New Food research report from Business Monitor International is now available from Fast Market Research
Boston, MA -- (SBWIRE) -- 12/25/2013 -- While we are bullish on the long-term prospects for the Chinese consumer sector, the country's domestic demand rebalancing is likely to be a long, drawn-out process. An acceleration of household spending driven by sizeable personal savings and rising wages would compensate for a reduction in capital outlay, helping to keep the economy motoring along at its current rate of expansion. Indeed, the vast size of China's consumer base, the undeveloped nature of organised retail, the relatively low penetration of services, and the strong scope for premiumisation are all structural positives and underpin our view that private consumption will slowly rise as a share of nominal GDP over the next decade.
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Headline Industry Data
- 2013 food consumption = +13.3%; compound annual growth rate (CAGR) forecast to 2017 = +9.4%.
- 2013 beer volume sales = +8.3%; CAGR forecast to 2017 = +8.7%.
- 2013 soft drinks volume sales = +7.5%; CAGR forecast to 2017 = +6.9%.
- 2013 mass grocery retail sales = +8.8%; CAGR forecast to 2017 = +9.1%.
Key Company Trends
A Year To Forget for Yum! Brands: Yum! Brands reported a 68% decline in global profit for Q313 (to September 2013) to US$152mn, leading to a 5.2% decline in its share price on October 9 2012. This has all but wiped out gains in the stock since the beginning of the 2013. The company, which owns KFC, Taco Bell and Pizza Hut, can attribute its poor performance over the last year to depressed sales from its KFC brand, particularly within China. While this has been a year to forget for Yum! Brands, its position in China, with the potential that the country holds, should see the company return to growth in the near future.
Instant Noodles Sales Slowing Down: Shareholders are asking about the growth stage of China's noodle industry. According to Nomura (FT), China consumes about 3 kilograms of instant noodles on a per capita basis annually, which incidentally compares with about 5 kilograms in Hong Kong. There could be room for the mainland to catch up with the more affluent Hong Kong, yet rising health consciousness could cap, to a degree, how much more mainlanders can consume per annum. More volume growth is possible as people work longer hours and the country's favourite convenience food could continue to grow as the population becomes more time-poor.
The idea that the sector is slowing down was backed up by the first half 2013 results announcement by Tingyi, the leading noodle company in China, with more than half of the market for instant noodles, according to the Financial Times. Noodle sales, which accounted for 43% of Tingyi's business in 2012, grew by 6.4% in the first half of the period, well below the 10% or so they averaged over the past few years.
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