Cereal Ingredients Market Headed for Growth and Global Expansion by 2020

Cereal ingredients are mainly used in the breakfast cereals (Hot and Cold breakfast cereals). Cereal ingredients play an important role in breakfast as it helps in maintaining the taste and nutritive quality in the food product. Some of the benefits of having a regular nutritional breakfast are improvement in memory, balanced cholesterol and insulin levels, physical activeness and low risk of obesity. The practice of skipping breakfast has been reducing, while the per capita consumption of breakfast has been increasing globally over the past few years. Cereals are considered to be an ideal breakfast category due to their high nutritional and low calorific value. Breakfast cereals are mostly made of whole grains ingredients such as oats, wheat, rice, barley and other grains.

North America is the largest market for cereal ingredients, followed by Asia-Pacific and Europe. Asia-Pacific region is expected to be the fastest growing market followed by Europe and North America.

Increasing demand for healthier food, changing consumer preference, increasing urban population and increasing health issues are the major driving force for cereal ingredients market. Research and development plays an important role in cereal ingredients market as it helps in developing new ingredients.

According to the WHO, in 2010, the number of overweight children under the age of five was around 42 million globally. Obese people are more likely to develop diseases such as diabetes and cardiovascular diseases at young age. High obesity rate among children is a major concern for parents, which compels them to keep their children away from high calorie breakfast food and opt for low calorie food such as breakfast cereals.

The lifestyle of urban population is more fast-paced as compared to the rural population. Fast-paced lifestyle along with an aspiration to stay fit attracts people to breakfast cereals. Being more aware of the nutritional aspects of ingredients used in various breakfast cereals, the urban population is keener to have a better breakfast with healthy ingredients. With urbanization increasing worldwide, this trend is expected to continue for a long period. According to the United Nations, urban population is expected to increase from 3.4 billion in 2009 to 6.3 billion in 2050. Increasing health issues such as obesity has become one of the most challenging problems in the world.

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Palm oil is one of the necessary ingredients in the production of breakfast cereals. Palm oil has specific and limited areas of cultivation since its plantations require a particular climate. This is creating a hurdle in procurement for breakfast cereal manufacturers. Around 90% of palm oil plantations are found in the tropical countries of Indonesia and Malaysia. Prices of cereal ingredients such as corn, wheat, soybean oil, sugar, cocoa and palm oil, have been increasing continuously. According to the statistics of the International Food Policy Research Institute (IFPRI), the global average price per kilogram of maize increased from around USD 0.16 in 2007 to USD 0.29 in 2012, and is expected to rise further. The global soybean prices also rose from USD 0.32 per kilogram in 2007 to USD 0.56 in 2012. Cost of packaging materials such as carton board, corrugated box and plastic, and prices of fuel including natural gas, propane and diesel have been rising constantly. This poses a serious challenge to the industry in balancing its price structure. According to the US Energy Information Administration, the price of natural gas, which was 0.50 million metric British thermal units (mmBTU) in 2011, rose to 0.58mmBTU in 2012.

Some of the major companies operating in the cereal ingredients market are Associated British Food Plc, Archer Daniels Midland Company, Bunge Limited, SunOpta Inc and Cargill Inc.

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