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Mizuho 1038 food_beverage



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  • 1. Japan Industry Outlook / 38 2012 No.1 Table of Contents1, Comprehensive Industry - Japan 15, Broadcasting (Japanese only)2, Iron and Steel - Japan 16, Marine Shipping (Japanese only)3, Non-ferrous Metals - Japan 17, Logistics - Japan4, Paper and Pulp (Japanese only) 18, Electric Power - Japan5, Cement - Japan 19, City Gas (Japanese only)6, Chemicals - Japan 20, Retail - Japan7, Pharmaceuticals - Japan 21, Food and Beverage - Japan8, Petroleum - Japan 22, Food Service Industry - Japan9, Automobiles - Japan 23, Construction (Japanese only)10, Shipbuilding (Japanese only) 24, Real Estate and Housing - Japan11, General Machinery (Japanese only) 25, Travel and Tourism - Japan12, Electronics - Japan 26, Nonbank (Credit Cards & Credit) (Japanese13, IT Services - Japan only)14, Telecommunications - Japan 27, HR Service Industry (Japanese only) Contact: Industry Research Division Mizuho Corporate Bank, Ltd.
  • 2. FY2012 Japan Industry Outlook (F&B) Food and Beverages Summary ■ Although the processed food consumer price index in 2011 saw some temporary fluctuation before and after the Great East Japan Earthquake, the general downward trend has stopped in response to the increasing prices of raw materials. Food expenditures for the January–November period in 2011 saw a decrease of 1.2% やや year-on-year, due to the decrease in eating out as well as the demand for fresh food such as seafood and vegetables. Although demand for eating out is forecast to recover in 2012, the index is estimated to fall by 0.5% year-on-year with decreasing prices of raw materials and recurrent price competition. ■ Cumulative earnings during the second quarter in FY2011 for the 31 major food manufacturing group companies saw an increase of 0.3% year-on-year in sales and a decrease of 2.8% in operating profits. As prices of raw materials are expected to start falling in September 2011 and will continue falling thereafter, many companies are estimated to see an increase in earnings with reduced costs in FY2012. ■ Although the processed food industry is estimated to see the Japanese market shrink in the long term due to the decrease in population, there are possibilities for the entire market to expand in the medium term through corporate efforts to develop business by adding value for the increasing number of elderly people. On the other hand, the overseas market is estimated to see 260 million people move into the upper-income range in Asian countries by 2020. It is thus possible for exporting businesses, which saw difficulty in pricing products due to a lack in purchase power, to grow significantly in the times ahead.I.INDUSTRY TRENDS1. While the market price for grains remain high, the level of low price strategies in theretail market is returning to that before the earthquake. Price indexes fluctuated The latest result of the consumer price index of processed food products between the (hereinafter referred to as “processed foods”) has leveled off, although it was appreciation of rising since January 2011 (see Figure 21-1). This is considered to be because of raw material the fact that the prices are in conflict with the increase in raw material prices prices and an economizing along with rising grain prices and an economizing trend among consumers, trend. based on concerns over the severe income environment in the times ahead. Food Food expenditures for the January–November period in 2011 were down 1.2% expenditures in year-on-year. Observing expenditure charges by major items from January to 2012 are forecast November 2011, the main reason for the decrease is considered to be the to decrease by remarkable fall caused by the impact of the earthquake in eating out as well as 0.5% year-on-year. the high component ratio of seafood and vegetables. Price revisions to raise 1 Mizuho Corporate Bank, Industry Research Division
