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Japan Food and Drink Report Q1 2010
Business Monitor International, Jan 2010, Pages: 81
Japan 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 Japan's food and drink industry.
As Japan’s economy continues to struggle in the wake of the global recession, we are forecasting GDP to shrink by 5.5% in 2009, following a contraction of 0.7% in 2008. These figures suggest hard times are up ahead for Japanese consumers, which in turn will have a knock-on effect on the country’s food, beverage and retail sectors. This quarter has already seen a number of the country’s food and drink manufacturers announce falling sales and profits, as discussed in BMI’s recently published Japan Food & Drink Report for Q110.
One such company posting disappointing results is brewing major Asahi Breweries, who reported that net income had fallen 14% year-on-year (y-o-y) to JPY19.7bn for Q309 ending September 30. For the period, sales also fell 1.1% to JPY409.2bn. These results are not surprising given that the alcoholic drinks industry is suffering from the effects of market saturation coupled with the impact of the recent economic downturn, and the country’s beer sector is feeling the worst of it with volume sales expected to contract a whopping 14.4% to 2014. This situation is forcing the leading brewers to seek diversification in order to reduce their dependence on the declining Japanese beer market and to this end, in September, Japanese brewer Suntory announced that it was in talks to buy soft drinks firm Orangina. If successful, the acquisition would be Suntory’s second major soft drinks purchase this year, and would confirm the view that Suntory’s international diversification ambitions go beyond the Asia Pacific region.
The country’s retail sector has also been feeling the pinch this quarter. The Japanese Franchise Association announced that convenience store sales had fallen 5.6% y-o-y to JPY605.53bn on a samestore basis in September 2009, while the number of visitors to such stores fell 2.8% y-o-y to 1.08bn.
Meanwhile, supermarket sales also suffered and the Japan Chain Stores Association confirmed that supermarket sales on a same-store basis declined by 3.4% y-o-y to JPY1.08trn in August 2009. Recent financial results posted by Japanese retail giant AEON support the notion that retail sales are struggling, as the retailer announced that its revenues had fallen 3.1% y-o-y to JPY2.53trn in the six months ending August 31 2009. However, it is not all negative and in October Japanese convenience retailer Lawson announced that operating profit had increased 3.6% y-o-y to JPY30.1bn and revenues 40% y-o-y to JPY227bn in H110.
We expect the Japanese economy to return to growth in 2010, albeit at a very modest 0.8%. This, coupled with the fact that the country’s food, drink and mass grocery retail sectors are all very mature markets, indicates that the operating environment is likely to remain tough for some time to come.
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