Malaysia Food & Drink Report Q1 2008
Business Monitor International, February 2008, Pages: 72
The Malaysia Food Drink Report provides independent forecasts and competitive intelligence on Malaysias food and drink industry.
The latest round of financial results announcements from Malaysia’s leading drinks companies have confirmed that producers remain gripped by the global challenges of rising ingredient, production and transportation costs. Afraid of losing sales in what remains a very price-sensitive market - in spite of steady economic growth and rising disposable incomes - beverage manufacturers in Malaysia have proved scared of passing these rising costs on to their customers. However, it is company profits that are paying the price for the adoption of this strategy, which is in turn affecting companies’ capacity for reinvestment and the pursuit of further growth.
The local unit of Singaporean beverage producer Yeo Hiap Seng (YHS) announced a pre-tax loss of US$4mn for the first nine months of 2007, compared to a pre-tax profit of US$5.4mn for the same period in 2006. Danish brewing giant Carlsberg announced that its local subsidiary was also suffering, with nine-month net profit falling by a worrying 32.6% to US$18mn. Some comfort for Carlsberg will come from the fact that its fierce local rival Guinness Anchor Berhad (GAB) also continues to struggle. In Q407, GAB announced that net profit for fiscal 2007, ending June, was down 13.8% to US$37mn. Although alcoholic and soft drinks sales in Malaysia are forecast to increase by 13.5% and 20.8% in value terms respectively to 2012, all three firms clearly believe that demand from their own consumers is not strong enough to accommodate price increases at this time. Per capita food and beverage consumption in Malaysia stood at a regionally impressive US$428 in 2007. The author expects this to increase by a reasonably healthy 8.6% to 2012. Nonetheless Malaysian consumers remain highly price conscious, with their purchasing behaviour having triggered some very aggressive price wars in the country in the past. With the above three firms playing it ‘safe’ by cushioning rising costs internally, there is now a risk that their capacity to reinvest in the sort of product innovation that typically stimulates sales growth in Malaysia will be jeopardised.
Such a risk becomes clearer when one considers another key financial announcement from recent months, that of the local subsidiary of Singaporean beverage giant Fraser & Neave (F&N). On acknowledging that spiralling costs might be structural, not short-term cyclical, F&N immediately made the bold decision of passing the higher prices on to its consumers. The tactic paid dividends. Not only did F&N’s pre-tax profit for FY07, ending September, climb by 13.9% to US$66.3mn, consumers proved undeterred and the company’s diverse portfolio was sufficient to see revenues surpass initial expectations by 4.4% to reach US$861mn. Such success has allowed F&N to proceed with its scheduled US$100mn investment in a new fruit juice and dairy plant for Malaysia, as well as allowing it to boost its soft drinks market share to the further detriment of its struggling rivals. The author would expect to see some of these rivals follow suit in 2008.
Executive Summary 5
Business Environment 6
Regional Food & Drink Business Environment Ratings 6
Table: Asia Pacific Food & Drink Business Environment Ratings - Q108 8
Malaysia’s Food & Drink Business Environment Ratings 8
SWOT Analysis 10
Mass Grocery Retail 10
Malaysia Mass Grocery Retail Industry SWOT 10
Food and Drink 11
Malaysia Food And Drink Industry SWOT 11
Macroeconomic Outlook 12
Table: Malaysia - Economic Activity 15
Retail16
Regional Overview: Declining Role Of Independent Retail In Asia Pacific 16
Table: MGR Versus Independent/Traditional Retailers In Selected Asia Pacific Markets, 2006 (store numbers) 17
Table: MGR versus Independent/Traditional Retailers In Selected Asia Pacific Markets, 2006 (sales, US$mn) 19
Industry Forecast Scenario 20
Table: Indonesia Mass Grocery Retail Sales by Format 21
Table: Grocery Retail Sales by Format - Historical Data & Forecasts 22
Industry Developments 22
Market Overview 24
Table: Structure Of Malaysia’s Mass Grocery Retail Market By Estimated Number Of Outlets 25
Table: Structure of Malaysia’s Mass Grocery Retail Market, Value Sales By Format (US$bn) 25
Table: Average Sales Per Outlet By Format, 2006 26
Sales/Store Number Breakdown By Retail Format Type, 26
Food And Drink 27
Regional Overview: Confectionery in the Asia Pacific region 27
Table: Leading Global Chocolate Manufacturers 27
Table: Leading Confectionery Companies in the Asia Pacific Region 30
Industry Forecast Scenario 32
Food 32
Table: Food Consumption Indicators - Historical Data & Forecasts 33
Drink 34
Table: Malaysia Beverage Sub-Sector Value Sales - Historical Data & Forecasts 35
Industry Developments 35
Food 35
Agriculture 36
Drink 37
Market Overview 38
Agriculture 38
Table: Malaysia Agricultural Sub-Sector Production Volume Data 39
Table: Malaysia Organic Agricultural Data 39
Table: Malaysia Dairy Industry Data (‘000 tonnes, unless stated) 39
Food 40
Drink 40
Tobacco42
Industry Forecast Scenario 42
Table: Cigarette Value/Volume Sales - Historical Data & Forecasts 43
Industry Developments 43
Market Overview 44
Competitive Landscape46
Key Players 46
Mass Grocery Retail 46
Table: Key Players in Malaysia’s Mass Grocery Retail Sector, 2006 46
Food and Drink 47
Table: Key Players in Malaysian Food & Drink Sector, 2 47
Asia Pacific Regional Company Case Studies 48
Food: Unilever In The Asia Pacific Region 48
Table: Per Capita Food Consumption in Selected Asia Pacific Markets (US$) 51
Drink: San Miguel Corporation In The Asia Pacific Region 52
Table: San Miguel Corporation In The Asia Pacific Region 53
Table: San Miguel Corporation Revenue And Earnings Growth By Operating Division, Q107 (%) 53
Table: San Miguel Corporation - Sales By Market (US$mn) 55
Table: San Miguel Corporation - Key Historical Data 56
Mass Grocery Retail: Metro In The Asia Pacific Region 57
Table: Metro Group - Five-Year Financial Results 57
Company Analysis 61
Mass Grocery Retail 61
Carrefour 61
AEON (M) Bhd 62
Food 63
Nestlé Malaysia 63
Drink 64
Guinness Anchor Berhad 64
Carlsberg Malaysia 65
Food & Drink Ratings Appendix 66
Introduction: Revised Methodology 66
Ratings Overview 66
Ratings System 66
Indicators 66
Limits of Potential Returns 67
Risks to Realisation of Potential Returns 68
Weighting 68
Weighting 69
Our Forecast Modelling 70
How We Generate Our Industry Forecasts 70
Retail Industry 70
Sources 71
- AEON (M) Bhd
- Carlsberg Malaysia
- Carrefour
- Guinness Anchor Berhad
- Nestlé Malaysia
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