  • 3. FY2012 Japan Industry Outlook (F&B) prices were seen only in some sections, and special demand after the earthquake was temporary. Although special sales decreased in the retail market in 2011 after the earthquake, they resumed once the problem of undersupply was resolved. When prices were raised in July, the increase in retail prices was smaller than the increase of prices shown by manufacturers. Therefore, food expenditures in 2011 are forecast to decrease by 1.1% year-on-year (see Figure 21-2). Even though demand for eating out is expected to recover in 2012, the falling prices of raw materials and recurrent price competition are likely to lower unit prices. Thus, food expenditures in 2012 are expected to see a decrease of around 0.5% year-on-year. [2005 average=100] Overall (goods/services) 107 Goods Figure 21-1: Consumer price Food Products index for processed food (Annual average) (M onthly change) 106 products 105 104 103 102 101 100 Source: Compiled by MHCB Industry Research Division based on the 99 Monthly Report on the Consumer 98 Price Index (Ministry of Internal Affairs and Communications) 1998 2000 2002 2004 2006 2008 2010 08/2 08/4 08/6 08/8 08/10 08/12 09/2 09/4 09/6 09/8 09/10 09/12 10/2 10/4 10/6 10/8 10/10 10/12 11/2 11/4 11/6 11/8 11/10 Figure 21-2: Growth rate of food expenditures over the previous year (left) and expenditure changes by major item from January to November 2011 (right) Change (left axis) Food Expenditures Composition ratio (right axis) Consumption Expenditures 3% 18%2% (Processed foods) (Fresh foods/ 2% 16% eating out) 1% 14% 0% 12%0% -1% 10% -2% 8% -3% 6%-2% consumption -4% 4% tax hike -5% 2% (yr) -6% 0%-4% Dairy(Ex. Milk) Confectionary Vegetables/seaweed Bread Noodles Milk Oil/seasonings Prepared foods Beverages Alcohol beverages Fish Eating out Meat 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011(estimate) Source: Compiled by MHCB Industry Research Division based on the “Annual Report on the Family Income and Expenditure Survey” (Ministry of Internal Affairs and Communications) Note: Nominal basis; fluctuations in the right-side graph are compared to the same period of 2010. Composition ratios are compared to food expenditures (January–November 2010). 2 Mizuho Corporate Bank, Industry Research Division
  • 4. FY2012 Japan Industry Outlook (F&B)2. Outlook for the shipment values of the processed food manufacturing industry in 2012The In 2011, there were concerns for the appreciation of the Food Price Index released byinternational the United Nations Food and Agriculture Organization, as the index renewed itsprices of majorraw materials, all-time high, exceeding that recorded in 2008. However, the prices of raw materialsthe leading are currently stable with a good harvest of wheat—the index of which dropped infactor for the September 2011. Yet, the future trends are unknown.shipment valueof the The market prices for grains are expected to continue fluctuating while graduallymanufacturing going up in the long term. Demand for cooking oil and edible meat is on an increase,industry, havestopped along with the economic growth of emerging countries. As around four to eightappreciating, but times as much grain is necessary to feed livestock in order to produce one kilogramare still on an of edible meat, demand for grain is expected to increase faster than the increase inupward trend in population. Demand for cooking oil is also growing five times as fast as the increasethe long term. of population, along with the increase of income. While seeing a long-term upward trend supported by fundamentals, the market prices for grain are expected to fluctuate in the short term, following changes in weather and trends in speculative investment. Figure 21-3: International prices of major raw Wheat Soy Corn Sugar 700 600 Source: Compiled by MHCB Industry Research 500 Division based on data released by Reuters. The 400 USD/ton forecast figures for 2012 300 are future prices of the Chicago Board of Trade as 200 of January 17, 2012 (for each contract month in 100 2012). 0 2010/10 2010/11 2010/12 2011/10 2011/11 2011/12 2012/10 2012/11 2012/12 2010/1 2010/2 2010/3 2010/4 2010/5 2010/6 2010/7 2010/8 2010/9 2011/1 2011/2 2011/3 2011/4 2011/5 2011/6 2011/7 2011/8 2011/9 2012/1 2012/2 2012/3 2012/4 2012/5 2012/6 2012/7 2012/8 2012/9 Chicago future price The shipment The domestic processed food manufacturing industry is unlikely to see a value of the significant change in amount in 2012, as it is an industry that provides daily manufacturing necessities. Factors related to weather are expected to cancel each other out. industry is Therefore, prices are likely to be the major factor for changes in market size. expected to slightly decrease With regard to prices, the shipment value of the manufacturing industry is in 2012 due to mainly impacted by consumer preference for lower prices as well as the the declining fluctuation in the prices of raw materials. prices of raw materials. 3 Mizuho Corporate Bank, Industry Research Division
