China Food and Drink Report Q4 2010

China 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 China's food and drink industry.

The long-term outlook for China’s food and drink sector remains strong, as reflected in the continued international interest and investments in the sector. However, the shorter-term outlook is less positive due to brewing economic difficulties. We believe that cracks are beginning to appear in the Chinese economy, which should grow in magnitude over the coming months. Inflation is heading higher and economic activity growth is heading lower, strengthening our case for a slowdown in economic activity in China as monetary policy is tightened further. We expect Chinese overheating to lead to a secondary slowdown in 2011, and are forecasting real GDP growth of 7.5% in 2011, with growth to remain around this level thereafter over the medium term, slowing industry growth.

Headline Industry Data

- 2010 per capita food consumption = +11.9%; forecast to 2014 = +54.1%
- 2010 beer volume sales = +13.7%; forecast to 2014 = +74.9%
- 2010 soft drink sales = +12%; forecast to 2014 = +65.4%
- 2010 mass grocery retail sales = +12%; forecast to 2014 = +64.2%

Key Company Trends

Soft Drinks Investments – Foreign investments continue to poor into China’s soft drinks industry, fuelling the sector’s bullish growth. In May 2010 US soft drinks behemoth PepsiCo unveiled a US$2.5bn threeyear spending plan for the Chinese beverage market following the completion of its US$1bn two-year China investment package, due to finish later this year. With its latest investment package, PepsiCo will look to fully exploit the country’s vast opportunities while minimising the risks to which it is exposed. As well as expanding its soft drink and snack food production capacity, the company will also invest heavily in agricultural development, thus securing a degree of valuable control over its supply chain. PepsiCo will also invest in the development of beverages specifically designed for local tastes.

Retail Acquisitions – In July 2010 retail giant Carrefour was successful in acquiring a controlling 51% stake in Hebei-based hypermarket operator Baolongcang for an undisclosed sum. With the acquisition of Baolongcang coinciding with Carrefour's 159th Chinese hypermarket opening, the company clearly retains every intention of maintaining its position as the country's dominant international retailer. As is usually the case when a store networks come up for sale, competition for the Baolongcang network was fierce, with Vanguard, the grocery retail operation of Hong Kong-listed China Resources Enterprises, local firm WuMart and South Korea's Lotte Shopping, all believed to be in the running for the acquisition. Such attention for a single province retailer with just 11 stores speaks volumes about Chinese MGR’s long-term potential.

Key Risks to Outlook

Double-Dip Ahead? – BMI expects a secondary slowdown in the Chinese economy, coupled with elevated risks of a bursting of the country's property bubble. In addition, brewing inflationary pressures could weigh on Chinese consumption as shoppers tighten their purse strings and restrict spending on consumer goods. Over the medium term, we are looking at a slight erosion of China's export competitiveness as a stronger yuan and increasing wage pressures take effect.

Food Safety Still A Concern – The local food and beverage industry continues to be plagued by problems such as poor food hygiene, and inferior safety standards. Over this past quarter alone, there were several incidents of authorities seizing large quantities of milk powder laced with melamine. SHOW LESS READ MORE >

Industry View

SWOT Analysis
China Food Industry SWOT
China Drink Industry SWOT
China Mass Grocery Retail Industry SWOT

BMI Business Environment Ratings
BMI’s Core Global Industry Views
Table: BMI Food & Drink Core Views
Asia Pacific Food & Drink Business Environment Ratings
Table: Asia Pacific Food & Drink Risk/Reward Ratings - Q4 2010
China Food & Drink Risk/Rewards Rating
Macroeconomic Outlook
CHINA - ECONOMIC ACTIVITY

Industry Forecast Scenario

Consumer Outlook

Food
Food Consumption
Table: China Food Consumption Indicators - Historical Data & Forecasts
Canned Food
Table: China Food Sub-sectors - Historical & Forecast Sales Data
Instant Noodles
Confectionery
Table: China Confectionery Sub-sectors - Historical & Forecast Sales Data
Trade
Table: China Food & Drink Trade Balance - Historical Data & Forecasts

Drink
Hot Drinks
Table: China Beverage Industry Sub-Sectors - Historical & Forecast Sales Data
Alcoholic Drinks
Table: China Beverage Industry Sub-Sectors - Historical & Forecast Sales Data
Soft Drinks
Table: China Beverage Industry Sub-Sectors - Historical & Forecast Sales Data

Mass Grocery Retail
Table: China MGR Retail Indicators - Historical Data & Forecasts
Table: Grocery Retail Sales by Format - Historical Data & Forecasts

Food
Industry Developments
Market Overview
Food Production
Instant Noodles
Confectionery
Trade
Agriculture
Rice Production
Dairy Industry
Organics

Drink
Industry Developments
Market Overview
Soft Drinks
Hot Drinks
Alcoholic Drinks
Beer
Wine
Spirits

Mass Grocery Retail
Industry Developments
Market Overview
Leading MGR Players
Table: Structure of China's Mass Grocery Retail Market by Estimated Number of Outlets
Table: Structure of China's Mass Grocery Retail Market – Sales by Format (US$bn)
Table: Structure of China's Mass Grocery Retail Market – Sales by Format (CNYbn)
Table: Annual Average Store Sales by Format – 2008

Competitive Landscape
Table: Key Players in China Food & Drink Sector - 2009
Table: Key Players in China's Mass Grocery Retail Sector - 2009
Company Analysis
Food
Hsu Fu Chi
Tingyi (Cayman Islands) Holding
China Foods Ltd (Formerly China National Cereals Oils And Foodstuffs)
China Mengniu Dairy Company
Drink
Tsingtao
Wahaha
Kweichow Moutai Co
Mass Grocery Retail
Carrefour
Lianhua Supermarket Holdings

BMI Methodology
Food & Drink Business Environment Ratings
Table: Returns
Table: Risks
Weighting
Table: Weighting
How We Generate Our Industry Forecasts
Sourcing
BMI Food & Drink Industry Glossary
Food & Drink
Mass Grocery Retail

- Hsu Fu Chi
- Tingyi Holding
- China Foods Ltd
- China Mengniu Dairy Company
- Tsingtao
- Wahaha
- Kweichow Moutai Co
- Carrefour
- Lianhua Supermarket Holdings