Pursuing Asian Growth

Most indications suggest that the Asia-Pacific region is set to increase its share of the global food-and-drinks industry over the next couple of decades. This can be attributed to factors such as the growing maturity of many western markets, the growth of an increasingly urban and affluent consumer base in countries like China and India, and the continued spread of multinational operators and their brands throughout much of the developing world. Many of the world’s leading retailers and food service operators are also targeting the Asia Pacific region, since it is considered to have significant scope for further development.



Burgeoning growth
Estimates of food-and-drink sales vary according to source, but all agree that grocery markets such as China, India and Indonesia are set to experience a period of continued growth over the next decade. Much of this is expected to be driven by the growing presence of multiple grocery chains, major examples of which include Wal-Mart of the US and Carrefour from Europe.



At present, modern supermarkets account for an estimated 75 percent of grocery sales in the Asia-Pacific region and traditional retailers the remainder, but the role of the independents is now in decline. Modern supermarkets are forecast to have captured a 50 percent share of the Chinese grocery market by 2012, whilst the share taken by these channels in Indonesia is expected to rise from 22 percent at present to around 40 percent by 2016. At the other end of the scale, organized retail channels still account for less than five percent of the expanding Indian market.



The Chinese grocery market was valued at around $285 billion in 2006, with a figure of $456 billion expected for 2010. Elsewhere, the Indian grocery market was valued at $221 billion in 2006, a figure expected to increase to $495 billion by 2020. India also represents the world’s second-largest supplier of food and vegetables, with an annual output of almost 135 million tons. Some of the other large developing grocery markets in the Asia-Pacific region include Indonesia (currently worth around $115 billion) and Vietnam (currently worth around $20 billion).



Specialized products
Many of these markets are also witnessing a trend towards packaged and value-added foods, especially in sectors such as dairy products. At present, processed foods still account for only 30 percent of food consumption in China, but this figure is expected to grow. The total market for packaged foods in the Asia-Pacific region was valued at $500 billion in 2006, a figure expected to grow by 20 percent in the years leading up to 2011. At present, dairy, bakery and processed foods (the latter sector of which is largely made up of dried foods such as noodles) account for around a quarter of sales, equivalent to a market worth $120 billion in 2006.




The Asia Pacific region also has a growing food service market. In the years leading up to 2010, the region is expected to increase its share of the global market to more than 30 percent, during which time the share taken by Europe is forecast to experience a slight decline. China’s food service industry was valued at more than $92 billion in 2006, which compares with nearly $17 billion for India. However, both countries still trail the US by some margin, with the North American market set to increase from around $500 billion at present to $685 billion by 2010. The food service market for the smaller countries of South-East Asia (e.g. Vietnam, Indonesia, Singapore, Taiwan, etc.) is currently worth almost $26 billion, comprising more than 1.1 million outlets. KFC represents China’s leading fast-food restaurant chain in terms of number of outlets, ahead of McDonald’s.


Recent developments
The present growth of the food industry in the Asia-Pacific region continues to attract a number of large multinational operators, many of which have either set up joint ventures with local firms or entered the markets via acquisition. Here are some of the more noteworthy examples.

• Danone has placed a strong emphasis on accelerating growth within the Asian region. During May 2007, it reaffirmed its partnership with Yakult Honsha, saying that it would maintain its 20-percent interest level until at least 2012. Earlier in the year, the company bought out Calpis Ajinomoto Danone (CAD), the joint venture it was operating with local firm Calpis. At the end of the previous year, Danone had created a new joint venture in China with the locally-based Mengniu Dairy Company, which now manufactures and distributes products within the Chinese dairy market. Danone holds a 49 percent stake in this entity and Mengniu the remainder.

• In recent years, the Dutch dairy giant Campina has created new joint ventures in Vietnam and Thailand, with local companies Vinamilk and Thai Dairy Industries respectively. The decision was taken to disband the Thai joint venture in the middle of 2007, following the news that Campina was to establish a new entity in the same country with another local fi rm, Thai Advanced Foods. The new joint venture supplies yoghurts and yoghurt drinks under the Betagen brand.

• In the summer of 2007, ABF of the UK set up a joint venture in China with the Hebei Tian Lu Sugar Group. ABF invested around $143 million into this latest venture, in which it owns a 51 percent stake. Prior to this development, the company had already been operating joint ventures in China dedicated to the manufacture of both sugar and animal feedstuffs.

• In April 2007, the US confectionery giant Hershey set up a joint venture with the Indian-based Godrej Beverages & Foods, creating Godrej Hershey Foods & Beverages. This new entity provides Hershey with access to the developing Indian confectionery market.

Rankings
The global food-and-drinks industry is still dominated by companies headquartered in either the US or Western Europe. According to the top-100 ranking that forms part of Leatherhead Food International’s Global Food Markets (GFM) database, almost 40 percent of the world’s leading suppliers have their headquarters in the US, rising to 44 percent if Canadian and Mexican companies are included. Firms headquartered in Western Europe account for a further 34 percent of global suppliers, most of which are located in countries such as the UK, France, Germany and the Netherlands.

Around 17 percent of the leading global suppliers are Japanese companies, the largest of which include the likes of Asahi Breweries, Kirin Brewery Company, Suntory, Ajinomoto and Nippon Meat Packers. At present, these companies have only a very limited presence outside the Asia-Pacific region, although the rising popularity of Japanese cuisine in places such as Western Europe may start to change this situation in the future. The top-100 ranking also includes Australasian operators such as the New Zealand-based Fonterra (one of the world’s leading suppliers of dairy products), as well as the Australian-based Coca-Cola Amatil and the Fosters Group.

According to the most recent ranking, Nestlé remains the global leader, with food-and-drink sales worth more than $73 billion in the year ending December 2006. The company’s food-and-drink revenue has increased substantially within the last financial year, largely as a result of acquisition activity. Much of this has been with the aim of increasing its presence in growth sectors such as health and weight management, the most notable example of which has been Jenny Craig, which was acquired for $600 million in the middle of 2006 and now forms an integral part of Nestlé’s Nutrition, Health & Wellness unit. Since then, Nestlé has also strengthened its position in the global market for baby foods by acquiring Gerber Foods from Novartis. This deal, which was worth $5.5 billion, took place in April 2007.

Top 60 Food Groups