  • 5. FY2012 Japan Industry Outlook (F&B) Figure 21-4: Estimated changes in the shipment value of the food manufacturing industry materials (Unit: JPY billion) 23,000 22,648 22,500 22,000 10 ial s ate n) ) ce s ate ) ial s ate n) ) ice s as t) 20 er io ns pri er io ns pr ter lat ter stim ter lat ter or ec m a ng op u at in (e a ng op u at by (f ha p d m ha p d ra w xc np on cte 11 ra w xc np on ct e 12 or fe ei pti fle 20 or fe ei pti ff e 20 aj ct o as um tr e aj ct o as um a fm pa cre ns No fm pa cre ns Un so Im ( De co so Im ( De co ice od ice od Pr fo Pr fo n n si si ge ge an an ( Ch ( Ch Source: Compiled by MHCB Industry Research Division based on “Beverage & Food Statistics Monthly Report” published by Nikkan Keizai Tsushin Co., Ltd., “Food Imports 2010” published by JETRO, and the websites of various business organizations, hearings, and data released by Reuters. The major The cost of raw materials accounts for around 40% of the total shipment value factors for price of the food manufacturing industry. The cost (the consumed amount multiplied fluctuations are seen to be the by the price) of the major raw materials (wheat, soy, corn, and sugar) is prices of raw estimated to be around one eighth (around 5% of the total shipment value)1 of materials and the total cost of raw materials. Factors for price fluctuation are considered to be foreign exchange the fluctuation of the prices of these raw materials as well as the changes in rates. foreign exchange rates. However, as processed food products are daily necessities, the violent fluctuation of the prices is undesirable. Thus, the fluctuation range at phases of both the appreciation and depreciation of the market prices are expected to be restricted to a certain extent through sales prices adjustment or adjustments to import price made by the government, as well as the cost absorption by enterprises. In this review, figures are adjusted as a portion not reflected in prices. The Japanese yen is expected to remain strong for a while, which will contribute to the reduction of procurement cost. It is also worth noting that the1 MHCB Industry Research Division took the impact of feed grains for processed meat products and dairy productsinto consideration. 4 Mizuho Corporate Bank, Industry Research Division
  • 6. FY2012 Japan Industry Outlook (F&B) prices of raw materials other than the major ones mentioned above are appreciating, such as those of coffee, cacao, spices, and packaging materials. Although the international prices for grains rose significantly in 2011 and led the shipment value of major raw materials to increase by 1.1%, only some products saw an increase in their prices. As a result, the change in the raw material prices was generally absorbed by enterprises. With regard to the shipment amount, the population (which has been a factor of concern) is estimated to decrease by 0.24% year-on-year in 2012. However, there has been a change in the patterns of food consumption in which food expenditures have been pushed up by rising unit prices. This is caused by the fact that there have been an increasing number of elderly and one-person households that tend to consume more food, causing a shift from fresh food to processed food, the increased production of individually packaged products in smaller quantities, and the development of high-value-added products that respond to needs for healthier and more convenient food products. The negative impact of the decrease in population is therefore expected to be cancelled out until around 2015.II. CORPORATE EARNINGS1. The earnings of the 31 top food manufacturers for the second quarter in FY2011 saw a slight increase in revenues and a decrease in profits. There is an The weighted average of the second-quarter earnings of the 31 listed food overall manufacturers with consolidated net sales in excess of 200 billion yen (hereinafter tendency for profits to referred to as the “major food manufacturer groups”) (based on the FY2007 decrease due