United States Food and Drink Report Q1 2012
Includes 3 FREE quarterly updates
The middle class in the US has struggled over the past decade as its share of the country’s wealth fell. We expect consumption growth to remain subdued in comparison with historical standards and believe it will be heavily reliant on government stimulus as well as loose monetary policy. The risks to our forecasts are largely to the downside, especially given the heightened price sensitivity and the subsequent increase in the consumption of private label goods across nearly all product categories.
Headline Industry Data
Key Industry Trends And Developments
PepsiCo Remains Interested in Foreign Markets: Continuing its international expansion, in November 2011 PepsiCo completed the acquisition of Brazilian biscuit maker Mabel, according to a report in local newspaper Estado de S. Paulo. The deal is said to be worth about US$520mn and represents a sizeable investment in the market. Mabel currently has five factories and offers more than 100 products including biscuits, crackers and wafers.
Expansion of Soft Drinks Portfolios: In November 2011, Kraft Foods announced plans for a caffeinated energy drink based upon its MiO no-calorie drink launched on the market in 2010. The product, launched in December 2011, will rival such brands as Red Bull. PepsiCo is also looking to renew its focus on ‘indulgent brands’ in an effort to drive growth across its portfolio, according to Albert Carey, CEO of PepsiCo Americas Beverages. Similarly, US beverage company Dr Pepper Snapple Group (DPSG) announced in December that it will build on the success of its new Dr Pepper Ten reduced calorie drink by testing five more varieties in selected locations in the US starting in January 2012. The widening portfolios are not only the result of organic expansion. In December, Coca-Cola announced that it had acquired a 50% stake in Saudi Arabian beverage manufacturer Aujan Industries. The deal, worth US$980mn, will allow Aujan to pursue its international expansion plans for brands including Barbican and Rani, as well as build upon the regional success of its Vimto brand.
Private Label Repositioning: Having failed to acquire the private label specialist Ralcorp Holdings, US company Conagra Foods in November 2011 demonstrated that it is sticking with a strategy of expansion within the private label sector by announcing the purchase of US private label firm National Pretzel. A large chunk of Conagra’s portfolio consists of smaller secondary brands, and it is expected this will push it to consolidate in an attempt to shore up margins.
Key Risks To Outlook Downside Risks Prevail: The risks to our consumer outlook are firmly on the downside. Given the still weak albeit improving state of the US labour market, we highlight that the potential for fiscal consolidation and the removal of tax breaks set to expire over the next 12 months poses the largest risk to consumer spending. We also expect the US consumer to remain in low gear over the forecast period to 2016. With household balance sheets still in repair and little ability for consumers to leverage up, it is difficult to see from where a catalyst that would fuel consumption would come.
The middle class in the US has struggled over the past decade as its share of the country’s wealth fell. We expect consumption growth to remain subdued in comparison with historical standards and believe it will be heavily reliant on government stimulus as well as loose monetary policy. The risks to our forecasts are largely to the downside, especially given the heightened price sensitivity and the subsequent increase in the consumption of private label goods across nearly all product categories.
Headline Industry Data
- 2011 per capita food consumption = +1.1%; forecast compound annual growth rate to 2016 = +2.1%
- 2011 spirits value sales = +4.1%; forecast compound annual growth rate to 2016 = +3.7%
- 2011 soft drink value sales = 3.1%; forecast compound annual growth rate to 2016 = +2.1%
- 2011 mass grocery retail sales = +5.2%; forecast compound annual growth rate to 2016 = +3.5%
Key Industry Trends And Developments
PepsiCo Remains Interested in Foreign Markets: Continuing its international expansion, in November 2011 PepsiCo completed the acquisition of Brazilian biscuit maker Mabel, according to a report in local newspaper Estado de S. Paulo. The deal is said to be worth about US$520mn and represents a sizeable investment in the market. Mabel currently has five factories and offers more than 100 products including biscuits, crackers and wafers.
Expansion of Soft Drinks Portfolios: In November 2011, Kraft Foods announced plans for a caffeinated energy drink based upon its MiO no-calorie drink launched on the market in 2010. The product, launched in December 2011, will rival such brands as Red Bull. PepsiCo is also looking to renew its focus on ‘indulgent brands’ in an effort to drive growth across its portfolio, according to Albert Carey, CEO of PepsiCo Americas Beverages. Similarly, US beverage company Dr Pepper Snapple Group (DPSG) announced in December that it will build on the success of its new Dr Pepper Ten reduced calorie drink by testing five more varieties in selected locations in the US starting in January 2012. The widening portfolios are not only the result of organic expansion. In December, Coca-Cola announced that it had acquired a 50% stake in Saudi Arabian beverage manufacturer Aujan Industries. The deal, worth US$980mn, will allow Aujan to pursue its international expansion plans for brands including Barbican and Rani, as well as build upon the regional success of its Vimto brand.
