Why Asia offers investors food for thought

The burgeoning economies of Asia, coupled with the region’s rapidly growing population, underscore the compelling investment potential within its food sector.

Asian tastes are shifting towards a more Western diet with a higher demand for protein.

With a growing middle class and continued urbanisation, Asian countries are experiencing a significant rise in food expenditure.

Asia’s population is set to reach nearly 4.5 billion by 2030, fuelling demand for food products, which are on track to reach $US8.4 trillion ($12.9 trillion) annually by 2030, more than double 2020 ­levels.

This demographic trend presents a lucrative opportunity for investors to capitalise on the increasing need for accessible and high-quality nutrition in the ­region.

To meet this burgeoning demand, improvements and capacity building in the entire food supply chain are needed. The Asian Development Bank (ADB) estimated an annual investment of $US120bn per annum would be required each year to 2050 to evolve the region’s food sector. The onus of investment will largely be on the private sector.

As a consumer staple, food is largely unaffected by international or local events. Demand is inelastic relative to other consumer goods, providing an attractive haven for those investors seeking to hedge against economic downturns or recession in today’s volatile global landscape.

While the scale of the food investment opportunity is well understood, the urgency is perhaps understated. OECD analysis of regional self-sufficiency in agriculture shows Asian food production substantially lags behind domestic needs compared to more developed economies.

Across 15 food types, Asia is self-sufficient in only four – rice, vegetable oils, eggs, and dairy. It is a net importer of most food categories, putting pressure on national trade balances across the region.

Proterra Asia managing partner Tai Lin. Picture: Glenn Hunt

The 2023 Asian Food Challenge report highlights the immense potential for productivity gains in Asia, particularly in narrowing the gap between agricultural output per hectare in Asia and northwest Europe – the most comparable region in terms of crop portfolios based on food grains, fruit, and vegetables.

The investment opportunities in Asian agriculture present both attractive risk-return and diversification benefits.

Opportunities are available and improvements achievable, not only in farm production, but also in downstream supply chains, food processing, and consumer brands.

By investing in technologies and infrastructure, Asia can unlock significant value and enhance its competitiveness.

The rise of the on-demand food culture in Asia has fundamentally altered the dining landscape. The transition from dine-in experiences to on-demand convenience is being driven by the popularity of food delivery platforms.

This surge, fuelled by busy lifestyles and a tech-savvy population, presents a unique challenge for the industry’s midstream – processors, distributors, and packagers – who bridge the gap between farms and restaurants. Here, innovation is paramount.

However, these challenges also present exciting opportunities. Consumers are demanding both convenience and sustainability throughout the food chain. This creates a golden opportunity for companies developing eco-friendly packaging solutions. By offering biodegradable materials and sustainable packaging technologies, these companies can become key players in shaping the future of Asia’s culinary scene.

In the principal Asian markets, private consumption contributes between 40 and 70 per cent of national GDP. Food expenditure comprises 20 to 40 per cent of this total expenditure. Asian consumers are now prioritising the quality and health benefits of food products, with a growing demand for higher-priced organic and artisanal goods. With Asian diets increasingly resembling those of the West, there’s an emphasis on higher protein intake, reflecting evolving lifestyle choices and nutritional preferences. For example, projections suggesting a 33 per cent increase in meat and seafood consumption across Asia by 2030 highlight the region’s growing appetite for protein sources.

Whether it is increasing efficiency and yield upstream or investing in one of the fast-growing sub-sectors of perishable food, investors should view opportunities in the Asian food sector as strategic, broad and diversified through the food value chain and the region’s unique mix of developing and developed economies.

The combination of population growth, economic expansion and evolving consumer preferences presents a ripe opportunity for investors to contribute to the transformation of Asia’s food sector.

By investing in initiatives that enhance productivity, sustainability and infrastructure, we hope investors cannot only generate attractive returns but also play a significant role in addressing the region’s food security challenges.

Embracing the Asian food opportunity is a win-win scenario. It fosters a sustainable environment, empowers local communities and presents a lucrative investment path. For investors, Asia certainly offers food for thought.

Tai Lin is the managing partner of Proterra Asia.