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Singapore Food and Drink Report Q2 2009
Business Monitor International, March 2009, Pages: 62
Singapore Food and Drink Report provides independent forecasts and competitive intelligence on Singapore's food and drink industry.
Singapore’s food, drink and retail industries are all mature sectors and this, coupled with the fact that the country has fallen into its first technical recession since 2002, according to the Ministry of Trade and Industry (MTI), may go some way to explaining the limited amount of merger, acquisition and expansion activity seen in Q109.
However, despite only a modest per capita food consumption growth forecast, of 11.2% to US$1,722.78 by 2013, and the forecast that Singapore’s GDP will contract by 2.8% in 2009, Singapore Airport Terminal Services Ltd (Sats), has approved the purchase of Temasek Holdings Pte’s 70% stake in Singapore Food Industries (SFI) and has been reported to have offered as much as US$336.7mn to purchase the whole of SFI. Sats hope that the acquisition will help protect it from the decline in flight catering as a result of the reduction in travel due to the global recession. However, SFI has also felt the pinch of the worsening economic situation and in December 2008 wound up its Irish business as a buyer for the unit could not be found.
Among the few companies feeling positive in Q209 are Asia Pacific Breweries (APB) and Singaporebased food ingredients group, Olam International, both of which announced strong results. Olam International made an after tax profit of US$9.8mn for fiscal Q109 reflecting an increase of 62% year-onyear (y-o-y), while APB’s revenue rose 12% to US$1.3bn for the FY08. Despite this increase in revenue, net profit for the alcoholic drinks firm declined 7% to US$81.8mn and APB CEO, Roland Pirmez, although happy with the results, has warned that caution should be exercised as the next few years will be challenging for the company due to the global economic slump.
Moving to the mass grocery retail (MGR) sector, Singaporean retailer NTUC Fairprice has further extended its 5% discount on many household items until the end of the year and has introduced a raft of initiatives to help customers through the recession and boost weakening consumer confidence. Despite the challenging times ahead and with supermarket sales predicted to rise by just 9.1% to reach US$1.84bn by 2013, NTUC Fairprice is still keen to continue to expand and plans to open three more stores; the customer loyalty that should stem from reduced prices should only help its cause.
Less positive in Q109 was the news that Singapore’s Yeo Hiap Seng has announced that it expects to make a loss for Q408. The revelation underlines the pressure that producer profits are under.
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