Singapore Food and Drink Report q4 2014

Q4 2014
www.businessmonitor.com
SINGAPORE
FOOD & DRINK REPORT
INCLUDES 5-YEAR FORECASTS TO 2018
ISSN 1749-2947
Published by:Business Monitor International
Singapore Food & Drink Report Q4

2014
INCLUDES 5-YEAR FORECASTS TO 2018
Part of BMIs Industry Report & Forecasts Series

Published by: Business Monitor International
Copy deadline: August 2014
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Singapore Food & Drink Report Q4 2014
CONTENTS
BMI Industry View ............................................................................................................... 7
SWOT .................................................................................................................................... 9
Food ....................................................................................................................................................... 9
Drink .................................................................................................................................................... 11
Mass Grocery Retail ................................................................................................................................ 13
Industry Forecast .............................................................................................................. 15

Consumer Outlook ................................................................................................................................... 15
Food ..................................................................................................................................................... 18
Food Consumption ................................................................................................................................. 18
Table: Food Consumption Indicators - Historical Data & Forecasts (Singapore 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Canned Food ........................................................................................................................................ 19

Confectionery ........................................................................................................................................ 20
Table: Confectionery Value/Volume Sales, Production & Trade - Historical Data & Forecasts (Singapore 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Fish ..................................................................................................................................................... 22
Table: Fish Volume Sales, Production & Trade - Historical Data & Forecasts (Singapore 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Oils And Fats ........................................................................................................................................ 23

Table: Oils And Fats Volume Sales, Production & Trade - Historical Data & Forecasts (Singapore 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Drink .................................................................................................................................................... 25
Hot Drinks ............................................................................................................................................ 25
Table: Hot Drink Value/Volume Sales, Production & Trade - Historical Data & Forecasts (Singapore 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Alcoholic Drinks .................................................................................................................................... 27

Table: Alcoholic Drinks Value/Volume Sales, Production & Trade - Historical Data & Forecasts (Singapore 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . 29
Soft Drinks ............................................................................................................................................ 30

Table: Soft Drinks Sales, Production & Trade (Singapore 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Table: Mass Grocery Retail Sales - Historical Data & Forecasts, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Trade .................................................................................................................................................... 36
Table: Trade Indicators - Historical Data & Forecasts, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Macroeconomic Forecast ................................................................................................ 38

Macroeconomic Analysis ..........................................................................................................................
Holding Out Hope In Construction ............................................................................................................
Trade Outlook Not So Bright ....................................................................................................................
MAS Stands Pat On Cue ..........................................................................................................................
38
38
39
39
Table: Economic Activity (Singapore 2009-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Industry Risk Reward Ratings .......................................................................................... 42

Asia Pacific - Risk/Reward Ratings ............................................................................................................. 42
Table: Asia Pacific Food & Drink Risk/Reward Ratings Q414 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Table: Asia Pacific Food & Drink Risk/Reward Sub-Factor Ratings Q414 (scores out of 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Page 4

Singapore Risk/Reward Ratings .................................................................................................................. 48
Table: Q414 Singapore Food & Drink Risk/ Reward Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Market Overview ............................................................................................................... 50

Food .....................................................................................................................................................
Agriculture ..........................................................................................................................................
Food Processing ....................................................................................................................................
Drink ....................................................................................................................................................
Soft Drinks ............................................................................................................................................
50
50
50
51
51
Alcoholic Drinks .................................................................................................................................... 52

Hot Drinks ............................................................................................................................................ 52
Table: Structure Of Mass Grocery Retail Market By Estimated Number Of Outlets, 2005-2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Table: Structure Of Mass Grocery Retail Market By Value (USDbn), 2007-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Table: Structure Of Mass Grocery Retail Market By Value (SGDbn), 2007-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Table: Grocery Retail Sales By Format, 2012 And 2021 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Industry Trends And Developments ................................................................................ 56

Food .....................................................................................................................................................
Key Industry Trends And Developments ......................................................................................................
Drink ....................................................................................................................................................
Mass Grocery Retail ................................................................................................................................
56
56
60
60
65
65
Competitive Landscape .................................................................................................... 71

Table: Key Players In Singapore's Food Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Table: Key Players In Singapore's Drinks Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Table: Key Players In Singapore's Mass Grocery Retail Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Company Profile ................................................................................................................ 73

