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Singapore Food and Drink Report Q1 2012
Business Monitor International, Jan 2012, Pages: 85
While the domestic economy will find strength in Singapore’s job and tourism market, consumption is typically hit hard as exports fall. Whereas a vigorous labour market and strong tourist arrival growth will provide some support for domestic demand, private consumption should still fall in 2012. However, we do not expect the metric to fall as sharply as it did in 2009, bearing out the relative resilience of the domestic economy. Prevailing risks to our 2012 domestic demand outlook include a sharper deterioration of the external macroeconomic environment and an acute ‘bursting’ of what we view to be a bubble in Singapore’s real estate market.
Headline Industry Data
- 2012 food consumption = +2.6%; compound annual growth rate (CAGR) forecast to 2016 = +1.6%
- 2012 alcoholic drink value sales = +4.3%; CAGR forecast to 2016 = +3.7%
- 2012 soft drink value sales = +4.0%; CAGR forecast to 2016 = +2.5%
- 2012 mass grocery retail sales = +2.7%; CAGR forecast to 2016 = +2.1%
Industry Trends & Developments
Retailers Linking Up With Overseas Suppliers For Greater Diversification: Local retailers are looking further afield for opportunities to tie up with farmers and agricultural suppliers. Leading Singapore retailer NTUC FairPrice has recently inked two-year contracts with two farms in Western Australia to supply 52mn carrots, which makes up about 80% of the retailer’s overall supply needs in a year. Local retailer Sheng Siong, meanwhile, is currently contemplating the idea of establishing supply contracts with overseas farmers. By securing contracts with more suppliers, particularly in the more developed agricultural markets such as Australia, local retailers will able to reap the benefits of secure supplies, low price volatility and better product quality.
Singapore As A Platform For Regional Expansion: US-based soft drinks producer The Coca Cola
Company (TCCC) officially launched its first concentrate facility in Singapore on September 20 2011. According to a spokesperson, the plant will facilitate volume growth in Asia, which is one of TCCC’s fastest growing markets. Meanwhile, the expiration of a bottling agreement between US soft drinks giant The Coca-Cola Company and Singapore-based soft drinks producer Fraser and Neave (F&N) marks a fresh start for both companies. Upon the termination of this agreement, F&N can now expand freely into the other high-growth regional markets such as Thailand and Indonesia.
Risk To Outlook
Downside risks to our expectations for softer demand conditions in Singapore could stem from a sharper deterioration of the external macroeconomic environment. Singapore’s huge trade and investment exposure to the US, EU and China makes it especially vulnerable to a slowdown in the world’s three largest economies. In particular, should the EU and US enter a renewed recession, languidness in Singapore’s export sector could prove an even larger drag on headline GDP growth. A hard landing in China, Singapore’s largest national export market, could also seriously inhibit the city-state’s growth trajectory in 2012. These scenarios are likely to weigh on consumer confidence and clearly would not come as welcome news to domestic consumer goods producers.
An acute ‘bursting’ of what we view to be a bubble in Singapore’s real estate market is another key risk
to the Singapore consumer story, as a sharp drop in real estate prices would coincide with a rapid fall in loan and credit growth, potentially derailing domestic demand growth.
Business Monitor International's Singapore 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 Singapore's food and drink industry.
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