New Food research report from Business Monitor International is now available from Fast Market Research
Boston, MA -- (SBWIRE) -- 04/29/2013 -- Fears over China's shaky financial system, overvalued property market and huge industrial overcapacity have been replaced by hopes that policymakers can engineer a recovery back above the 8% level.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.
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
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.
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