Auric Pacific ..........................................................................................................................................
Petra Foods ............................................................................................................................................
Fraser & Neave .......................................................................................................................................
Asia Pacific Breweries ..............................................................................................................................
Sheng Siong ............................................................................................................................................
NTUC FairPrice .....................................................................................................................................
73
75
78
80
83
86
Global Industry Overview .................................................................................................. 89

Table: Select Food Companies - R&D And Advertising Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Table: Food And Drink Core Views . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Demographic Forecast ..................................................................................................... 98

Table: Singapore's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Table: Singapore's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Table: Singapore's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Table: Singapore's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Page 5
Glossary ........................................................................................................................... 102

Food & Drink ...................................................................................................................................... 102
Mass Grocery Retail ............................................................................................................................. 102
Methodology .................................................................................................................... 104

Industry Forecast Methodology ..............................................................................................................
Sector-Specific Methodology ..................................................................................................................
Sources ..............................................................................................................................................
Risk/Reward Rating Methodology ...........................................................................................................
104
105
105
106
Table: Food & Drink Risk/Reward Rating Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Table: Weighting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Page 6
BMI Industry View

BMI View: Singapore has one of the highest levels of food consumption in the region, which effectively
eliminates the possibility of substantial industry growth in the short or medium term. This is illustrated by
our modest sales growth forecasts for a majority of sub-sectors to 2018. Nonetheless, we believe that
Singaporean alcoholic drinks market has not reached a saturation point yet and holds significant growth
potential over our forecast period.
Headline Industry Data
Total food consumption (local currency) growth year-on-year (y-o-y) in 2014: +1.9%; compound annual
growth rate (CAGR) to 2018: +2.1%
Per capita food consumption (local currency) growth (y-o-y) in 2014: -0.1%; CAGR to 2018: +0.3%
Alcoholic drinks sales (local currency) growth (y-o-y) in 2014: +5.8%; CAGR: 6.8%
Total soft drink sales (local currency) growth (y-o-y) in 2014: +3.2%; CAGR to 2018: +2.6%
Total mass grocery retail sales (local currency) growth year-on-year (y-o-y) in 2014: +2.7%; compound
annual growth rate (CAGR) to 2018: +2.9%
Latest Industry Trends & Developments

Sanyo To Pay USD187.5mn For 25% Of Olam's Packaged-Foods Business: In August 2014, Sanyo Foods
has acquired a 25% stake in Singapore-based food ingredients processor Olam International's packagedfoods business for USD187.5mn. On completion of the transaction, Olam expects to register a net cash
inflow of USD167.5mn and an addition to reserves of USD80.8mn. The instant-noodle joint venture
between the companies will be a holding company for all of Olam's packaged-foods businesses incorporated
in Singapore, with Olam having the management control. Olam, which sells its packaged foods mainly in
Africa, recorded turnover of USD350mn in 2013.
GIC Inks Exchangeable Loan Agreement With CCC: In May 2014, the Government of Singapore
Investment Corporation (GIC) inked an Exchangeable Loan Agreement with Philippines-based Century
Canning Corporation (CCC). As part of the agreement, GIC has invested PHP3.4bn (USD76.2mn) in CCC,
which will be used by the firm to finance the growth and expansion of existing units, including but not
limited to CNPF, probable acquisitions and venturing into new businesses. The agreement can be extended
by both companies and will be for a term of one year. GIC can also swap both principal and all accrued
interest into 245.5mn issued and outstanding shares of CNPF, where in it will hold 11% of CNPF's issued
and outstanding shares.
Page 7
Asahi Set To Acquire Etika International: In April 2014, Japan-based Asahi Breweries' Singapore unit said
it was is set to acquire the dairy product business of Singapore Exchange (SGX)-listed Etika International
Holdings in a USD329mn deal. Under the terms of the agreement, Asahi Breweries will acquire Kuala
Lumpur-based Etika Dairies Sdn Bhd and 11 other companies in the region. The reported sale will provide a
good opportunity for the group to boost their business and to maximise returns for its shareholders,
according to a statement from Etika Holdings.
WSH To Acquire Shree Renuka Sugars For USD200mn: In February 2014, Wilmar Sugar Holdings
(WSH), an affiliate of Singapore-based agribusiness group Wilmar International, decided to acquire a
controlling stake in Indian sugar company Shree Renuka Sugars (SRS) for a consideration of
USD200mn. Under the terms of the transaction, SRS will be jointly controlled by its existing promoters and
WSH, with the two parties having equal shareholding and board representation in SRS. WSH is considering
financing the acquisition through a combination of its existing funds and bank borrowings. The transaction
is subject to regulatory and shareholder approvals
Del Monte Pacific Acquires Del Monte Foods: In February 2014, Singapore-based food and beverage
company Del Monte Pacific (DMPL) completed the acquisition of Del Monte Foods' (DMF) Consumer
Products business for USD1.67bn. The acquired unit will now be renamed as Del Monte Foods (DMFI).
The acquisition includes Del Monte, S&W, Contadina and College brands, which generated USD1.8bn in
sales and USD164mn in earnings before interest, taxes, depreciation and amortisation (EBITDA) in 2013.
The deal will allow DMFI to boost its international market presence through DMPL's presence in the
Philippines and other Asian markets, while introducing new products into the US market from Asia.
Nestl Signs R&D Agreement With Government Agency: Nestl and Singapore's Agency for Science,
Technology and Research (A*STAR) signed an agreement in January 2014 that will see collaboration
across many areas of food and nutrition research. The agreement supports one of A*STAR's strategic
priorities, to develop its capabilities in food and nutrition research. From Nestl's perspective, the agreement
will help them to optimise their production processes and provide nutritional foods for their customers,
meeting the needs of an increasingly educated and affluent consumer base.
This is not the first time that the two bodies have worked together. Previous research projects focussed on
understanding nutrition requirements for infants and women during pregnancy, to promote life-long
metabolic health. The new agreement will see the involvement of A*STAR researchers in collaborative
projects with Nestl affiliates worldwide, and in turn will allow Nestl access to A*STAR's research
facilities and technology.
Page 8
SWOT
Food
SWOT Analysis
Strengths
The food-processing sector, although small, is efficient and works at maximum

