Mise en page 1 - Euler Hermes

More documents

Recommendations

Info

Euler Hermes Economic Outlook no. 6 | 2011 - Global Sectors Review Global risk A Food products and beverages No standing still Overview: a growing industry In 2010, activity in the agrifoods sector mirrored the disparities in the economic fortunes of nations, with different growth patterns separating the developed countries (+6.5% by value compared to 2009 in the United States, +3.3% in Italy, +3.0% in France and +1.2% in Germany) from the emerging regions (+16.1% in China, +13.4% in Brazil). As with the recovery (+13%) in world agrifood trade, these figures need to be read in the light of the favourable price effects for various products. Current situation: cyclical constraints at work A recent FAO/OECD report confirmed expectations of an increase in average agricultural prices over 2011-2020 (up in real terms, against the preceding decade, by 20% for grains and by 30% for meat), but to levels nonetheless still below the peaks of 2007/2008 and H1 2011. The increase in input costs, estimated at between 6% and 10% for 2011, will be exacerbated not only by the upward trend in energy prices but also by the still growing volatility in other commodity prices (with the average monthly variation up by 30% between 2000-2005 and 2006-2010). In the short term, agrifood businesses will often only be able to pass on these costs to their customers downstream partially, or even not at all. This is for two reasons. The first is the great uncertainty over sales, prompted by sluggish consumer spending, and by the manifest resistance of distributors (who, like Tesco, have ambitions for their own- branded goods). The second is the ever-greater promotional activity undertaken by many groups. In the end, the agrifood sector, which stood out by avoiding any shock from oversupply during the crisis, is facing a different kind of shock, in this instance over margins, and this is a particular worry for SMEs in the sector. Outlook: actions on all fronts The classic methods for restoring profitability involve optimising industrial operations and attaining critical mass (e.g., the merger of Arla Foods and Hansa-Milch) or expanding sales (acquisition of Parmalat by Lactalis), in particular in emerging regions (acquisitions in Turkey and China by Diageo, talks between Nestle and Hsu Fu Chi in China). Manufacturers continue to hone their strategic positions by targeting the most lucrative segments (Nestlé’s ongoing commitment to nutraceuticals, with its purchase of Prometheus Laboratories) or moving into more buoyant segments (ConAgra’s continued expansion of its private label business in its efforts to acquire Ralcorp; or General Mills’ development of dairy products activities following its purchase of Yoplait). In addition to such efforts, an increasing number of other cost-saving solutions will be pursued: portion size reduction, package redesigns, or recipe changes (replacement of skimmed milk powder by soya proteins by Nestlé in Vietnam), etc. _BG Major world food and beverage companies Rank Company Nationality Turnover 2010 Change USD billions 2010/20009 1 Cargill USA 107.9(*) N/A 2 Nestlé Switzerland 105.5 6.5% 3 ADM USA 61.7(**) -10.8% 4 Pepsico USA 57.8 33.7% 5 Kraft USA 49.2 26.9% 6 AB InBev Belgium / Brazil / USA 36.3 -1.4% 7 Coca-Cola USA 35.1 13.3% 8 Unilever UK / Netherlands 30.3(1) 3.7% 9 Mars USA 30.0 N/A 10 Tyson USA 28.4(***) 6.5% Food production growth, selected countries Change Change Change 2008/2007 2009/2008 2010/2009 Germany -1.7% -1.0% 0.9% Brazil 0.4% -1.4% 4.3% USA -1.3% -0.6% 4.2% France -0.7% 1.1% -0.5% Japan 0.6% 2.0% 0% Sources: national statistics (*) as of 31 may (**) as of 30 june (***) as of 30 september (1) only food activity Source: companies 8
Economic Outlook no. 6 | 2011 - Global Sectors Review Euler Hermes Global risk B Consumer electronics Everything is converging Overview: the digital age Estimated at $340 billion in 2010, the world consumer electronics market covers the entire range of hi-fis, videos, personal computers, photographic equipment, games and mobile phones manufactured for sales to individuals.. Almost two-thirds of all production takes place in Asia. Last year marked a return to growth (+4% by volume) in this sector that was heavily hit by the past economic crisis. The major Korean manufacturers (Samsung, LG) came out stronger, at the expense of Japanese competitors (e.g., Sony and Panasonic), who had long ruled the roost. While all regions saw an upturn, the emerging countries were particularly dynamic in 2010, even leaving aside the impact of televising the FIFA World Cup to a global audience, which played a big part in leading a great many households to re-equip themselves with the very latest in video equipment. Current situation: H1 2011 in line with 2010 Televisions by far constitute the greatest item by value in consumer electronics. In the same way, Blu-ray has completely replaced the old VHS equipment, and flat screens have done the same to CRT displays. Innovation in this segment continues apace, with image quality in flat panel displays improving through the use of LED technology, with 3D systems, and with increased enthusiasm for connecting to digital TV via the internet. The potential sales growth is great, with industry statistics showing that less than 10% of TVs purchased worldwide offer internet connectivity and only 5% have 3D capability. This is a good time for manufacturers, with growth opportunities in markets where the household consumption share of GDP is on the rise, i.e., in the emerging markets. The relocation of global growth from the West to the East, with its vast reservoir of buyers for consumer electronics, is clearly promising. And this applies not only to less profitable entrylevel goods. A study by Accenture shows that, in terms of the sales outlook, it is households in the emerging countries that are the most receptive to recent innovations, and thus the highest margin goods. The percentage of respondents planning to purchase equipment within a year is between 10% and 20% in the emerging countries, compared to no more than 5% in the developed countries. Outlook: more uncertain in H2 2011 Despite all this, there are still questions about the industry’s continued growth in H2 2011. The Japanese tsunami in March stuck part of the sector’s supply chain, taking a number of Japanese manufacturing plants out of service. Although Japan accounts for only 15% of world electronics production, it is still dominant in certain basic electronic components (e.g., flash memories). Should the situation there persist, one cannot rule out an abrupt rise in material costs for consumer electronics manufacturers. If this proves to be the case, and given their inability to pass on their added costs downstream, they could find it hard to maintain their margins._ML Major world consumer electronics companies Rank Company Nationality Turnover 2010 Change USD billions 2010/2009 1 Samsung (*) South Korea 81 -1% 2 Panasonic (*) Japan 39 -3% 3 Sony (*) Japan 38 -12% 4 Sharp (*) Japan 30 4% 5 Toshiba Japan 15 7% 6 LG South Korea 19 25% 8 Philips Netherlands 12 -0.3% 9 Hitachi (*) Japan 11 10% (*) financial year ending 31 March Source: Companies World electronics output (consumer and professionnal) in % per zone 2010 Europe 19% North America 17% Japan 15% China 30% Asia Pacific (others) 15% Rest of the world 4% Total 100% Sources: Les Echos, Digiworld 9
Page 1 and 2: no. 6 2011 Global Sectors Review Gl
Page 3 and 4: Economic Outlook no. 6 | 2011 - Glo
Page 7: Economic Outlook no. 6 | 2011 - Glo

Mise en page 1 - Euler Hermes

Create successful ePaper yourself

Delete template?

Save as template?