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Singapore Food and Drink Report Q1 2009
Business Monitor International, Jan 2009, Pages: 62
This Singapore Food Drink Report provides independent forecasts and competitive intelligence on Singapore's food and drink industry.
In Q408, there was minimal merger and acquisition (M&A) and expansion activity because of weak consumer confidence and a sharp economic slowdown. GDP growth was 7.7% in 2007 and BMI expects this to be 3.9% in 2008. Companies are fearful of expanding in this climate of uncertainty and weak consumer confidence. Should a company wish to expand, there is the added difficulty of obtaining credit in order to carry out its expansion plans, with banks being reluctant to lend.
Despite concern over the global economy, Singapore-based food ingredient supply chain Olam International announced in Q4 that it was to acquire the sugar-milling complex owned by Giridharilal Sugar and Allied Industries in India for approximately US$9.9mn. Such an acquisition is a positive step for the company as it tries to expand solely from exporting sugar to incorporate the production process as well.
The global economic downturn this has left Singaporean companies that have expanded internationally exposed. One example of this is Singapore Food Industries (SFI); SFI is now considering closing its UK and Irish unit, which saw losses quadruple over the course of 2008. This is perhaps unsurprising as GDP growth in the UK is expected to be 0.6% in 2008, with BMI predicting a contraction of 0.1% in 2009. The outlook for Ireland is also bleak with BMI expecting contractions of 2.4% and 3.8% for 2008 and 2009, respectively. However, domestically, companies are also vulnerable owing to rising input costs such as fuel, packaging and ingredients. QAF Ltd, the Singapore-based food, diary, fruit juice and meat company, posted a profit warning for Q308, citing a rise in production costs and a slump in selling prices as the cause for its deficit.
However, on the back of weakening consumer confidence many of the country’s retailers are running sales and promotional offers on house brand items to entice consumers into their stores. Commodity prices are easing, owing to weaker demand, and this could alleviate the pressure on Singaporean food and drink companies slightly, but the environment is likely to remain tough with activity expected to be minimal well into 2009.
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