capacity with strong levels of government support. Added-value food production
counts for a significant proportion of the total.
The government aims to increase Singapore's food production capabilities.
Importers can operate freely without concern over discriminatory taxes.
Singapore's location makes it an ideal hub for regional exporters and this has led to
considerable investment.
Per capita food consumption levels are among the highest in the region, giving
manufacturers access to a high-spending and susceptible audience.
The mass grocery retail sector is highly developed, providing excellent distribution
avenues for processed foods.
Weaknesses
A small population and limited domestic processing facilities force Singaporean

companies to look abroad for new business development opportunities.
Singapore's limited natural resources mean it is dependent on imports of raw

materials and food; domestic food production levels remain low.
There is little room for development of the agricultural sector.
Singapore's absence of tariffs on food products means domestic producers face

fierce competition from foreign manufacturers.
Competition from low-cost neighbouring countries is on the increase, and its

population is ageing rapidly.
The market is highly mature and holds limited growth potential over our forecast
period.
Page 9
SWOT Analysis - Continued
Opportunities
Sales of packaged food and 'healthy' products have increased as a result of

consumers' increasing consciousness about food safety and hygiene.
Well developed infrastructure and a competitive business environment make

Singapore an attractive choice for added-value food producers.
Consumers are interested in branded, premium and added-value goods, rendering

these crucial ingredients for a successful product launch in the country, whether in
the food, drink or retail sector.
Wealthy, time-poor consumers are susceptible to the launch of processed and

convenience foods, which can be sold at the premium end of the market.
Threats
The food-processing industry is threatened by competition from low-cost neighbours,

such as China. This will remain a problem as Singapore will continue to have high
labour and land costs.
Volatile food prices could negatively impact sales of many food products.
Page 10
Drink
SWOT Analysis
Strengths
Wealthy locals, a large expatriate community and tourism support the country's
competitive and dynamic alcohol and soft drink sectors.
Importers can operate freely without concern over discriminatory taxes.
Singapore's location makes it an ideal hub for regional exporters, and this has led to
considerable investment.
Alcoholic drinks are widely consumed thanks to a relaxed attitude towards

consumption among Singaporeans, the presence of a large expatriate community and
high tourism levels.
Weaknesses
A small population and limited domestic processing facilities force Singaporean

companies to look abroad for new business development opportunities.
The most profitable sectors, such as soft drinks and alcohol, are already mature,
making growth difficult except through substantial marketing investment.
Although incomes are high, most consumers are still price-conscious.The market is
highly mature and holds limited growth potential over our forecast period.
Opportunities
Consumers are interested in branded, premium and added-value goods, rendering