settlement) saw an increase of 0.3% year-on-year in sales and a decrease of 2.8% to the increase year-on-year in operating profits (see Figure 21-5). There were only a few in cost. companies that saw an increase in both revenues and profits, excluding the cases in which the new consolidation of subsidiaries contributed to the increase. With regard to sales, some companies with a high ratio of overseas sales saw a decrease in revenues due to the appreciation of the yen. With regard to profits, there was an overall downward trend due to the rising cost caused by the appreciation of the prices of raw materials. In particular, there were many companies that saw a decrease both in revenues and profits with dairy products because of the difficulty in procurement as well as the disruption in production caused by the earthquake. Companies in the flour milling as well as the oil and fat industries saw an increase in revenues, as there was price revision for some products, while they saw a decrease in profits, as they were not able to fully reflect the increase in the prices of raw materials on their product prices. 5 Mizuho Corporate Bank, Industry Research Division
  • 7. FY2012 Japan Industry Outlook (F&B) Figure 21-5: FY2011 second-quarter total earnings of major food manufacturer groups (percentage change over FY2010) ←% change of sales → Revenue Increase/ Nippon Suisan 70 (Sales +14.6% , Operating Profit Increase Profit+91.8%) Revenue Decrease/ 60 Profit Increase 50 Coca-cola West HD Sapporo HD 40 House Foods (Sales +21.5%, Operating Profit ← +51.0%) Maruha Nichiro 30 Prima Meat % change of operating profit Asahi 20 10 Ito En Ajinomoto Marudai Showa Sangyo Kirin HD 0 Nisshin OilliO Megmilk Snow Nichirei-10 -5 0 Total 5 10 Kikkoman T oyo Suisan Kagome -10 Nippon Nippon Flour Yakult Kewpie Yamazaki Baking -20 Coca-Cola Central Japan Nisshin Foods Nisshin Seifun Fuji Oil → Morinaga -30 Ezaki Glico -40 Revenue Decrease/ Profit Decrease Revenue Increase/ Profit Meiji HD Decrease (Sales -2.1%, Operating Profit -58.9%) Ito ham (Sales -0.2%, Operating Profit -213.3%) Source: Compiled by MHCB Industry Research Division based on corporate financial statements. Note: Targets the 31 top food manufacturers with consolidated net sales in excess of 200 billion yen (based on the FY2007 settlement). Figures for companies that close their books in November and December have been revised according to the LTM (Last Twelve Months), based on the 3Q settlement.2. Outlook for FY2011 and FY2012: Profits are expected to increase in FY2012, withimproved profitability as a result of a fall in the prices of raw materials. Corporate Among the major food manufacturer groups, the top seven companies with earnings in consolidated net sales of more than 700 billion yen saw a decrease in sales FY2011 are revenues in FY2011, due to the decline in demand for alcoholic drinks as well expected to be weak, while as the decrease in overseas sales as a result of the appreciation of the yen. some recovery is Although prices were raised for some products along with the rising prices of expected in raw materials, it was not sufficient to absorb the increase in cost. When the FY2012. prices of bread products were raised, the companies tried to maintain the overall selling prices by releasing new products with lower prices in order to respond to the needs of consumers who demand low-price products. It was thus difficult to increase revenues. Profits are forecast to decrease due to the profit deterioration caused by the appreciation of the prices of raw materials as well as the postponement of structural reforms, such as factory restructuring as a result of the earthquake (see Figure 21-6). The companies are expected to see a slight increase in revenues and an increase 6 Mizuho Corporate Bank, Industry Research Division
