Japan Food and Drink Report Q3 2011

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Japan Food and Drink Report Q3 2011 Published on July 2011

Report Summary The Japanese consumer is bearing the brunt of the economic hit following the earthquake that struck Japan on March 11 2011. Already in a delicate shape prior to the earthquake due to Japan's ageing population woes, stagnating wage growth and depleting savings, the consumer sector suffered another damaging blow from the earthquake, and there is hardly any sign of optimism in the near-term and longterm growth prospects of domestic consumer-facing players. With this in mind, we stress the importance of international diversification for domestic consumer goods manufacturers as they search for new opportunities abroad. Headline Industry Data - 2011 Per Capita Food Consumption = +0.8%; compound annual average growth to 2015 = +3.5% - 2011 Alcoholic Drinks Value Sales = -3.6%; compound annual average growth to 2015 = +3.2% - 2011 Soft Drinks Value Sales = -0.3%; compound annual average growth to 2015 = +7.9% - 2011 Mass Grocery Retail Sales = +3.6%; compound annual average growth to 2015 = +0.3% Key Company Trends Brewers Still Reeling from the Quake Aftermath ' Bills are quickly stacking up for the local brewers as they engage in reparations of their damaged factories. For Q111, Japanese brewer Kirin sunk into the red as it suffered initial post-quake expenses of around JPY5.1bn (US$62.3mn). Likewise, Sapporo incurred earthquake-related costs of JPY1.9bn (US$23.2mn) and more than doubled its net losses for Q111 to JPY6.3bn (US$76.9mn) than Q110. In contrast, Asahi's fortunes were brighter, as it shrugged off subdued domestic demand and post-quake charges to report a strong rebound in its net profits from JPY4mn (US$48.9mn) in Q110 to JPY3.6bn (US$44.4bn) in Q111. Convenience Retailers Best Poised To Weather Quake Aftermath ' Underlining weakening domestic demand, the majority of the country's mass grocery retailers have already slashed their operating income forecasts and are pencilling in negative revenue growth for the fiscal year ending February 2012. FamilyMart, for instance, is currently expecting operating profits for FY2011/12 (March-February) to come in 6% lower than its initial forecast before the earthquake. While 2011 is likely to prove much more challenging for Japanese retailers, we believe that convenience store retailers such as FamilyMart and Lawson are in a superior position to capitalise on the 'back-to-basics' spending of consumers following the earthquake. Medium-Term Risks To Outlook Notwithstanding the potential for a near-term deflationary shock as consumer savings rates increase in response to the crisis, our country risk team is pencilling in consumer price inflation to come in at 0.0% and 0.4% in 2011 and 2012 respectively, up from -0.7% in 2010, suggesting that inflationary pressures are likely to gain momentum over the coming quarters. The quake has led to a sharp reduction in productive capacity and is likely to prompt an aggressive accommodative response from the central bank (such as increasing money supply), both of which are likely to trigger higher inflationary pressures. It is the longer-term inflationary dynamics that are of greater consequence, however, and in this regard we are concerned about the central bank's willingness to expand its quantitative easing programme, which has the potential to ignite runaway inflation in Japan. Should price pressures pick up strongly in the medium term, Japanese households could rein in their spending as their real purchasing power declines.

Table of Content SWOT Analysis .... 9

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>> Get this Report Now by email! Japan Food SWOT .. 9 Japan Drink SWOT .... 10 Japan Mass Grocery Retail SWOT 11 Business Environment .... 12 BMI's Core Global Industry Views 12 Table: BMI Food & Drink Core Views .... 17 Asia Pacific Food & Drink Risk/Reward Ratings ... 18 Table: Asia Pacific Food & Drink Risk/Reward Ratings -Q3 2011 .. 22 Japan's Food and Drink Business Environment Rating .... 23 Macroeconomic Outlook . 24 Table: Japan - Economic Activity .. 27 Industry Forecast Scenario ... 28 Consumer Outlook 28 Food.. 32 Food Consumption 32 Table: Food Consumption Indicators - Historical Data & Forecasts .... 33 Confectionery... 33 Table: Value/Volume Sales of Selected Food Sub-Sectors - Historical Data & Forecasts.. 34 Canned Food ... 35 Table: Value/Volume Sales of Selected Food Sub-Sectors - Historical Data & Forecasts.. 35 Trade 36 Table: Japan Food & Drink Trade Indicators - Historical Data & Forecasts . 37 Drink . 37 Alcoholic Drinks ... 37 Table: Japan Beverage Sub-Sectors - Value Sales - Historical Data & Forecasts .... 39 Hot Drinks .. 39 Table: Japan Beverage Sub-Sectors - Value Sales - Historical Data & Forecasts .... 40 Soft Drinks .. 40 Table: Japan Beverage Sub-Sectors - Value Sales - Historical Data & Forecasts .... 41 Mass Grocery Retail .. 41 Table: Japan Mass Grocery Retail Indicators - Sales Value by Format - Historical Data & Forecasts .. 44 Food 45 Key Industry Trends and Developments ... 45 Regional Countries Easing Import Restrictions . 45 Lower Rice Output, Higher Rice Consumption .. 45 Market Overview .. 47 Food Consumption 47 Confectionery... 48 Functional Food ... 49 Canned Food ... 49 Frozen Food .... 50 Trade 50 Agriculture .. 51 Japan Food & Drink Report Q3 2011 Š Business Monitor International Ltd Page 4 Drink .... 52 Key Industry Trends And Developments .. 52 Still Reeling From the Quake Aftermath .. 52

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>> Get this Report Now by email! Brewers Shifting Focus To Premium Brands 53 Bottled Water Demand Soars Amid Radiation Concerns .. 53 Market Overview .. 54 Alcoholic Drinks ... 54 Beer .. 54 Wine .. 55 Hot Drinks .. 56 Soft Drinks .. 56 Functional Drinks . 57 Mass Grocery Retail .... 58 Key Industry Trends and Developments ... 58 Convenience Retailers Best Poised To Weather Quake Aftermath .... 58 Many Jumping On the International Bandwagon ... 59 Market Overview .. 60 Leading MGR Players .... 61 Table: Structure of Japan's Mass Grocery Retail Market by Estimated Number of Outlets . 63 Table: Structure of Japan's Mass Grocery Retail Market - Sales by Format (US$bn) .... 63 Table: Structure of Japan's Mass Grocery Retail Market - Sales by Format (JPYbn) .... 63 Table: Average Annual Sales per Outlet by Format - 2010 ... 64 Table: Grocery Retail Sales by Format - Historical Data & Forecasts . 64 Competitive Landscape ... 65 Consumer Share Price Analysis 65 Key Players . 65 Key Players in Japan's Food & Drink Sector .... 65 Key Players in Japan's Mass Grocery Retail Sector .... 66 Company Analysis. 67 Food . 67 Ajinomoto ... 67 Drink . 70 Asahi Breweries Ltd ... 70 Kirin . 73 Mass Grocery Retail .. 75 Seven & I Holdings .... 75 Lawson Inc .. 78 AEON 82 Seiyu . 84 BMI Food & Drink Methodology . 85 Food & Drink Business Environment Ratings ... 85 Table: Rewards 86 Table: Risks 87 Weighting .... 87 Table: Weighting .. 88 BMI Food and Drink Industry Glossary .... 89 Japan Food & Drink Report Q3 2011 Š Business Monitor International Ltd Page 5 Food And Drink .... 89 Mass Grocery Retail .. 89 BMI Food & Drink Forecasting And Sourcing ... 91

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>> Get this Report Now by email! How We Generate Our Industry Forecasts ... 91 Sourcing . 92

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