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Japan Food and Drink Report Q4 2009Published by: Business Monitor International Published: Oct. 7, 2009 - 83 Pages Table of Contents
AbstractAs Japan appears to be slowly emerging from the 'Great Recession', there is little doubt that the country issubstantially weaker than before. While the economy does seem to be improving, it is from a very deeptrough, and as discussed in BMI’s recently published Japan Food & Drink Report for Q409, this has hada major impact on consumer confidence and the country’s food and drink industry. Japan benefits from alarge and highly dynamic alcoholic drinks industry, which accounts for around 19% of the combined foodand beverage industries. However, the outlook for the alcoholic drinks industry is poor. It is sufferingfrom the effects of market saturation and from the country’s recent economic downturn, which negativelyimpacted on alcoholic drinks sales, stymieing consumer purchasing patterns and preventing theemergence of premiumisation, which has driven alcohol sales growth in other highly mature markets.The tough times for the industry are clear from the recent financial results of a number of the country’smain brewers, released in August. Local brewing giant Kirin announced that during H109 (ended June 302009) its net profit plummeted by 82% year-on-year (y-o-y) to JPY14.96bn (US$157.5mn) while its salesregistered a 1.2% y-o-y growth to JPY1.06trn (US$11.16bn). The company has reported that its operatingprofit declined by 16% y-o-y to JPY40.18bn (US$423.0mn) as a result of Australian dollar weakness andpoor performance of its soft-drink business. Brewing and distilling company Suntory announced thatduring H109 its net income declined by 28.4% y-o-y to JPY8.16bn (US$85.5mn) while its salesregistered 1% y-o-y growth to JPY731bn (US$7.66bn). Suntory attributed the drop in net income to a risein raw material costs and appreciation of the yen against other operating currencies. Meanwhile, beer andsoft drink company Sapporo Holdings announced that during H109 it registered a net loss of JPY738mn(US$7.8mn) as compared to a net profit of JPY9.59bn (US$100.9mn) during H108. During the sameperiod, sales declined by 6% y-o-y to JPY182.41bn (US$1.92bn), with the ongoing economic slowdownblamed for the poor results. The sector's advanced stage of maturity, exacerbated by stagnant wage growth and an ageing population,has seen the market become sluggish and all leading brewers are now seeking diversification, eithergeographic, in product terms, or both. These difficult times will also likely lead to industry consolidation.In fact, in July it was revealed that Kirin and Suntory, both industry giants, are considering a merger. Already working together in the fields of procurement and distribution, such a merger would lift bothcompanies' domestic pricing and earnings power, as well as improving their ability to accelerateinternational expansion. Combined, the two parties would hope to have more weight to compete in highprofile international M&A activity and more resources to support organic expansion. They would alsohave an improved footprint in the ultra-competitive local soft drinks industry, a segment both havestruggled to penetrate in the way they have the beer industry. Clearly, the impact of the recession on thedrinks industry will be felt for some time to come. Get Full Details About This Report >> |
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