these crucial ingredients for a successful product launch in the country, whether in
the food, drink or retail sector.
High tourism levels and a hot climate boost sales opportunities for soft drinks and
alcoholic drinks manufacturers.
Although the hot drinks sector is highly mature, opportunities exist to capitalise on the
country's increased health consciousness by producing fruit and herbal teas.
The beer and wine sub-sectors are forecast to experience healthy growth and are still
many years from reaching market maturity.
Page 11
In the face of regional competition for both exports and investment, the government is
encouraging economic diversification to boost competitiveness and is now promoting
the tourism sector, which in turn will boost drinks sales.
Threats
High commodity costs threaten manufacturers' profit margins, potentially resulting in

reduced capacity for reinvestment.
Singapore continues to face strong and growing competition from low-cost

neighbours such as China and Vietnam. This will remain a problem as long as
Singapore continues to have high labour and land costs.
Page 12
Mass Grocery Retail
SWOT Analysis
Strengths
Singapore's mass grocery retail (MGR) sector is modern and characterised by intense
competition, which benefits consumers and ensures a high level of business activity
as well as a reasonably dynamic environment.
Most modern retail formats are present in the country, meaning modern shopping
choices exist for most occasions and most consumer preferences.
As modern retailers have long dominated sales and independents have managed to
carve out their own niche, there is little in the way of protective and restrictive
legislation in place.
Singapore has one of the highest incomes per capita in the world, and we predict
strong economic growth over the forecast period, which will drive future MGR sales.
Weaknesses
Growth in the supermarket sector is expected to be modest, with retailers forced to

discount in order to attract consumers. Investment is likely to increasingly focus on
upgrading existing outlets.
Suitable real estate for development in Singapore is rare and accordingly sells at a
premium; available land attracts the attention of numerous bidders, and this often
drives a plot of land well over its real value.
Older Singaporeans in particular have shown a preference for shopping at wet

markets, and they remain the choice for everyday purchases of fresh items for a wider
demographic.
The relative small size of the local MGR market means that local operators will be
forced to expand into other regional markets to achieve long-term growth.
The market is becoming increasingly mature, with forecast MGR sales growth rates
for 2013-2018 expected to be much lower compared to 2007-2012.
Opportunities
Opportunities exist in the convenience retail sector, and operators will be able to take
the smaller format into areas that cannot accommodate larger outlets.
Page 13
Partnerships with petrol station operators have also proved a useful means of
furthering convenience store development cost effectively and in high footfall areas.
The opening of just one new hypermarket can provide a considerable stimulus to a
retailer's sales, owing to the immense profitability of this format.
Consumers have shown themselves to be hugely susceptible to added-value in-store

products and services, particularly with regard to highly innovative features, and this
allows retailers to achieve growth in spite of crowding.
Private labelling has proved an important means of securing consumer loyalty,

provided that branded goods can be significantly undercut and quality is not
jeopardised.
Compared with many other similarly developed Asian economies, independent retail
continues to account for a reasonable chunk of the market, indicating that expansion
opportunities remain.
Threats
Higher growth opportunities in neighbouring markets threaten to capture the attention

of Singapore's multinational retailers, potentially resulting in reduced investment in
the country.
Although susceptible to innovative and premium goods, Singaporean consumers are

price-conscious - demanding value, not just image - which retailers must take into
account when formulating their development strategies.
Page 14
Industry Forecast
Consumer Outlook
The Singaporean consumer outlook remains steady as the city-state continues to push for economic
momentum. Following a 2.7% performance in 2013, we envisage private consumption accelerating slightly
to 4.0% in 2014 and averaging 5.2% (year-on-year) till the end of our forecast period to 2018. However,
risks to this forecast are likely to the downside, as the nascent correction in the Singapore real estate market
may take a bite out of domestic demand.
Steady Growth
Singapore Population (mn) & Private Final Consumption Nominal Growth % y-o-y
7.5
20
15
5
10
5
2.5
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012e
2013f
2014f
2015f
2016f
2017f
0
-5
Population, mn (LHS)
Private final consumption, SGD nominal growth % y-o-y (RHS)
e/f= BMI estimate/forecast. Source: World Bank, UN, Statistics Singapore, IMF, BMI
Despite steady private consumption and impressive labour dynamics in the face of a headline GDP growth
slowdown last year, the economy faces challenges that could impact consumer sentiment. One such
challenge is the high levels of debt currently seen in Singapore, with household debt now standing at
roughly 150% of household income, the second highest in the region behind Malaysia. There will
undoubtedly be repercussions for both lower income households as well as those that have leveraged
themselves aggressively (in order to take part in the country's housing boom) once global interest rates
Page 15
begin to normalise. Nevertheless, we stress that Singapore remains among the best-placed developed
markets to weather such a phenomenon.
Leveraging Up
Singapore - Total Household & Mortgage Liabilities, SGDmn (LHS) & % GDP
Source: BMI, Singstat, MTI
There has been a great deal of recent discussion about the risk facing the Singaporean economy from an
eventual rise in global interest rates. The country's monetary policy is, in some ways, inappropriate for a
country whose nominal GDP growth is averaging almost 6% per year over the past five years. A credit
boom has undoubtedly resulted from the deeply negative real interest rate environment. It is difficult to tell
exactly what impact global rate normalisation will have on the local economy, and much depends on the
trajectory of the rise in US rates and on the eventual equilibrium level to which they reset. Our core view is
that interbank rates in the US and Singapore will begin to rise steadily beginning in 2015, but remaining
subdued by historical standards. As the price of money affects almost every major business spending and
consumption decision, higher costs of credit will undoubtedly have far-reaching implications. However,
higher global rates will bring positive as well as negative developments, and we believe that Singapore is
among the developed nations best equipped to withstand global interest rate normalisation.
Page 16
The Effects Of Cheap Money

