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France Food and Drink Report Q4 2011
Business Monitor International, Sep 2011, Pages: 123
Consumer spending on food and drink in France has remained generally lacklustre, with consumers showing much less dynamism than elsewhere in the EU. The market has been primarily driven by trends toward value, with private labels and discount retail the big winners in this scenario. Flat growth in the second quarter of 2011 and a deteriorating global economic backdrop have led to a downwards revision for French real GDP growth forecast to 1.8% in 2011, from 2.2% previously. Indications for 2012 are not much brighter with growth forecast at 1.7%.
Headline Industry Data - 2011 per capita food consumption = +0.5%; forecast to 2015 = +5.6%
- 2011 alcoholic drink sales = +0.2%; forecast to 2015 = +0.4% ?? 2011 soft drink sales = +2.8%; forecast to 2015 = +13.9%
- 2011 mass grocery retail sales = +2.6%; forecast to 2015 = +13.9% Key Industry Trends And Developments
Lactalis Secures Parmalat Deal – French dairy giant Lactalis has recently sealed the takeover of Italian rival Parmalat, securing an 83.3% stake in the business. Although Parmalat's board originally turned down the offer, Lactalis, as the company's largest shareholder, was able to nominate candidates to the Italian firm's board. According to a company statement, with the takeover of Parmalat, Lactalis has an estimated turnover of EUR15bn and has become the ‘worldwide leader in dairy products’. Lactalis President Emmanuel Besnier said the deal was a ‘very important step’ for the family-owned company, adding the acquisition would expand the company’s business by 50%.
Soft Drinks Tax Imposed – In an unprecedented step, the French government has recently confirmed that VAT on soft drinks with added sugar will be increased from 5.5% to 19.6% from the beginning of 2012, with the proceeds used to fund social security payments to farmers. Such action could have a fairly significant impact on the country's carbonated soft drink sector, which unlike many in Europe, continues to register growth. Perhaps even more significant is the precedent that could be set in terms of the move being followed in other countries across the world if the action is seen to successfully cut down the consumption of unhealthier types of soft drinks.
Key Risk To Outlook Eurozone debt crisis – The greatest short-term risk to the French outlook is a credit event elsewhere in the eurozone. This would elevate risk aversion toward and could destabilise the economic recovery. It would also raise questions about the fiscal solvency of other countries in the eurozone, and while France is among the bloc’s ‘core’ states, its government debt pile of over 80% of GDP in 2010 (according to our estimates) compares unfavourably even with the likes of Spain.
Faltering recovery – BMI note that France remains highly susceptible to a regional downturn and should the global economic backdrop continue to deteriorate, a return to recessionary territory in France cannot be ruled out at this stage. With the economic recovery still weak, the government’s plans for significant fiscal retrenchment could weigh more heavily on growth than we expect.
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