2014-01-25 19:47:42 - New Food market report from Business Monitor International: "Japan Food & Drink Report Q1 2014"
BMI's outlook for Japan's food and drink industry remains subdued as the stagnant economy continues to limit the industry's growth potential. Consumption tax hikes, planned for April 2014, will further weaken the Japanese consumer, while the absence of structural reforms and negative demographic tendencies will weigh on the economy over the longer term.
Prime Minister Shinzo Abe's combination of ultra-loose monetary policy and higher public spending has bolstered economic growth in 2013. As such, BMI has revised its forecast for Japan's real GDP growth to 1.8%, from a previous forecast of 1.4%. However, we believe that even this moderate growth rate is unsustainable over the coming years, as the effects of Abe's monetary and fiscal measures will gradually wane and as
the government takes action to manage its excessive national debt. As one of the measures to increase its revenues, the government is considering gradually raising the consumption sales tax - from 5% to 10% - by 2015. If passed, the tax increases will put additional pressure on consumer spending power.
Full Report Details at
Headline Industry Data (local currency)
* Per capita food consumption (local currency) growth (y-o-y) in 2013: +0.21%; CAGR to 2017: +0.30%.
* Alcoholic drinks value (local currency) sales growth (y-o-y) in 2013: +0.45%; CAGR to 2017: +0.55%.
* Soft drinks value (local currency) sales growth (y-o-y) in 2013: +3.51%; CAGR to 2017: +3.54%.
* Total mass grocery retail value (local currency) sales growth (y-o-y) in 2013: +0.46%; CAGR to 2017:
Key Industry Trends
Suntory To Focus On Organic Growth: Japan's Suntory Food & Beverage acquisition of the iconic UK soft drinks brands Lucozade and Ribena from pharmaceutical firm GlaxoSmithKline (Glaxo) was probably one of 2013's most significant deals. With the brands not really suited to Glaxo's overall portfolio, it was a great opportunity for Suntory to purchase some very well-established brands that have a longstanding history in a number of emerging markets. Indeed, these brands are now under the ownership of a pure food and drink firm like Suntory, which needs more exposure to grow its brands and markets. The overseas sales of the two largest Japanese soft drinks companies, Kirin Holdings and Suntory, account for about 30% and 20% of their annual sales respectively. With almost half of Japan's population forecast to be older than 65 by 2025 and the outlook for growth in the mature soft drinks industry not particularly exciting, it is clear why Suntory has been made moves abroad.
In December 2013, Suntory's CEO Nobuhiro Torii announced that the company will hold off on making any major acquisitions over the next 12 months, with the focus very much now on organic growth and probably the ongoing integration of Ribena and Lucozade into its business. A key area of concern in Japan is the proposed increase in sales tax effective from April 2014 from 5% to 8%. Suntory will want to continue to remain as competitive as it can at home while integrating its new businesses and looking for long-term growth in emerging markets.
Kirin Shows Interest In San Miguel Stake: In November 2013 The Japanese brewery Kirin Holdings has expressed an interest in acquiring the remainder of the Philippines-based drinks company San Miguel Brewery, according to Bloomberg Business week. Kirin already holds a 48% stake in the firm, although is reportedly not the only potential bidder interested in acquiring the remaining interest. The stake is worth an estimated US$5.9bn.
Nissin Targets Low-Income Consumers With Noodle Range: In November 2013 Japan-based Nissin Foods has launched a new line of 'affordable', high-quality instant noodles under its Nissin Noodle Shop range in the Japanese market, reports Just Food. The move is aimed at expanding the company's Noodle Shop range in Japan. The market for instant noodles in Asia-Pacific was worth US$40bn in 2012, according to Euromonitor.
Suntory Launches Limited-Edition Whiskies: In November 2013, Suntory Beverage & Food, a domestic subsidiary of Japanese beverage company Suntory Holdings, has launched collection of luxury whiskies from its Japanese single malt whisky distilleries Yamazaki and Hakushu. The Yamazaki Cask Collection has been launched on the distillery's 90th anniversary, while Hakushu 2013 Collection has been launched on its 40th anniversary. The Yamazaki Cask Collection features four whiskies: Bourbon Barrel, Puncheon, Sherry Cask and Mizunara. The sale of the Yamazaki Cask Collection started in the week ending November 30 by specialist whisky retailers, while the Hakushi Collection is sold only to 'a select number' of bars with undisclosed prices.
Risks To Outlook
With domestic demand likely to remain subdued, there is a growing dependence and thus vulnerability to external developments on the global markets. As such, a quick deterioration of growth in global markets, especially China or the US, could tip the Japanese economy back into recession.
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