  • 8. FY2012 Japan Industry Outlook (F&B) in profits in FY2012, thanks to some improvement in conditions such as the effects of the consolidation seen by the acquiring companies, recovery in commercial demand, and the fall in the prices of raw materials. Figure 21-6: Balances for seven listed food manufacturers Actual: Companies FY10 FY11 FY12 (Unit) (Actual) (Estimate) (Forecast) 7 Sales (JPY billions) 8775.6 8670.4 8696.1 7 Operating (JPY Profit billions) 439.3 410.9 449.4 Rate of Incrase and Decrease: Brief FY10 FY11 FY12 (Unit) (Actual) (Estimate) (Forecast) 7 Sales (%) + 0.9% - 1.2% + 0.3% Operating 7 Profit (%) + 21.2% - 6.5% + 9.4% Source: Compiled by MHCB Industry Research Division based on publicly released data by each company. Note: Consolidated basis: Figures for FY2011 and FY2012 are based on MHCB Industry Research Division forecasts. Seven companies: Kirin Holdings Co., Ltd., Asahi Group Holdings, Ltd., Ajinomoto Co., Ltd., Nippon Meat Packers Inc., Maruha Nichiro Holdings Inc., Yamazaki Baking Co., Ltd., Meiji Holdings Co., Ltd.III. TOPICS: Consideration of business areas with middle-term potential – the processedfood industry The agriculture- and food-related industries have been playing an importantThe role played bythe industries role in the country, as can be seen in the fact that the domestic production ofrelated to these industries was 43 trillion yen in FY2009, accounting for 9.1% of the totalagriculture and GDP of Japan, and the number of employees accounted for 13% of that of allfood is growing industries in 2010 (see Figure 21-7). Even though these industries are expectedboth in thedomestic and to shrink in the long term due to depopulation, the decrease in final foodoverseas markets. consumption may remain negligible in the middle term mainly thanks to the shift in consumption from fresh food to processed food (see Figure 21-8). Thus, there are potentials for the overall market to grow, depending on the efforts made by companies in developing products that can provide unique experiences or narratives. With regard to overseas markets, on the other hand, there will be additional 260 million wealthy people whose annual family disposable income is 35,000 dollars or above by 2020 in Asian countries that are close to Japan in geographical terms as well as in food culture (see Figure 21-9). Thus, the conditions will be more than desirable for the government, which has set out a goal to achieve food exports of one trillion yen (see Figure 21-10), as well as for the major food manufacturers expanding local manufacturing and sales. 7 Mizuho Corporate Bank, Industry Research Division
  • 9. FY2012 Japan Industry Outlook (F&B) Figure 21-7: Size of the agriculture- and food-related industries 8 .17 million Source: Compiled by pe ople Agriculture- MHCB Industry 43 trillion and food- Research Division based yen related on “Summary of Gross industries Economic Calculation Domestic on Agricultural and Product: 473 Food-related Industries” One out of 7.7 and on “Basic Statistics trillion yen people is involved on Agriculture, Forestry, (2009) in work related to and Fisheries,” published food. by the Ministry of Employed   Agriculture, Forestry and population: Fisheries. 62.56 million (2010) Figure 21-8: Estimated final consumption of food and beverages Source: Compiled by (JPY trillions ) MHCB Industry Research 100 Increase in expenditures on 100% “values” such as experiences Division based on “Future and narratives 90% of the Low Birth Rate and 80 80% the Aging Society and -1.9% 70% Outlook for the Food 60 60% Consumption Patterns in 51.1% 62.6% Japan” and on “Input Increase in the 50% 73.6 trillion ratio of 72.2 trillion Output Table 2005” (trial 40 40% calculation by the JPY expenditure for JPY processed food 30% Ministry of Agriculture, 20 26.8% 20% Forestry and Fisheries) Decrease in the ratio of21.3% 10% published by Policy expenditures on fresh food Research Institute, 0 0% Ministry of Agriculture, 2005 2025 (CY) Forestry and Fisheries. Figure 21-9: Changes in the number of those wealthy in Asia Source: Compiled by MHCB Industry Research (Billion people) 0.26 billion Division based on0.3 Euromonitor International. 2.3 times people Note: The figures refer to Other Asian countries0.3 the size of the population Taiwan with a disposable income0.2 Korea of USD 35,000 or above, India calculated with the0.2 China component ratio of0.1 households by disposable income group multiplied0.1 by the population. Other Asian countries include0.0 Malaysia, Thailand, the 1995 2000 2005 2010 2015 2020 (cy) Philippines, Indonesia, Vietnam, Hong Kong, and Singapore. 8 Mizuho Corporate Bank, Industry Research Division
