Boston, MA -- (ReleaseWire) -- 05/30/2014 -- With job market weakness finally showing up in Australia's headline unemployment rate, we believe that private consumption growth will show significant weakness in 2014. The soft job market will weigh on wage growth, and together with high levels of household debt - at 94.4% of GDP as of end-2013 - households could begin deleveraging. While we project private consumption growth to slow to 1.3% in 2014, from an estimated 1.5% in 2013, we highlight that there is a possibility that if the global environment weakens significantly, there could be even greater job cuts, which would very likely lead to an overall contraction in private consumption. As a result, we continue to see a shift of consumption habits towards private labels in Australia over the coming years as a growing number of consumers acknowledge private labels as a very compelling alternative to proprietary branded goods.
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Headline Industry Data (local currency)
- 2014 per capita food consumption = +0.7%; forecast to 2018 = +1.3% compound annual growth rate (CAGR).
- 2014 soft drinks sales = +2.1%; forecast to 2018 = +2.6% CAGR.
- 2014 alcoholic drinks sales = +1.9%; forecast to 2018 = +2.4% CAGR.
- 2014 mass grocery retail sales = +3.4%; forecast to 2018 = +4.1%.
Key Industry Trends And Developments
Parmalat Strengthens Australian Position: Italian dairy giant Parmalat announced in April that it completed the acquisition of Australian dairy and juice manufacturer Harvey Fresh. The company, owned by French dairy firm Lactalis, indicated that its local subsidiary would pay EUR79mn (USD109mn) for the Western Australia-based company. Harvey Fresh had turnover of around EUR113mn (USD156mn) in its last financial year and manufactures fresh milk, UHT milk, flavoured milk, cream, yoghurt, cheese and fruit juice.
GE Capital Finances Accolade Wines: Australia-based drinks producer Accolade Wines has received a USD300mn cross-border finance facility from US-based GE Capital in a move to recapitalise its balance sheet and fund continued global growth. 'GE's global platform is important to the implementation of our strategy of being a full-service new world wine proposition globally across the three core price segments of value, mid-market and premium,' said CEO John Ratcliffe.
Wesfarmers Expansion To Consolidate Its Position: Australian retailer Wesfarmers' recent announcement that it is looking for new acquisition targets confirms our view for the retail sector in Australia to remain relatively closed to new entrants. We expect the company will target expansion in its office/home supply segment, in the cafe/restaurant industry, or internationally.
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