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United States Food and Drink Report Q2 2011
Business Monitor International, April 2011, Pages: 98
The United States 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 United States's food and drink industry.
The big downside risk for the US economy in 2011 – that taxes rise and unemployment benefits were not extended actually turned into a major upside surprise in December 2010 after Congress not only approved an extension of the income tax regime and unemployment benefits, but also cut payroll taxes by two percentage points. The latter was unexpected and prompted us to raise our 2011 real GDP growth forecasts, with a significant lift in private consumption being the main driver. An improving economic outlook also had a positive impact on consumer confidence and this improvement will be greeted warmly by retailers and the food and drink sector.
Headline Industry Data:
- 2011 per capita food consumption = +2.0%; forecast to 2015 = +9.9%
- 2011 alcoholic drink sales = +1.4%; forecast to 2015 = +9.9%
- 2011 soft drink sales = +2.0% ; forecast to 2015 = +8.5%
- 2011 mass grocery retail sales = +2.7%; forecast to 2015 = +12.9%
Key Company Trends And Developments:
Green Mountain-Starbucks tie up is a win for both parties: US coffee shop operator Starbucks has signed a deal with coffee capsule producer Green Mountain Coffee Roasters that will see Starbucks coffee become available for Green Mountain’s popular Keurig single-cup brewing system. The move continues Starbucks push into the retail sector a strategy adopted in response to high levels of market saturation in the coffee shop sector and puts the firm in a position to benefit from the booming demand for coffee capsules. For Green Mountain the deal will add a powerhouse brand to its portfolio of capsules and will also broaden its distribution with Starbucks outlets selling Starbucks branded capsules (known as K-cups) as well as Keurig brewers.
Lacklustre Family Dollar results could indicate change in US retail trends: The latest quarterly results posted by US discount operator Family Dollar came in below expectations. For a sector that has consistently surprised to the upside, the results were disappointing and led to a 9% drop in Family Dollar’s share price, as well as a general slide across the lower end of the retail spectrum. The below consensus results can be explained in several ways. However, BMI believes that an upturn in consumer confidence in the second half of 2010 combined with an improved outlook for GDP growth in 2011 may mean the sector is set for a sustained period of lower growth.
Key Risks to Outlook:
Pain has just been delayed: There is still considerable uncertainty about the housing market recovery, and we do not believe the tax measures will do much to bring down the unemployment rate. The fiscal drag that we expected going into 2011 has merely been deferred by the new tax policy. If these provisions are not extended beyond 2011 then we believe growth will be significantly affected. While we find it hard to believe that taxes would be raised and benefits cut heading into an election year in 2012, it is not out of the question.
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