6 – What happens to our food consumption when we get richer?

25 July, 2017

A previous blog described how grain consumption changes as incomes increase but what about food and drink consumption?  How does their consumption change with income?

This chart helps answer that question. The chart traces how the per capita expenditure on food and non-alcoholic beverages changes as per capita GDP increases.  The wealthier a nation is, the smaller the proportion of their wealth (as measured by GDP) is spent on food and non-alcoholic drinks.

Source: Based on World Bank (2017) data for 180 countries

As people become richer they tend to shift their purchases towards education, health, entertainment, travel and the quality of their housing. However, just because nations reduce the proportion of their GDP allocated to food and drink consumption, as they become richer, do they also in absolute terms reduce their expenditures on these items? The answer is almost always, NO!

As shown in the next chart, as nations become wealthier they spend MORE on food and drink. So a rich country like Australia with a per capita GDP of around USD65,000 spends per capita around USD3,650 on food and non-alcoholic beverages. By contrast, a relatively poor nation like Zimbabwe in Africa, with a per capita GDP of less than USD1,000, only spends per capita around USD400 on food and non-alcoholic beverages. So just because a declining proportion of a person’s wealth is spent on food and drink as their wealth increases, this does not imply their actual expenditure on food and drink will diminish. In fact, their expenditure on food and drink increases. Hence, although the food sector forms a smaller share of the economic wealth of a nation as its wealth increases, in absolute terms the food sector becomes increasingly valuable.

Practically, as a person’s income and wealth increases, they tend to change their consumption habits as they are able to afford more expensive foods and drinks. Often expenditure on dairy, fruit and meat consumption increases. An implication is that the food sector benefits from people becoming richer as they spend more on food and drink. It does mean, however, that other sectors of an economy are likely to grow quicker and faster than the food and drink sector as a nations becomes wealthier. Employment and career prospects are greater and more varied as a nation grows in wealth. This can have implications for attracting and retaining appropriately skilled workers within the food and agriculture industries.

Source: Based on World Bank (2017) data for 180 countries

For Australia’s grains industry, the prospect of growing richer populations in many parts of Asia offers the prospect of a growing demand for grains, especially feed grains but also increased demand for grains used in a variety of grain-based foods; noodles, breads, biscuits, pastries and cakes.

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