Singapore - Private Property Price Index (LHS) & SIBOR 3-Month Rate, %
Source: BMI, URA, ABS
Although concerns such as household debt and the cost of credit prompt questions over the health of the
Singaporean economy and consequently the consumer, we retain our view that the economy remains on
sound footing, retaining its position as one of the region's outperformers. Looking to the city-state's longerterm growth prospects, we forecast GDP to expand at an average of 3.3% between 2014 to 2018,
reinforcing a steady and stable outlook. Key supporting factors underpinning this growth will remain the
government's sound economic policy, a highly skilled work force and favourable business climate: factors
that continue to bode well for the Singaporean consumer, presently and into the future.
Page 17
Food
Food Consumption
Food Consumption
Total food consumption (local currency)

growth year-on-year (y-o-y) in 2014: +1.9%;
compound annual growth rate (CAGR) to 2018:
+2.1%
Per capita food consumption (local currency)
growth (y-o-y) in 2014: -0.1%; CAGR to 2018:
+0.3%
Singapore has one of the highest levels of food
(2011-2018)
10
7.5
2.5
greatly surprising that the total food and drink sales
2018f
2017f
2016f
2015f
2014f
2013e
growth in the short or long term. Therefore, it is not
2012
eliminates the possibility of substantial industry
2011
consumption in the region, which effectively
Food consumption SGDbn

Food consumption, SGD, % y-o-y
are forecast to experience a fairly modest growth of

2.1% in local currency terms between 2013 and
2018. Value sales will be largely driven by
National Sources/BMI
population growth, as per capita food sales are

expected to increase only by a CAGR of 0.3% over
the same period.
Other factors, which prevent very strong growth in food consumption include the inherent price-sensitivity
of local consumers, despite the country's relative wealth, as well as the highly developed and competitive
nature of the local food and drink industry. Looking at the demographics, the country has an ageing
population, which, while already enjoying high incomes, remains very price sensitive when making
consumer goods purchases. Consequently, the majority of local industry players have relied on competitive
pricing as a means of building their existing market share, which will continue to curb consumption growth
potential in value terms.
Nonetheless, Singapore's positive long-term economic outlook, increasing tourism and low unemployment
levels will ensure that domestic food and beverage consumption remains high. Singapore is therefore likely
to continue playing a significant role in the regional growth strategies of multinationals, as the country's
solid existing spending levels provide steady returns on investments and thus support the companies'
expansions into emerging markets.
Page 18
Table: Food Consumption Indicators - Historical Data & Forecasts (Singapore 2011-2018)
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
Food consumption SGDbn
6.6
6.8
7.3
7.4
7.5
7.7
7.8
8.0
Food consumption, SGD, % y-o-y
2.7
3.1
6.0
1.9
1.9
1.8
1.9
2.8
1,278.5
1,291.0
1,340.9
1,340.2
1,341.4
1,342.4
1,346.2
1,363.3
5.3
5.6
5.8
6.0
6.2
6.4
6.6
6.9
1,016.7
1,049.6
1,072.7
1,085.2
1,104.1
1,118.7
1,140.9
1,175.2
Food consumption, SGD per capita

