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Australia Food and Drink Report Q1 2012
Business Monitor International, Nov 2011, Pages: 118
Business Monitor International's 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.
The Queensland floods, a strong Australian dollar and declining consumer spending have darkened their Australian retail picture in 2011. BMI is holding on to a cautious outlook for the Australian consumer sector over 2011-2012 as BMI foresee a dip in private consumption, including retail spending, following a fall in domestic property prices that will lead to a loss of wealth. While there is little scope for optimism in Australia’s short-term consumer outlook, the long-term outlook for domestic consumer goods manufacturers and retailers is more upbeat. Australia’s healthy population growth and stable economic growth make for a reasonably positive-looking consumer picture.
Headline Industry Data
- 2011 per capita food consumption = +1.9%; CAGR forecast to 2016 = +0.9%.
- 2011 soft drinks sales = +3.4%; CAGR forecast to 2016 = +2.2%.
- 2011 alcoholic drinks sales = +1.7%; CAGR forecast to 2016 = +1.8%.
- 2011 mass grocery retail sales = +1.9%; CAGR forecast to 2016 = +3.5%.
Key Industry Trends
SABMiller Finally Wins Bid for Foster’s: In September 2011 UK brewing giant SABMiller finally sealed its acquisition for Foster's Group with an improved offer of AUD9.9bn (US$10.2bn), or AUD5.1 (US$5.2) per share, after it failed twice in its attempt to land Foster's with an offer of AUD4.9 (US$5.0) per share. Given SABMiller’s focus on strengthening Foster's brand positioning, improving supply chain management and reaping cost savings post-acquisition, BMI believe there is a strong cause for optimism in the UK brewer's turnaround strategy for Foster's. SABMiller CEO Graham Mackay commented during the company’s presentation on the acquisition of Foster's that there are premiumisation opportunities on offer in Australia as 'consumers move towards premium beers, craft beers and higher value lowercarbohydrate beers' and that the beer sector has continued to deliver 'long-term increases in profit and cash generation'
Aldi Takes Advantage of Private Label Demand: Domestic expansion is at the top of the agenda for German-based discount retailer Aldi's Australian business, whose product range largely consists of private labels. The retailer, which has 265 outlets in Australia, is expected to open between 25 and 30 stores in the country in 2012 and will be focusing its expansion on the eastern states of Australia. With domestic demand uncertainties lying ahead in 2011, Aldi is clearly looking to take advantage of a period of softened consumer confidence, which should work well for its lower-value offerings and private label goods. Over the longer term, the shift of consumption habits towards private labels will continue to pick up momentum, and Aldi should find itself better positioned to exploit this trend with an expanded domestic scale.
Risks To Outlook
With Chinese economic expansion set to slow in H211, BMI are concerned that further monetary tightening in China may dampen demand for Australian resources, particularly from mining, and force Australia’s full-year export growth into negative territory by 2012. BMI have long argued that, even if the Chinese economy continues to hold up, Australia's domestic woes mean that it is significantly at risk of a recession. The swing factor in determining whether Australia can escape outright contraction or recession, in their view, will be China's demand for Australian exports.
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