Boston, MA -- (SBWIRE) -- 01/28/2014 -- BMI View: In terms of the growth prospects for the Taiwanese economy looking into 2014, we expect supportive pressure from the tech sector and Chinese demand to wane as the year progresses. Additionally, we highlight two factors - the structural rebalancing of China's economy and increasing incidence of political deadlock in Taiwan - which we believe will hurt its economy in the long term. We have consequently downgraded our 2013 and 2014 real GDP projections from 3.0% and 4.0% to 2.1% and 3.0% respectively. Therefore, we remain relatively pessimistic about the performance of Taiwan's food and drink market in the short- to medium term, although we caution that select individual (premium) sectors are likely to outperform the overall market.

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Headline Industry Data (local currency)

- 2013 per capita food consumption (value): +1.07%; forecast compound annual growth rate (CAGR) 2013 to 2017: +2.45%.
- 2013 alcoholic drinks sales (volume): +1.69%; forecast CAGR 2013 to 2017: +1.66%.
- 2013 soft drinks sales (value): +4.18%; forecast CAGR 2013 to 2017: +3.92%.
- 2013 mass grocery retail sales: +4.51%; forecast CAGR 2013 to 2017: +3.71%.

Key Company Trends

Hey Song Invests In Healthier Drinks: In early 2013 Taiwanese soft drinks manufacturer Hey Song announced plans to invest at least TWD1bn in building a new production line in Zhongli City, expected to be operational by 2014, and which will cater for new, healthier drinks. The new aseptic production line will be the first of its kind in Taiwan and will allow the company to add vitamins, milk and other nutritional elements to its drinks.

Uni-President Accelerates Investment In China: In early 2013 Taiwan-based Uni-President announced plans for a US$100mn investment to set up a bottled water and food factory at different locations in China. Uni-President indicated that the prospects for China's consumer market are extremely promising. In order to capitalise on the substantial business opportunities, the company is accelerating investment in the country over the next two years, with the aim of operating a manufacturing base in each of the Chinese provinces as its short-term objective. At present, the company has a total of 24 food, beverage and bottled water factories in China.

Key Risks to Outlook

Should we see a re-emergence of a crisis in the eurozone, or a downward spiral in China's economy, we can expect Taiwan to head into a sharp recession.

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