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Food and beverage market holds its own in economic crisis
In the North American food and beverage market, Shanahan showed how extreme factors in 2008 both negatively and positively affected the food and beverage industry. Among these factors in early 2008 were: an “exponential increase in commodity and energy prices,” increasing biofuel production, depreciation of the US dollar, increasing demand from emerging markets, squeezed margins and inflated valuations of acquisition targets. End-of-year 2008 saw “exponential decrease in commodity and energy prices,” easing of margin pressures, a more realistic valuation of take-over targets, continued depreciation of the US dollar and restricted R&D and marketing investments.
This year, Shanahan predicted continued, but lower, price inflation rates for energy and other commodities, decreased dependence on biofuels, increased aggressive food pricing strategies to gain market share, continuation of interest in health and wellness and an increased focus on cost-saving strategies among businesses and consumers. As of December 2008, the commodity food and price beverage index fell back to 2007 levels, reflecting a sharp decrease in the cost of ingredients, and is expected to remain low for some time.
As valuation of companies becomes more realistic, those processors with ready cash will be able to acquire other companies more easily. In addition, processors are expected to benefit from lower transportation costs brought on by increased government spending on infrastructure after the 2009 economic stimulus bill is passed. Shanahan also suggested that processors are concentrating their efforts on core products and establishing key supplier partnerships to provide combined, branded foods.
“Growth in specialty food and beverage categories may be constrained as the average consumer’s food budget shrinks,” said Shanahan. “However, the demand for products with enhanced health and wellness benefits is expected to remain in place. The primary change will be that consumers are going to maintain their health and wellness goals by clipping more coupons and choosing more store or private label brand alternatives,” he added.
While organic food market growth is expected to flatten, comfort foods will be bolstered by a 13.6 % increase in SNAP benefits (previously known as food stamps), and processors’ aggressive pricing strategies will keep basic foods within consumers’ reach. In addition, consumers still want convenient and easy-to-prepare meals. Health and wellness awareness will drive demand for functional food ingredients such as Omega 3 fatty acids, and alternative delivery formats of dietary supplements, such as in fruit juices and yogurts, said Shanahan.
FDA limited in dietary supplement/food regulation
Since earlier GAO reports, FDA published a draft guidance on requirements for reporting adverse events (harmful effects or illnesses) and current good manufacturing practice regulations for dietary supplements. Mandatory reporting went into effect on December 22, 2007. Although FDA has seen a three-fold increase in reports-948 adverse reports filed from January through October 2008 compared to 298 in the same period in 2007-GAO believes underreporting still is a concern. FDA plans further actions to facilitate adverse event reporting.
According to GAO, FDA has taken some steps to identify and act upon dietary supplement safety concerns. However, FDA has limited information on the number and location of dietary supplement firms, types of products on the shelves and information about moderate and adverse events.
GAO says FDA dedicates relatively few resources to oversight activities, and when a safety concern has been identified, it lacks mandatory recall authority. In addition, demonstrating significant or unreasonable risk for specific ingredients is a difficult process.
GAO recommends that the secretary of Health and Human Services direct the FDA commissioner to request additional authority to oversee dietary supplements, issue guidance on new ingredients and clarify the boundary between dietary supplements and foods with added dietary ingredients. FDA should also take steps to improve consumer understanding of dietary supplements.For more on GAO’s report, Dietary Supplements (GAO-09-250), visit www.gao.gov, or download the complete 77-page document.
China steps up food safety
The National Food Safety Commission will oversee and coordinate the functions of five central governmental departments. They include MOH (food safety risk evaluation standard setting, accident investigation and information release), MOA (edible agricultural products), SAIC (food in circulation, such as in transportation and markets), AQSIQ (quality control of food products manufacturing) and SFDA (food and drug safety, which has responsibility for the catering sector, such as in restaurants).A leader of the State Council, or Cabinet, will head the commission and help to strengthen the country’s food safety monitoring system, Health Minister Chen Zhu told China Daily. The Health Minister, whose duty is comprehensive coordination of the five groups, is now under the direct leadership of Vice Premier Li Keqiang.
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