Boston, MA -- (ReleaseWire) -- 01/29/2014 -- BMI's outlook for Japan's food and drink industry remains subdued as the stagnant economy continues to limit the industry's growth potential. Consumption tax hikes, planned for April 2014, will further weaken the Japanese consumer, while the absence of structural reforms and negative demographic tendencies will weigh on the economy over the longer term.
Prime Minister Shinzo Abe's combination of ultra-loose monetary policy and higher public spending has bolstered economic growth in 2013. As such, BMI has revised its forecast for Japan's real GDP growth to 1.8%, from a previous forecast of 1.4%. However, we believe that even this moderate growth rate is unsustainable over the coming years, as the effects of Abe's monetary and fiscal measures will gradually wane and as the government takes action to manage its excessive national debt. As one of the measures to increase its revenues, the government is considering gradually raising the consumption sales tax - from 5% to 10% - by 2015. If passed, the tax increases will put additional pressure on consumer spending power.
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Headline Industry Data (local currency)
- Per capita food consumption (local currency) growth (y-o-y) in 2013: +0.21%; CAGR to 2017: +0.30%.
- Alcoholic drinks value (local currency) sales growth (y-o-y) in 2013: +0.45%; CAGR to 2017: +0.55%.
- Soft drinks value (local currency) sales growth (y-o-y) in 2013: +3.51%; CAGR to 2017: +3.54%.
- Total mass grocery retail value (local currency) sales growth (y-o-y) in 2013: +0.46%; CAGR to 2017: +0.41%.
Key Industry Trends
Suntory To Focus On Organic Growth: Japan's Suntory Food & Beverage acquisition of the iconic UK soft drinks brands Lucozade and Ribena from pharmaceutical firm GlaxoSmithKline (Glaxo) was probably one of 2013's most significant deals. With the brands not really suited to Glaxo's overall portfolio, it was a great opportunity for Suntory to purchase some very well-established brands that have a longstanding history in a number of emerging markets. Indeed, these brands are now under the ownership of a pure food and drink firm like Suntory, which needs more exposure to grow its brands and markets. The overseas sales of the two largest Japanese soft drinks companies, Kirin Holdings and Suntory, account for about 30% and 20% of their annual sales respectively. With almost half of Japan's population forecast to be older than 65 by 2025 and the outlook for growth in the mature soft drinks industry not particularly exciting, it is clear why Suntory has been made moves abroad.
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