Boston, MA -- (SBWIRE) -- 10/02/2013 -- 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.

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%.

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Key Company Trends

Fonterra Hit As Contamination Fears Unfold: The Chinese government's decision to recall milk imported from New Zealand in July 2013 over contamination fears marked the latest blow to the latter's dynamic infant formula segment in recent weeks. New Zealand-based dairy major Fonterra is likely to be most severely impacted by the scandal: approximately 90% of China's imported milk comes from New Zealand, and the company is China's largest single supplier of infant nutritional products.

Diageo's Baijiu Buy Points To Growth Potential: Diageo, the world's largest spirits company, increased its stake in the Chinese baijiu spirit producer Shui Jing Fang in July 2013. Indicating the increasing penetration of multinationals in the country's alcohol segment, Diageo's purchase highlights the ongoing potential of the Chinese spirit sector despite recent turbulence in the forms of disappointing Chinese New Year sales and a continued government-driven austerity drive.

By purchasing the remaining 47% stake in China's Shui Jng Fang Holding Company, Diageo now owns a 39.71% indirect stake in the baijiu producer Shui Jing Fang, a deal the maker of Smirnoff vodka and Johnnie Walker whisky has been working on for the last six years. In 2011, Diageo became one of the first international companies to secure a majority stake in a Chinese corporation, raising its ownership of the holding company from 49% to 53% following intensive lobbying by the British government. Marking a considerable victory for a foreign company given the government's protection of national products, the deal signals the continuing potential of the country's lucrative spirits segment and Diageo's drive in expanding its global spirits footprint.

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