2013-03-14 10:44:48 - Recently published research from Business Monitor International, "China Food & Drink Report Q2 2013", is now available at Fast Market Research
Fears over China's shaky financial system, overvalued property market and huge industrial overcapacity have been replaced by hopes that policymakers can engineer a recovery back above the 8% level. We maintain our view that the prospects for H113 look relatively bright. However, there may be some negative surprises in store as the recovery comes up against the country's structural hurdles. As such, we are forecasting real GDP growth of 7.5% in 2013, versus the Bloomberg consensus of 8.1%.
The recent improvements in the state of the economy are likely to support the ongoing expansion of China's food and drink industry. As tastes and preferences continue to evolve and the spending power of consumers beyond Beijing, Shanghai and Guangzhou rises, we expect
companies to continue viewing China as one of the outstanding growth opportunities.
Full Report Details at
Headline Industry Data
* 2013 food consumption = +13.3%; compound annual growth rate (CAGR) forecast to 2017 = +13.1%.
* 2013 beer volume sales = +8.3%; CAGR forecast to 2017 = +8.6%.
* 2013 soft drinks volume sales = +7.5%; CAGR forecast to 2017 = +7.1%.
* 2013 mass grocery retail sales = +8.8%; CAGR forecast to 2017 = +9.0%.
Key Company Trends
SABMiller Agrees US$864mn China Deal: SABMiller has a strong presence in China, even if the country is far more important in volume terms than earnings in terms of its contribution to the group. In the year to September 2012, the Asia-Pacific region accounted for nearly one-third of overall group earnings before interest, taxes, depreciation and amortisation (EBITDA). In terms of profits per hectolitre of beer sold, China is believed to be among the lowest earners for SABMiller - contributing less than 5% to group EBITDA. While China has been doing well for SABMiller in volume terms for some time, it is a very small contributor to earnings (believed to be less than 10%). The biggest factor behind the discrepancy in terms of China's overall contribution to earnings versus volume sales is believed to be the result of the fact that SABMiller operates a joint venture and therefore splits its earnings. SABMiller operates in China through a joint venture with China Resources Enterprise Limited (CREL), and it is likely that SABMiller will want China to contribute a lot more to earnings in the future. On February 5, it was announced that SABMiller had reached an agreement to acquire China's Kingway Brewery Holdings via China Resources Snow Breweries - the joint venture that SABMiller operates with CREL.
Yum! Brands Projects Q1 Contraction Amid China Challenges: While Yum! Brands, which owns the KFC and Pizza Hut brands, among others, remains the most well-established Western fast-food operator in China, the company's connection to a recent food safety investigation in the country has dented its sales. Yum! Brands' same-store sales for Q412 fell 6% year-on-year (y-o-y), and Yum! is anticipating a samestore contraction of 25% y-o-y for Q113. Concerns about KFC's supply chain in China were raised in November 2012 when it was reported that some of Yum! Brands' poultry suppliers were using high levels of antibiotics in their meat. This led to an official government investigation, which has resulted in a great deal of negative publicity for one of the most iconic and successful brands in China.
Can Kellogg's Crack China With New Venture?: US-based food firm Kellogg is hoping more Chinese consumers wake up to its breakfast cereals and consume its snacks throughout the course of the day. The firm, known for its cereal brands, has launched another attempt at cracking China, announcing in September 2012 a joint venture with Singapore's Wilmar International Limited to manufacture, sell and distribute cereals and savoury snacks in China. In our view, Kellogg is most likely hoping this venture will be far more successful than its last major attempt to gain in a foothold in China; in 2008 it acquired Zhenghang Food Company, which later was acquired by Malaysia-based Munchy Group.
Hershey Looking To Expand: In September 2012, John Bilbrey, the CEO of US confectionery company Hershey, said that the company is surveying options for its next growth wave in China, where it currently operates a joint venture with the South Korean company Lotte Shopping Company. Whether Hershey goes for continuity by growing its manufacturing capacity with Lotte, or decides to go it alone by adding capacity independently, China will play a crucial role in Hershey's ongoing attempts to earn a greater contribution of its annual sales from emerging markets, which currently stands at a relatively modest 15%.
Diageo Eager For Baijiu Growth: In October 2012, global drinks firm Diageo confirmed that it is on the lookout for acquisitions in the baijiu category in China, with Andrew Morgan, the firm's president for Europe, revealing that it would use its newly acquired controlling stake in Shui Jing Fang as a platform to acquire other brands.
About Business Monitor International
Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at www.fastmr.com/catalog/publishers.aspx?pubid=1010
About Fast Market Research
Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.
For more information about these or related research reports, please visit our website at www.fastmr.com
or call us at 1.800.844.8156.