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Australia Food and Drink Report Q1 2011
Business Monitor International, Nov 2010, Pages: 87
Australia 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 Australia's food and drink industry.
While Australia's potential property meltdown and the risk of a Chinese secondary slowdown could dent consumer spending over the near term, the country's favourable demographics and healthy growth forecast paint a positive long-term consumer picture. As one of the most developed and mature Asia- Pacific economies, Australia's high existing spending levels will continue to buoy the re-emergence of the premiumisation trend. This trend is expected to continue encouraging investments from industry players into Australia, particularly in sub-sectors such as non-carbonates and functional foods. Indeed, leading industry players such as Nestlé Australia and Coca-Cola Amatil have already committed investments to these sub-sectors, and this dynamism will only serve to further stimulate industry growth.
Headline Industry Data
2010 per capita food consumption = 1.3%; forecast to 2015 = 4.4%
2010 alcoholic drinks sales = 3.5%; forecast to 2015 = 9.9%
2010 soft drinks sales = 5%; forecast to 2015 = 10.9%
2010 mass grocery retail sales = 5.6%; forecast to 2015 = 20.1%
Key Trends
Tying into our broader view that the Australian discount sector will outperform over our forecast period, German-based discount grocery chain Aldi will commit more than AUD$1bn (US$926.3mn) over the next three years to bolster its domestic presence by opening new stores and distribution centres. Driven by a continued price-consciousness amongst consumers, the discount sector is forecast to grow strongly off a relatively low base. Aldi could leverage its successful positioning as the country's leading discount retailer and commitment to private labelling to make further market-share gains against from rival retailers such as Coles and Woolworths, while entrenching itself in Australia's high-growth discount sector.
With excess supplies, unfavourable climatic factors and fluctuating currency rates dogging the Australian wine industry, alcoholic drinks players continue to restructure and divest non-core assets as they look to contend with the difficult wine market. Australian brewing giant Foster's Group, for instance, is in the middle of a restructuring process and has hived off 22 vineyards as of 30 June 2010. Foster's also decided to completely demerge its beer and wine businesses and the proposition of Foster's beer unit as a standalone entity has garnered interest from UK brewer SABMiller and Japanese brewer Asahi. While Foster's recent financial results suggest that the company is not out of the woods yet, Australian alcoholic drinks producer Australian Vintage has shown tentative signs of improvement with an 89% increase in FY09/10 (end June) net profits on the back of its restructuring drive.
Key Risks To Outlook
With China as its biggest export destination, a secondary near-term slowdown in the Chinese economy would have a significant impact on Australia's external sector. This could place a drag on our alreadybearish 2011 forecast of 1.6% in Australia's economic growth, which would eventually dampen the country's private consumption growth.
Meanwhile, a growing band of manufacturers are increasingly turning their heads towards cheaper regional destinations in Asia. Cheaper food imports from more-efficient rivals could erode the competitiveness of Australia's exports. This coupled with the risk of a secondary slowdown in the Chinese and EU economies (two of its key trading partners) could weigh on Australia's positive food and beverage trade balance.
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