Food service leads internationalization
Dec. 15, 2014
by Morton I. Sosland
Whenever internationalization of grain-based foods is being analyzed in order to gain insights from a different viewpoint into the future of the industry, the inclination for a long time has been to focus on grain supply and demand. Depending on whether a country or a region was self-sufficient in wheat or other grain crops would be the criteria usually cited as the main, if not the sole, determinant of how the industry that made the ultimate food products unfolded. Indeed, the state of the domestic baking business more often than not related to the supply of wheat, either grown domestically or even imported through regular channels of trade.
Even as international trade in wheat and other grains has expanded due to production and population gains as well as the reduction and elimination of trade barriers, this grain factor has taken a backseat to developments at the very far end of the industry. That relatively new force is the way in which the outreach of retail food operators, mainly quick service restaurants, has radically changed the grain-based foods industries in many countries eager to keep in line with what are new markets.
Without doubt, much of this activity had its origin many years ago in the international expansion of McDonald’s Corp. It was McDonald’s, which now has 35,000 units around the world, that initially went so far as to encourage bun suppliers in the United States to build bakeries in other countries to supply the fast food chain. For a considerable time, McDonald’s occupied a unique position in striving to establish an international enterprise rivaling what it has established in America. But once its competitors also encountered an American market that is increasingly difficult to penetrate their focus began to shift to trying to build new customers, mainly in Europe and Asia. Each of these efforts introduces new forces into how grain-based foods operates, prompting changes that affect immediate suppliers like bakers, but also extend to flour millers and even to the sort of wheat wanted to produce the desired quality of flour.
Like much else that has happened in the recent internationalization of grain-based foods, the process might have begun with U.S.-based companies, but has quickly drawn participation from many different countries. Hardly anything symbolizes that better than the purchase of a retail chain known for its bagels by a European group well respected for its investment acumen. “We see significant opportunity for growth,” a spokesman for the acquirer commented, also citing the numerous brands bought that could be used in building business globally.
At the same time that the U.S.-based bagel restaurant chain was being bought, an American doughnut chain announced its first move into South America with an agreement to start operations in Colombia. It is the Western Hemisphere that exemplifies the way national borders are a minimal influence in limiting the reach of grain-based foods. That is not just true in the wide-open marketplace embracing companies operating in Canada, the United States and Mexico, but applies to enterprises with even longer or newer approaches.
Only a very few of the outreach moves of the industry, including its quick service food businesses, were embroiled in the American controversy involving acquisitions designed to set up new headquarters where corporate taxes were lower than in the U.S. While wanting to avoid commenting on such legal issues, it should be apparent that, based on what has been transpiring in grain-based foods for years, that such combinations make great sense on their own and have not been driven by a desire to save on or to avoid taxes.
It is no surprise that sophisticated foods based on grains have become the cornerstone of diets in many countries in all parts of the world. This is a development that may be traced to the vitality of trade in grains, but has evolved into a highly complex business that only strengthens the fundamental position of grain-based foods.