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South Korea Food and Drink Report Q3 2009
Business Monitor International, July 2009, Pages: 67
South Korea Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on South Korea's food and drink industry.
There has been minimal merger, acquisition and expansion activity in South Korea’s food and beverage industry this quarter largely due to a slowdown in the economy. This report forecasts that GDP growth will contract 3.3% in 2009, and 1.8% in 2010. The uncertain economic climate, coupled with a small population and increasing market maturity, is currently doing little to entice investment.
However, despite ongoing concerns over the economy there has been some interesting activity in the alcoholic drinks sector this quarter. After mounting speculation, firstly about whether Anheuser Busch InBev would sell Oriental Brewery (OB) and secondly who would buy it, Q309 has seen US private equity giant Kohlberg Kravis Roberts and Co (KKR) emerge as the clear front runner. Staying with drink industry news, Scottish Whisky firm Edrington announced that it is planning to grow its business in South Korea despite the economic slowdown. In the short-term, whisky sales are dropping as consumer confidence wanes and in February 2009 whisky sales fell 7% y-o-y. However, the company is likely to benefit in the long run in light of the expected increase in alcoholic drink sales, with estimates reaching US$1.4bn in 2009 before rising to US$3.8bn by 2013.
Moving to the mass grocery retail sector many retailers appear to be feeling positive. For example, Tesco Samsung has announced further expansion plans this quarter, in addition to the six hypermarkets it plans to open in 2009 the firm has also confirmed its intention to add 100 more convenience stores to its network by the end of FY09. Tesco has also stated its belief that the country can handle a further 100 Tesco Express outlets every year for the foreseeable future. This optimism is not surprising when sales within the convenience sector are predicted to increase 56.9% to reach US$9.2bn by 2013. South Korea’s Lotte Shopping also has reason to feel positive after posting financial results for Q109, total sales increased 7.3% to US$2.1bn and operating profit rose 11.5% to US$172.2mn when compared to the same period the previous year.
The actions of KKR, Edrington and Tesco Samsung signify the long-term appeal of the comparatively high-spending South Korean market, even as prevailing economic conditions continue to put pressure on firms operating within the country.
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