Private Label Repositioning: Having failed to acquire the private label specialist Ralcorp Holdings, US company Conagra Foods in November 2011 demonstrated that it is sticking with a strategy of expansion within the private label sector by announcing the purchase of US private label firm National Pretzel. A large chunk of Conagra’s portfolio consists of smaller secondary brands, and it is expected this will push it to consolidate in an attempt to shore up margins.
Key Risks To Outlook Downside Risks Prevail: The risks to our consumer outlook are firmly on the downside. Given the still weak albeit improving state of the US labour market, we highlight that the potential for fiscal consolidation and the removal of tax breaks set to expire over the next 12 months poses the largest risk to consumer spending. We also expect the US consumer to remain in low gear over the forecast period to 2016. With household balance sheets still in repair and little ability for consumers to leverage up, it is difficult to see from where a catalyst that would fuel consumption would come.
Contents
BMI Industry ViewSWOT Analysis
US Food Industry SWOT
US Drink Industry SWOT
US Mass Grocery Retail Industry SWOT
Business Environment
BMI’s Core Global Industry Views
Table: Agricultural Commodity Prices
Table: Core Views Q112
Macroeconomic Outlook
Table: GDP Contribution To Growth
Industry Forecast Scenario
Consumer Outlook
Food
Food Consumption
Table: Food Consumption Indicators – Historical Data & Forecasts
Confectionery
Table: Confectionery Value/Volume Sales – Historical Data & Forecasts
Canned Food
Table: Canned Food Value/Volume Sales – Historical Data & Forecasts
Dairy
Table: Dairy
Drink
Alcoholic Drinks
Beer
Table: Beer Value/Volume Sales – Historical Data & Forecasts
Spirits
Table: Spirits Value/Volume Sales – Historical Data & Forecasts
Wine
Table: Wine Value/Volume Sales – Historical Data & Forecasts
Table: Alcohol Production, Consumption And Trade – Historical Data & Forecasts
Soft Drinks
Table: Soft Drinks Value/Volume Sales – Historical Data & Forecasts
Hot Drinks
Table: Hot Drink Value Sales – Historical Data & Forecasts
Trade
Table: Food & Drink Trade Balance – Historical Data & Forecasts
Mass Grocery Retail
Table: Mass Grocery Retail Sales Value by Format – Historical Data & Forecasts
Table: Sales Breakdown By Retail Format Type (%)
Food
Key Industry Trends And Developments
Interest in Organic Foods Remains Strong
Dairy Market Of Interest
International Snack Expansion For PepsiCo
Manufacturing Still Attracts Interest
Sara Lee Split To Streamline Business
Private Labels Gain Shelf Space, Driving Consolidation
Firms Cut Prices In Response To Economic Downturn
Meat, Confectionery Firms Consolidate
Targeting Of Hispanic Community A Key Growth Area
Market Overview
Food Consumption
Confectionery
Canned Food
Agriculture
Drink
Key Industry Trends And Developments
Constellation’s Share Price Buoyed By Asset Sales And US Growth
Diageo To Brew Red Stripe On US Mainland
US Cider Brand Acquired By Irish C&C
Brown-Forman Posts Strong Results; Beam Global Remains Takeover Target
CBA Posts Strong Sales Growth, But Profits Under Pressure
Craft Beer Growing Strongly
Green Mountain-Starbucks Tie-Up Is A Win For Both Parties
Portfolio Expansion Continues
Focus On Energy Drinks
Market Overview
Alcoholic Drinks
Soft Drinks
Hot Drinks
Mass Grocery Retail
Key Industry Trends And Developments
Walmart’s Sales Recovering
Discount Sector Attracts Private Equity Interest
Store Expansion Continues
Large Retailers Report Sales Growth
Focus On Convenience
Market Overview
Main Players
Table: Structure Of The Mass Grocery Retail Market By Number Of Outlets
Table: Structure Of The Mass Grocery Retail Market – Sales By Format (US$bn)
Table: Average Annual Sales Value By Format – 2010 (US$mn)
Competitive Landscape
Key Players
Table: Key Players – Food Sector
Table: Key Players – Drink Sector
Table: Key Players – Mass Grocery Retail Sector
Company Monitor
Food
Kraft
Kellogg Company
General Mills
Tyson Foods
The Hershey Company
Drink
The Coca-Cola Company
PepsiCo
Anheuser-Busch InBev (ABI)
MillerCoors
Mass Grocery Retail
Walmart Stores
BMI Methodology
Food & Drink Business Environment Ratings
Ratings Methodology
Ratings System
Indicators
Table: Limits Of Potential Returns
Table: Risks To Realisation Of Potential Returns
Weighting
Table: Weighting
BMI Food & Drink Industry Glossary
Food & Drink
Mass Grocery Retail
BMI Food & Drink Forecasting And Sources
How We Generate Our Industry Forecasts
Sources Skip to top