Food consumption, USDbn
Food consumption, USD per capita
Canned Food
Canned food sales (local currency) growth (y-o-y) in 2014: +3.5%; CAGR to 2018: +6.9%
We anticipate a solid growth in the demand for canned food over our forecast period. Between 2013 and
2018, the total sales (in local currency) are forecast to increase by 39.8%, while volume sales are expected
to experience slower growth at 22.7%. There are three main drivers behind this good growth forecast:
premiumisation, food accountability and a greater number of women entering the workforce.
With the average consumer in Singapore already enjoying a high income and demonstrating willingness to
trade up to higher-priced and value-added food products, demand for canned food is expected to remain
strong in the near term. With canned foods often valued at a higher price than fresh produce, accelerating
premiumisation is expected to fuel demand for canned food.
In addition, due to the spate of food safety and hygiene scares in the Asia Pacific region, food product origin
has emerged as another significant purchasing determinant (besides price and convenience) for Singaporean
consumers. Canned foods typically carry well detailed food labels and are often perceived as safer options
to fresh produce, given the stringent quality controls applied in canned food manufacturing. As a
result, demand for these products is expected to increase.
Local canned food producers are also recognising the importance of food accountability, and an increasing
number of canned food producers are changing their food labels to include more information such as the
quantity of trans-fats, calorie values and expiry date. According to the Agri-Food and Veterinary Authority,
a greater awareness of food labelling has seen the number of cases violating the rules for food labelling
falling by more than half in three years. This trend towards improving accountability among food producers
Page 19
is likely to persist throughout the coming decade and should stimulate demand for canned food over our
forecast period.
Lastly, given the increasing number of working women and with Singaporeans already leading busy
lifestyles, demand for convenience food products such as canned food is set to rapidly outpace total food
consumption over our forecast period to 2018.
Confectionery
Confectionery sales (local currency) growth (y-oy) in 2014: +3.6%; CAGR to 2018: +4.4%
Chocolate sales (local currency) growth (y-o-y) in

2014: +6.4%; CAGR to 2018: +6.4%
Sugar confectionery sales (local currency) growth

(y-o-y) in 2014: +3.7%; CAGR to 2018: +4.8%
Gum sales (local currency) growth (y-o-y) in

2014: +1.7%; CAGR to 2018: +1.7%
Confectionery sales in Singapore are expected to
Confectionery
(2011-2018)
150,000
100,000
50,000
experience a fairly modest growth both in terms of
meanwhile, volume (tonnes) sales are forecast to

grow at a considerably lower rate, by 8.2% over our
2018f
2017f
2016f
2015f
2014f
2013e
2012
value (local currency) sales increase by 23.9%,
2011
value and volume. To 2018, we forecast an overall
Confectionery sales, tonnes, % y-o-y

Confectionery sales, tonnes
forecast period, indicating the importance of

premiumisation to this sub-sector. While the industry
is without a doubt mature, Singaporean consumers

have shown a strong desire for new and innovative
products, and a willingness to pay a premium for these products remains a major driver behind value sales
growth.
Chocolate will be the fastest growing sub-sector in confectionery sales, demonstrating a CAGR of 6.4% in
local currency terms between 2013 and 2018. Sugar confectionery value (local currency) sales are expected
to increase at a slightly slower pace of 4.8% (CAGR), while gum sales will grow only by 1.7% (CAGR).
Singapore's confectionery industry is exceptional in the sense that it is one of the few sub-sectors in which a
great deal of the manufacturing occurs domestically. A number of big confectionery players such as
Bengawan Solo, BreadTalk, PrimaDli and Four Leaves have established a strong presence in the
Page 20
country, while smaller confectionery shops have grown rapidly over the past few years. These companies
have been constantly reinventing their product offerings and have also reinvested heavily in marketing and
promotional campaigns as they vie for a larger share of the confectionery market, further fuelling value
sales growth.
Table: Confectionery Value/Volume Sales, Production & Trade - Historical Data & Forecasts (Singapore 2011-2018)
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
Confectionery sales,
SGDmn
1,135.62
1,203.99
1,254.41
1,299.03
1,357.02
1,417.07
1,481.67
1,553.62
Gum sales, SGDmn
238.04
252.42
265.24
269.69
274.31
278.72
283.26
288.57
98.73
104.96
108.88
117.23
126.70
136.36
147.60
160.20
189.30
205.22
212.19
218.37
225.77
232.27
240.05
248.76
tonnes
116,847.8
119,104.6
120,402.3
120,774.6
122,715.9
124,951.0
127,370.6
130,290.2
SGD per capita
218.7
227.0
231.8
235.5
241.5
247.9
255.0
263.3
USDmn
903.1
978.9
1,003.5
1,051.8
1,116.9
1,180.9
1,255.6
1,339.3
4,402.2
4,380.7
4,510.1
4,667.3
4,822.4
5,001.2
5,193.2
5,406.0
0.8
0.8
0.8
0.8
0.9
0.9
0.9
0.9
124.1
129.1
136.1
144.8
153.9
163.6
174.2
185.8
Sugar confectionery
sales, tonnes
90,993.3
92,595.4
93,789.1
94,601.0
96,531.1
98,835.3
101,324.3
104,158.2
Sugar confectionery
sales, kg per capita
17.5
17.5
17.3
17.1
17.2
17.3
17.4
17.7
Gum sales, tonnes
21,452.3
22,128.4
22,103.2
21,506.3
21,362.4
21,114.6
20,853.1
20,726.0
Gum sales, kg per

