling commodity prices have been a trend since mid-2011, when according to Index Mundi, the market peaked at just under $30 / tonne. Prices dropped as low as $10.67 / tonne in August 2015, the lowest price since the end of 2007 though there has been a slight rally towards the end of the year, with prices buoyed slightly by the extension of the European quota system to 2017. However, the extension of the EU27 quota is likely to only delay market uncertainty for the short to mid-term.

Figure 1: Global Market Performance, Retail Sugar and Sweeteners

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Source: Economist Intelligence Unit; Statistics Canada; Canadian Sugar Institute; U. S. Department of Agriculture; National Bureau of Statistics of China; IndexMundi; Information Resources, Inc; Badan Pusat Statistik Republik Indonesia (Statistics Indonesia); Ministry of Agriculture Republic of Indonesia; ISMEA; The Nielsen Company; IAFE-NRI; Statistics South Africa; South African Sugar Association; Zafranet; Mintel

Note: The size of each bubble represents the respective size of the market in volume

For condiments and table sauces, the picture is much stronger. The majority of global markets continue to show volume growth and it is estimated that 2015 will have delivered a net 3% market growth across 32 major markets, continuing the pattern of the last five years. (Note significant currency fluctuations prevent an accurate assessment of the global value performance).

In volume terms, the emerging markets of Asia, and to some extent Latin America, continue to be the main engines of growth, most notably China and Vietnam. Across emerging markets in general, demand for condiments of all sorts is fuelled by the increasing demand for packaged foods from the rising number of middle class consumers.

Though few table sauces are likely to be considered inherently healthy they are used in relatively small quantities such that few consumers have significant health concerns. That said, one of the most notable trends for sauces has been the continued focus on purity and naturalness, with claims such as no additives, low allergen and organic featuring prominently in many markets.

The most notable industry issue in 2015 was the completion of the Kraft-Heinz merger, making the new company by far the dominant player in the US and also opening routes for expansion for many of their key brands globally. At present, most of the companies’ activity post-merger has focussed on cost cutting, streamlining operations and ensuring their marketing and sales operations are more efficient. The hard focus on cost reduction is likely to be a key theme for Kraft-Heinz and their competitors throughout 2016, and it is yet to see what the long-term impact on consumer markets will be.

In terms of innovation, Unilever still remain the most active condiment supplier globally, accounting for roughly one in 20 of all condiment launches, though they are now strongly challenged by Kraft-Heinz in many markets.

Figure 2: Global Market Performance, Table Sauces

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Source: Economist Intelligence Unit; Statistics Canada; Information Resources, Inc.; Destatis; Ministry of Internal Affairs and Communications of Japan; INEGI; The Nielsen Company; Detal Dzisiaj; Intesco Research Group; Business Statistics; The Ministry of Agriculture, Food and Environment of Spain (MAGRAMA); InfoScanCensusTM; IRI España; Publicaciones Alimarket, S.A.; Bureau of Labor Statistics; U.S. Department of Agriculture; General Statistics Office (GSO); Office of the Economic Advisor- Ministry of Commerce & Industry, Government of India; Mintel

Note: The size of each bubble represents the respective size of the market in volume

While the performance of the global seasonings market is difficult to quantify due to the large amount of spices and herbs sold loose in many markets, an estimate of the relative health of the category can be gleaned from the amount of innovation activity undertaken. Globally, 2015 saw a 6% increase in the number of retail seasoning launches compared to 2014, suggesting a market in good health, with all regions showing increases in activity levels. However, it should be noted the rate of increase is slightly lower than the 9% growth between 2013-14.

As with table sauces and sweeteners one of the most notable traits for many new launches has been the focus on reassuring consumers over purity and naturalness, with no preservative and organic claims featuring prominently.

The category had its share of issues in 2015. Quality issues with Indian seasoning exports were raised by the USDA, and the category has been rocked twice this year by product substitution issues, most notable of which has been an issue over ingredient substitution in oregano mixes following poor 2015 harvests. As yet, there doesn’t appear to have been a significant consumer reaction to these issues.

In terms of market activity, McCormick’s have made a number of notable global acquisitions throughout 2015 and are likely to continue their global expansion in the next year. McCormick’s have also indicated the growing importance of natural credentials, particularly in the US be stating that in 2016 70% of their US branded seasonings range will carry GMO-free labelling.

* Please note: the market size data referenced in this report is current as of January 31, 2016