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Thailand Food and Drink Report Q1 2011
Business Monitor International, Dec 2010
The Thailand 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 Thailand's food and drink industry.
While global headwinds are likely to knock Thailand’s economic growth in 2011, the country’s consumer sector remains relatively insulated from the slump on global trade, due to positive consumer sentiment and an increasing number of tourist arrivals. On the back of these positives, the domestic consumer sector continues to display strong growth potential over our five-year forecast horizon. However, with investors quick to grab any growth opportunity on offer here, we would caution that a number of sub-sectors are quickly approaching saturation. Strong acquisition interest from Casino Guichard-Perrachon and Tesco for Carrefour’s Thailand stores is telling of the domestic retail sector’s potential, although Casino’s acquisition will speed up the sector’s path to saturation.
Headline Industry Data:
2010 Food Consumption = +6.6%; forecast to 2015 = +48.4%
2010 Alcoholic Drinks Consumption= +7.8%; forecast to 2015 = +39.5%
2010 Soft Drinks Consumption= +6.2%; forecast to 2015 = +29.8%
2010 Mass Grocery retail Growth= +9%; forecast to 2015 = +44.9%
Key Company Trends
Casino Outbids Tesco To Acquire Carrefour - French retailer Casino Guichard-Perrachon has agreed to acquire French supermarket rival Carrefour’s 42 stores in Thailand, of which 34 are hypermarkets, for EUR868mn (US$1.2bn). With the addition of 42 stores under the Big C Supercenter store banner, Casino’s future earnings could see a major boost as it reaps greater economies of scale through improved distribution efficiencies. In addition, Big C’s future could provide it with stronger bargaining power and improved purchasing terms, and also lower its production costs. Casino could also use Carrefour as a strategic springboard to grow its emerging market presence to boost its revenue growth.
Thailand An Increasingly Crucial Growth Driver - TUF's modest financial performance – the company reported a 3% growth in revenue for Q310 – has brought to light the importance of geographical diversity in its growth plans. While developed markets will continue to account for the bulk of its revenues in the near term, we would expect TUF to channel a significant proportion of its investments to the emerging markets of the Middle East, Asia, Africa and Latin America. These markets are characterised by low existing spending levels, but they offer tremendous growth opportunities that are not available to TUF in developed markets.
Key Risks To Outlook:
Commodity Price Volatility – Commodity price volatility is a key risk to our interest rate expectations. Should price pressures build considerably through the coming months, we believe this could place pressure on the central bank to hike rates in order to keep inflationary pressures in check. Lower credit availability could discourage consumer spending and weigh on our positive consumer outlook.
Negative Global Headwinds – The impact of weakening export demand may be worse than expected and could act as a drag on our economic growth forecast of 3.6% for Thailand in 2011. A worse-thanexpected economic slowdown is likely to weigh on consumer sentiment and dampen consumer spending.
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