capita
4.1
4.2
4.1
3.9
3.8
3,693.2
3.6
3,512.6
45.8
47.6
49.0
48.9
48.8
48.8
48.7
48.9
Chocolate sales,
USDmn
Gum sales, USDmn
Chocolate sales,
tonnes
Chocolate sales, kg
per capita
Chocolate sales,
SGDmn
Gum sales, SGD per

capita
Page 21
Fish
Frozen fish (tonnes) growth (y-o-y) in 2014: +1.4%; CAGR to 2018: +1.5%
Preserved fish (tonnes) growth (y-o-y) in 2014: +3.8%; CAGR to 2018: +3.7%
Fish is one of the most consumed food stuffs in Singapore, with per capita consumption of seafood
estimated to be around 25kg per year. This places seafood as the second most popular food in the country,
behind chicken, which has an estimated per capita consumption of 35kg per year, and just ahead of pork at
20kg per year. Frozen fish sales are slightly higher than preserved fish sales, yet the latter are expected to
grow faster than frozen fish. We expect per capita consumption of frozen fish to remain largely
stable standing at around 10.5kg to 2018, while per capita consumption of preserved fish is expected to
increase by 10.2% and reach 13.4 kg over the same period. Currently, local production of fish makes up
only 4% of Singapore's demand; however, the government has introduced incentives in an attempt to raise
this figure to 15% in the next five years.
Table: Fish Volume Sales, Production & Trade - Historical Data & Forecasts (Singapore 2011-2018)
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
Frozen fish production, tonnes
38,009.4
38,533.7
40,002.4
41,332.1
42,716.0
44,201.5
45,746.6
47,307.9
Frozen fish production, tonnes,

% y-o-y
5.4
1.4
3.8
3.3
3.3
3.5
3.5
3.4
56,662.5
56,637.8
57,557.5
58,338.4
59,173.3
60,109.9
61,106.0
62,118.4
Frozen fish sales, tonnes, % yo-y
2.5
0.0
1.6
1.4
1.4
1.6
1.7
1.7
Frozen fish sales, kg per capita
10.9
10.7
10.6
10.6
10.5
10.5
10.5
10.5
23,446.1
22,755.6
22,065.2
21,374.8
20,684.4
19,993.9
19,303.5
18,613.1
-2.9
-2.9
-3.0
-3.1
-3.2
-3.3
-3.5
-3.6
42,099.1
40,859.8
39,620.4
38,381.0
37,141.7
35,902.3
34,662.9
33,423.6
-2.9
-2.9
-3.0
-3.1
-3.2
-3.3
-3.5
-3.6
Frozen fish sales, tonnes
Frozen fish exports, tonnes

Frozen fish exports, tonnes, %
y-o-y
Frozen fish imports, tonnes
Frozen fish imports, tonnes, %
y-o-y
Frozen fish balance, tonnes
-18,653.1 -18,104.1 -17,555.2 -17,006.2 -16,457.3 -15,908.4 -15,359.4 -14,810.5
Frozen fish balance, tonnes, %

y-o-y
-2.9
-2.9
-3.0
-3.1
-3.2
-3.3
-3.5
-3.6
35,734.0
37,618.5
39,503.0
41,387.5
43,272.0
45,156.5
47,041.0
48,925.5
Preserved fish (other)

production, tonnes, % y-o-y
5.6
5.3
5.0
4.8
4.6
4.4
4.2
4.0
Preserved fish (other) sales,

