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Malaysia Food and Drink Report Q3 2009
Business Monitor International, June 2009, Pages: 74
The Malaysia Food Drink Report provides independent forecasts and competitive intelligence on Malaysia's food and drink industry.
Malaysia has been hit hard by worsening global conditions and we now expect the country to enter into a recession in 2009, with a full-year economic contraction of 1.9% forecast. we have also further revised down Malaysia’s 2010 growth forecast from 3.2% to 2.6%, in view of the fact that the current downturn is expected to be longer and more pronounced than initially anticipated. With many companies exercising caution in such an uncertain climate it is not surprising that this quarter has seen little major merger and acquisition activity. However, despite the tough operating environment a number of Malaysia’s food and drink companies have performed well and expansion plans continue to proceed in the mass grocery retail (MGR) sector.
Despite tough economic conditions, this quarter saw Nestlé Malaysia post strong results for FY08, revenue increased by 13.5 % to MYR3.9bn (US$3.86bn) from MYR3.4bn in 2007, and net profit rose 17% to MYR340.9mn (US$94.9mn), well exceeding its initial earnings expectations of MYR320.5mn.
Malaysia’s second largest brewer, Guinness Anchor Berhad (GAB) is also feeling positive after posting its results for Q209; revenue for the quarter increased 13% to MYR 328.5mn (US$91.1mn) and pre-tax profit was up 29% to MYR34.7mn (US$9.6mn), when compared to the same period last year. However, the Malaysian subsidiary of Danish brewer Carlsberg, Carlsberg Malaysia, has not fared so well. The company’s net profit dropped 3% to MYR76.1mn (US$21.2mn) for FY08 despite revenue increasing 7% to MYR960.2mn (US$280.4mn). This drop underlines the pressure that profits are under and as a result Carlsberg Malaysia announced this quarter that it would increase the price of some of its products in the hope of improving its bottom line.
Moving to the MGR sector, French retail giant Carrefour announced its intentions to open 100 convenience stores in the country, focusing particularly on the company’s private-label brands. This is a significant strategic shift for the company, however, with value sales through convenience outlets forecast to grow 52.6% to reach US$350mn in 2013, it would seem a sound decision. Rumours have also been circulating that Tesco is to expand further into the convenience sector; the company has not ruled this out but confirmed this quarter that its strategy remains focused on expansion in the profitable hypermarket sector.
Despite some positive signs this quarter – both the recent financials of leading food and beverage companies and the indications given by the expansion plans of leading retailers – the operating environment for Malaysian food and drink producers is likely to remain tough, at least in the short-term, as economic weakness continues to play out.
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