  • 10. FY2012 Japan Industry Outlook (F&B) Figure 21-10: Target set out by the government to expand exports of agricultural, forestry, fisheries, and food products Exports expanded through: (Billion JPY) - Efforts to deal with the impacts of the 1trillion JPY 1,000 Fresh food etc. nuclear plant disaster - National strategic marketing Processed food etc. 800 - Systems to support exports 600 516.0 507.8 492.0 449.0 445.4 453.3 400 200 0 (CY) 2006 2007 2008 2009 2010 2011 2020 (Estimate) (Target ) Source: Compiled by MHCB Industry Research Division based on “Statistics on Imports and Exports of Agricultural, Forestry, and Fisheries Products” and “Food Industry Newsletter” published by the Ministry of Agriculture, Forestry and Fisheries.The highly aging The most important middle-term factor in the Japanese market is a significantsociety will increase in elderly and one-person households. There are estimated to be 18.99benefit the million elderly households in 2020, up 21% compared to 2010, reaching 37.7%processed foodindustry. of the total population. The food expenditure per person is higher for elderly people than young people (see Figure 21-11), as people in this generation value the quality of food rather than prices. It is considered structurally impossible to avoid price competition among food providers (retailers, wholesalers, and manufacturers). On the other hand, however, there are potentials for companies to improve total marketing performance by designing products and making value propositions that attract elderly consumers. The elderly market will be an attractive market for the processed food industry to develop value-based business. Figure 21 -11: Changes in the number of elderly households (2010–2020) ( 10,000 households) 4,000 Householder 65 years old or 2010 2020 3,500 above Householder less than 65 Source: Compiled by 3,000 years old 1,102 MHCB Industry 1,268 2,500 Research Division based on data in 2,000 2010 2020 “Household 1,500 465 631 Projections for Japan,” 2,356 published by the 1,000 2,042 National Institute of 500 1,105 1,102 Population and Social 0 Security Research. One-person households Households with two people or more 9 Mizuho Corporate Bank, Industry Research Division
  • 11. FY2012 Japan Industry Outlook (F&B) Figure 21-12: Food expenditures per person (2010) 10,000 JPY Source: Compiled by80 Eating out MHCB Industry Research70 Division based on a Eating in and home meal replacement household survey carried out60 Eating out by the Ministry of Internal50 Affairs and Communication.40 Note: The figures were calculated from the food30 expenditures for households20 with two people or more10 divided by the number of household members by the 0 29 years old 30 – 39 years 40 – 49 years 50 – 59 years 60 – 69 years 70 years old age group of the and under old old old old and over homeowner. Age group of householder Although there are issues to deal with (such as the impact of the nuclear plantThere are disaster), there are possibilities for food exports from Japan (which had seenpossibilities for difficulty in pricing products due to a lack of consumer buying power) to growgrowth in foodexports which and bring business chances contributing to the maintenance of employment inhad been Japan, through the expansion of the middle-income and higher-incomerestricted due to population in Asian emerging countries. However, it is not easy for domesticpricing food providers to deal with complicated trade administration and localdifficulties. regulations while appropriately responding to overseas demand. It is considered to be another obstacle for food exports that there is no distributors that seize the needs of local consumers in realtime while encouraging local demand in order to build a stable supply system. In order to solve such problems, it is seen effective to build a tight food distribution relationship between major Japanese food wholesalers and local companies (not restricted to retailers or wholesalers) with dominant power in distribution in emerging countries. There are companies in Asian emerging countries that are highly interested in importing Japanese food, expecting the expansion of the middle-income and higher-income population. There are potentials for such companies to build a mutually beneficial alliance with Japanese major wholesalers Shingo Tanaka Makiko Kitamura Distribution & Consumer-related Team Industry Research Division Mizuho Corporate Bank, Ltd. 10 Mizuho Corporate Bank, Industry Research Division