Recently published research from Business Monitor International, "China Food & Drink Report Q1 2013", is now available at Fast Market Research
Boston, MA -- (SBWIRE) -- 03/01/2013 -- 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 pace of expansion. Indeed, the vast size of China's consumer base, the undeveloped nature of organised retail, relatively low penetration of services, and 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. However, we would take issue with the notion that this process can occur without a material slowdown in headline economic expansion.
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Headline Industry Data
- 2013 food consumption = +13.3%; compound annual growth rate (CAGR) forecast to 2017 = +13.3%.
- 2013 alcoholic drinks value sales = +12.7%; CAGR forecast to 2017 = +10.8%.
- 2013 soft drinks value sales = +13.2%; CAGR forecast to 2017 = +10.7%.
- 2013 mass grocery retail sales = +9.3%; CAGR forecast to 2017 = +9.2%.
Key Company Trends
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 savory 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, drinks giant 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.
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