Hong Kong Food and Drink Report 2008

Publication Date	April 2008
Publisher	Business Monitor
Product Type	Report
Pages	73
ISBN Number	not applicable
Product Code	BMI01657

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Summary

Activity levels in Hong Kong's small but very mature food and beverage industry throughout 2007 highlight just how profitable a market this remains for investors. However, while high consumer spending ensures that interest and dynamism remain high, the last 12 months have seen a marked trend of local investors turning away from the islands in search of higher growth opportunities elsewhere. This report examines this trend and assesses its implications for industry sales growth and the competitive landscape.

Two events from 2007 sum up this trend, one financial, one strategic. Hong Kong instant noodle producer Tingyi (Cayman Islands) Holding Corp announced H107 sales growth of 35.2% to US$1.5bn. The company has typically had to rely on Hong Kong for sales of its high value, convenience noodle products and yet it confirmed in August 2007 that China had been almost the solitary driver of this impressive growth. Hong Kong may well remain an important testing ground for new product development for Tingyi in 2008, and yet going forward, the future success of the company lies on the mainland.

Tingyi's progress in China coincided with news that San Miguel Brewery Hong Kong, the local subsidiary of the Philippines food and beverage giant, was to close one of its two Hong Kong brewing facilities and shift production to China. The decision was taken on the back of rising distribution costs, stronger long-term opportunities in China and the perceived challenges of Hong Kong's alcoholic drinks regulatory environment - mainly excise hikes.

The increased commitment of manufacturers to China to the detriment of Hong Kong is both contributing to, and a product of, the growth outlook for Hong Kong's food and beverage industry. To 2012, BMI expects total food consumption in Hong Kong to fall by 3.7% to US$11.2bn; discounting continues to grip the industry and manufacturers are forced to compete on price just to preserve market share in this increasingly crowded market. However, that said, even with this fall, per capita food consumption is still forecast to stand at a regionally impressive US$1,482 in 2012.

This conflict - a lack of growth opportunities, but attractive current spending levels - explains the approach currently being taken by manufacturers in Hong Kong. For example, San Miguel has already confirmed that it might consider utilising its now defunct brewing facility for soft drink or spirits production; the company is loathe to abandon the factory altogether because of the sales and profitability opportunities that do exist in the market.

Throughout 2008, this is likely to remain a prevalent feature of the market. Manufacturers will have to continue to juggle their priorities, looking to Hong Kong for immediate profits and the mainland for longterm growth.

Content

Executive Summary
Business Environment
Regional Food & Drink Business Environment Ratings
- Table: Asia Pacific Food & Drink Business Environment Ratings - Q108
Hong Kong's Food & Drink Business Environment Rating
SWOT Analysis
Mass Grocery Retail
Hong Kong Mass Grocery Retail Industry SWOT
Food and Drink
Hong Kong Food & Drink Industry SWOT
Macroeconomic Outlook
- Table: Economic Activity
Retail
Regional Overview: Declining Role Of Independent Retail In Asia Pacific
- Table: MGR Versus Independent/Traditional Retailers In Selected Asia Pacific Markets, 2006 (store numbers)
- Table: MGR versus Independent/Traditional Retailers In Selected Asia Pacific Markets, 2006 (sales, US$mn)
Industry Forecast Scenario
Hong Kong Mass Grocery Retail Sales by Format (US$bn) - Historical Data & Forecasts
- Table: Sales Breakdown by Retail Format Type
Industry Developments
Market Overview
- Table: Structure of Hong Kong's Mass Grocery Retail Market by Estimated Number of Outlets
- Table: Structure of Hong Kong's Mass Grocery Retail Sales (US$mn) by Format
- Table: Average Sales per Outlet by Format, 2006
Food and Drink
Food Regional Overview: Confectionery in the Asia Pacific region
- Table: Leading Global Chocolate Manufacturers
- Table: Leading Confectionery Companies in the Asia Pacific Region
Drink Regional Overview: Wine In The Asia Pacific Region
- Table: Australian Wine Exports To Selected Asian Markets
- Table: Wine Sales In Selected Asia Pacific Markets - Historical Data And Forecasts (mn litres)
Industry Forecast Scenario
Food
- Table: Hong Kong Food Consumption - Historical Data & Forecasts
- Table: Hong Kong Food Sub-Sector Indicators - Historical Data & Forecasts
- Table: Food, Drink & Tobacco Sectoral Trade Forecasts
Drink
- Table: Hong Kong Beverage Sub-Sector Indicators - Historical Data & Forecasts
Industry Developments
Food
Drink
Market Overview
Food
Drink
Tobacco
Industry Forecast Scenario
- Table: Cigarette Value & Volume Sales - Historical Data & Forecasts
Industry Developments
Market Overview
Competitive Landscape
Key Players
Mass Grocery Retail
- Table: Key Players in Hong Kong's Mass Grocery Retail Sector
Food and Drink
- Table: Key Players in Hong Kong's Food & Drink Sector
Regional Company Case Studies
Food: Unilever In The Asia Pacific Region
- Table: Per Capita Food Consumption in Selected Asia Pacific Markets (US$)
Drink: San Miguel Corporation In The Asia Pacific Region
- Table: San Miguel Corporation In The Asia Pacific Region
- Table: San Miguel Corporation Revenue And Earnings Growth By Operating Division, Q107 (%)
- Table: San Miguel Corporation - Sales By Market (US$mn)
- Table: San Miguel Corporation - Key Historical Data
Mass Grocery Retail: Metro In The Asia Pacific Region
- Table: Metro Group - Five-Year Financial Results
Company Analysis
Mass Grocery Retail
Dairy Farm International
AS Watson
Food
Golden Resources
Drink
Tsit Wing
San Miguel Hong Kong
Vitasoy International
Food & Drink Ratings Appendix
Introduction: Revised Methodology
Ratings Overview
Ratings System
Indicators
Limits of Potential Returns
Risks to Realisation of Potential Returns
Weighting
Weighting
BMI Forecast Modelling
How We Generate Our Industry Forecasts
Retail Industry
Sources