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Singapore Food and Drink Report Q4 2009
Business Monitor International, Aug 2009, Pages: 61
Singapore 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 Singapore's food and drink industry
The mature Singaporean market poses challenges to investors particularly in terms of fierce competition and only moderate food consumption growth (3.7% in local currency to 2013) and this is further compounded by the current global economic conditions. However, BMI has recently revised up its GDP growth forecast for 2009 from -7.2% to -4.8%. While this is still a notable contraction it does signify an expected improvement in the economy and as such many of the country’s food and drink producers have performed better this quarter, following disappointing results last quarter.
Among those firms performing positively are Petra Foods and Singapore-based food ingredients group Olam International Limited. For Q109 Petra Foods reported that group revenue had risen 12.9% to US$281.8mn while net profit climbed 92.4% to US$3.3mn. Meanwhile, Olam International posted strong financials for 9M09 (financial year ending 30 June 2009) with revenue rising 7.3% to SGD6.1bn while net profit almost doubled to SGD205.3mn. Feeling particularly positive is Singapore’s BreadTalk Group who appears to have escaped relatively unscathed from the financial crisis announcing that it aims to increase revenue for FY09 by between 20% and 30%. The company also has ambitious expansion plans not only locally but also on a more international level, hoping to quadruple its number of outlets to 1,000 in three years. Owing to Singapore’s geographical constraints it is not surprising that BreadTalk is seeking to further expand abroad in order to capture new market share.
Moving to the drinks sector, Singaporean beverage giant Fraser and Neave reported disappointing H109 financial results. Group revenue fell 4.3% y-o-y to SGD2.4mn while group PBIT (profit before interest and tax) fell 13% y-o-y to SGD339.4mn, this was largely due the property and publishing side of the business underperforming. However, the food and beverage division demonstrated remarkable resilience with PBIT rising 12% y-o-y to reach SGD172.9mn. Given the essential nature of food and drink this resilience is to be expected to a certain extent.
Elsewhere, retailer NTUC Fairprice opened its third hypermarket in the country this quarter, becoming the first chain to operate round-the-clock opening hours. This additional store is likely to significantly increase the company’s sales given the immense profitability of the format. Sales from hypermarkets are forecast to grow by an enormous 115.7% to reach US$1.1bn in 2013, with the contribution of just one additional store making a sizeable contribution to this growth forecast.
Despite some positive results this quarter, the operating environment is expected to remain tough in the short term. However, in the longer term Singapore is likely to continue to be an attractive proposition for investors due to high consumer spending levels.
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