China Food and Drink Report Q3 2009

Publication Date	June 2009
Publisher	Business Monitor
Product Type	Report
Pages	88
ISBN Number	not applicable
Product Code	BMI02276

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Summary

With recently released figures showing that in Q109 the Chinese economy grew at its slowest pace since quarterly records began in 1992, many food and drink producers continue to worry about the impact of this slowdown of their sales. Nevertheless, despite the slowing economic growth, China remains an unmissable opportunity for expansion-orientated companies, as discussed here in BMI's China Food & Drink Report for Q309. Tellingly, this quarter witnessed a number of major merger and acquisition stories in the country's high growth drinks industry.

In March the country's leading brewer by volume, China Resources Snow Breweries (Snow), acquired Hupo Brewery located in Shandong province, China for US$42mn. The brewer said that it plans to spend US$8mn on technology upgrades at the existing brewing facilities, which will enable it to increase beer production by 3mn hectoliters. This was followed by Snow's April acquisition of Shandong-based Amber Breweries in a deal worth CNY285mn (US$41.7mn). Clearly, Snow is ramping up investment in a bid to become a truly national player in China's still-fragmented beer industry and to beat fierce rival Tsingtao. These acquisitions will allow the company to build its footprint in what is a high consumption province, and indicates that while brewers have traditionally stuck to their home provinces, this trend is changing along with growing levels of competition.

In another deal that was closely watched by those in the industry, following months of speculation, in March the Chinese Ministry of Commerce finally rejected US soft drink giant The Coca-Cola Company's (TCCC) US$2.4bn bid for local juice major Huiyuan Juice Group. Many industry insiders expected the deal to go through, despite the slow progress, as the government could have used this acquisition to send a strong signal about China's new anti-monopoly law. However, the merger was rejected on the grounds that it was anticompetitive, and would hurt small-scale local juice producers, potentially pushing up juice prices and limiting choices for consumers. Although the food and drink industry is not thought to be of national strategic importance, Huiyuan Juice is an iconic household name in China and there was thought to be quite strong consumer sentiment about it potentially falling into foreign hands.

As the largest ever international takeover of a Chinese firm, the deal was seen as a test of China's recently revised competition law. However, as demands for protectionism have been rising globally on the back of the financial crisis, it began to look increasingly unlikely that the deal would go through. The entire process was followed very closely by those companies keen to exploit the immense opportunity presented by the vast and high growth Chinese market, especially those keen to enter inorganically via acquisitions and those preferring to take full ownership of Chinese enterprises rather than smaller stakes.

The veto is an untimely signal that while China is keen to attract more foreign investment and improve its reputation, it is not yet ready to offer a more liberal business environment, despite what Beijing rhetoric might have suggested.

Content

Executive Summary
SWOT Analysis
China Food Industry SWOT
China Drink Industry SWOT
China Mass Grocery Retail Industry SWOT
Business Environment
Asia Pacific Food & Drink Business Environment Ratings
- Table: Asia Pacific Food & Drink Business Environment Ratings Q3 2009
China Food & Drink Business Environment Rating
Macroeconomic Outlook
China - Economic Activity
Food
Industry Forecast Scenario
Food Consumption
- Table: China Food Consumption Indicators - Historical Data & Forecasts, 2006-2013
Canned Food
- Table: China Processed Food Volume/Value Sales - Historical Data & Forecasts, 2006-2013
Instant Noodles
Confectionery
- Table: China Confectionery Value/Volume Sales - Historical & Forecast Sales Data, 2006-2013
Trade
- Table: China Food & Drink Trade Balance - Historical Data & Forecasts
Industry Developments
Market Overview
Food Production
Instant Noodles
Confectionery
Trade
Agriculture
Rice Production
Dairy Industry
- Table: China Dairy Production & Consumption ('000 Tonnes)
Organics
Drink
Industry Forecast Scenario
Hot Drinks
- Table: China Hot Drinks Value Sales (US$mn) - Historical Data & Forecasts, 2006-2013
Alcoholic Drinks
- Table: China Beverage Industry Production and Value/Volume Sales - Historical Data & Forecasts, 2006-2013
Soft Drinks
- Table: China Beverage Industry Sub-Sectors - Historical & Forecast Sales Data. 2006-2013
Industry Developments
Market Overview
Soft Drinks
- Table: Estimated Soft Drinks Sales Breakdown in China, Value Sales (%)
Hot Drinks
Alcoholic Drinks
Beer
Wine
Spirits
- Table: Estimated Alcoholic Drinks Sales Breakdown in China, Value Sales (%)
Mass Grocery Retail
Industry Forecast Scenario
- Table: China MGR Retail Indicators - Historical Data & Forecasts, 2006-2013
- Table: Grocery Retail Sales By Format (%) - Historical Data & Forecasts
Industry Developments
Market Overview
Leading MGR Players
- Table: Structure Of China's Mass Grocery Retail Market By Estimated Number Of Outlets, 2002-2007
- Table: Structure Of China's Mass Grocery Retail Market - Sales By Format (US$bn), 2002-2007
- Table: Annual Average Store Sales By Format (US$mn)
Competitive Landscape
Key Players
Food and Drink
- Table: Key Players in China Food & Drink Sector - 2008
Mass Grocery Retail
- Table: Key Players in China's Mass Grocery Retail Sector - 2008
Company Analysis
Food
Tingyi (Cayman Islands) Holding
China Foods Ltd (formerly China National Cereals Oils And Foodstuffs)
China Mengniu Dairy Company
Drink
Tsingtao
Wahaha
Kweichow Moutai Co
Mass Grocery Retail
Carrefour
Lianhua Supermarket Holdings
Appendix
Commodity Price Forecasts
Corn
- Table: Corn, 2005-2010
Soybean
- Table: Soybean, 2005-2010
Rice
- Table: Rice, 2005-2010
Wheat
- Table: Wheat, 2005-2010
Cocoa
- Table: Cocoa, 2005-2010
Coffee
- Table: Coffee, 2005-2010
Milk
- Table: Milk, 2005-2010
Sugar
- Table: Sugar, 2005-2010
Country Snapshot: China Demographic Data
Section 1: Population
- Table: Demographic Indicators, 2005-2030
- Table: Rural/Urban Breakdown, 2005-2030
Section 2: Education and Healthcare
- Table: Education, 2002-2005
- Table: Vital Statistics, 2005-2030
Section 3: Labour Market and Spending Power
- Table: Employment Indicators, 2001-2006
- Table: Consumer Expenditure, 2000-2012 (US$)
- Table: Average Annual Manufacturing Wages, 2005-2012
Food & Drink Business Environment Ratings
Ratings Methodology
Ratings Overview
Ratings System
Indicators
Limits Of Potential Returns
Risks To Realisation Of Potential Returns
Weighting
Weighting
BMI Food & Drink Industry Glossary
Food & Drink
Mass Grocery Retail
BMI Food & Drink Forecasting & Sourcing
How We Generate Our Industry Forecasts
Sourcing