tonnes
60,832.2
63,808.6
65,901.3
68,404.1
71,071.5
73,729.8
76,430.5
79,175.7
Preserved fish (other) sales,

tonnes, % y-o-y
3.9
4.9
3.3
3.8
3.9
3.7
3.7
3.6
Preserved fish (other)

production, tonnes
Page 22
Fish Volume Sales, Production & Trade - Historical Data & Forecasts (Singapore 2011-2018) - Continued
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
Preserved fish (other) sales, kg

per capita
11.7
12.0
12.2
12.4
12.6
12.9
13.2
13.4
Preserved fish (other) exports,

tonnes
14,656.5
14,726.9
14,857.1
15,642.4
16,747.8
17,870.5
19,038.0
20,252.3
Preserved fish (other) exports,

tonnes, % y-o-y
6.4
0.5
0.9
5.3
7.1
6.7
6.5
6.4
Preserved fish (other) imports,

tonnes
39,754.7
40,917.0
41,255.4
42,659.0
44,547.3
46,443.8
48,427.5
50,502.5
Preserved fish (other) imports,

tonnes, % y-o-y
3.3
2.9
0.8
3.4
4.4
4.3
4.3
4.3
Preserved fish (other) balance,

tonnes
-25,098.2 -26,190.1 -26,398.3 -27,016.6 -27,799.5 -28,573.3 -29,389.5 -30,250.2
Preserved fish (other) balance,

tonnes, % y-o-y
1.6
4.4
0.8
2.3
2.9
2.8
2.9
2.9
Oils And Fats
Crude soya-bean oil sales (tonnes) growth (y-o-y) in 2014: +2.5%; CAGR to 2018: +2.6%
Corn-oil sales (tonnes) growth (y-o-y) in 2014: +23.7%; CAGR to 2018: +16.9%
Crude soya-bean oil volume sales are expected to experience a rather modest expansion to 2018, with the
CAGR standing at 2.6%. In contrast, we forecast a very strong sales growth for corn-oil sales, which are set
to grow by a CAGR of 16.9% to 2018.
Table: Oils And Fats Volume Sales, Production & Trade - Historical Data & Forecasts (Singapore 2011-2018)
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
Crude soya-bean oil production,

tonnes
4,056.2
4,089.6
4,182.9
4,267.5
4,355.5
4,449.9
4,548.2
4,647.4
Crude soya-bean oil production,

tonnes, % y-o-y
3.2
0.8
2.3
2.0
2.1
2.2
2.2
2.2
4,063.2
4,117.2
4,231.1
4,336.3
4,444.9
4,559.9
4,678.8
4,798.6
Crude soya-bean oil sales,

tonnes, % y-o-y
3.7
1.3
2.8
2.5
2.5
2.6
2.6
2.6
Crude soya-bean oil sales, kg per

capita
0.8
0.8
0.8
0.8
0.8
0.8
0.8
0.8
1,454.2
1,413.0
1,371.9
1,330.7
1,289.6
1,248.4
1,207.3
1,166.1
Crude soya-bean oil sales, tonnes
Crude soya-bean oil exports,

tonnes
Page 23
Oils And Fats Volume Sales, Production & Trade - Historical Data & Forecasts (Singapore 2011-2018) - Continued
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
Crude soya-bean oil exports,

tonnes, % y-o-y
-2.8
-2.8
-2.9
-3.0
-3.1
-3.2
-3.3
-3.4
Crude soya-bean oil imports,

tonnes
1,461.2
1,440.6
1,420.1
1,399.5
1,379.0
1,358.4
1,337.9
1,317.3
Crude soya-bean oil imports,

tonnes, % y-o-y
-1.4
-1.4
-1.4
-1.4
-1.5
-1.5
-1.5
-1.5
Crude soya-bean oil balance,

tonnes
-7.0
-27.6
-48.2
-68.8
-89.4
-110.0
-130.6
-151.2
Crude soya-bean oil balance,

tonnes, % y-o-y
-151.3
295.0
74.7
42.8
29.9
23.0
18.7
15.8
115.2
115.6
116.6
117.6
118.6
119.7
120.8
121.9
1.2
0.3
0.9
0.8
0.9
0.9
0.9
0.9
1,666.2
2,418.7
3,171.9
3,924.9
4,678.1
5,431.3
6,184.5
6,937.8
82.6
45.2
31.1
23.7
19.2
16.1
13.9
12.2
0.3
0.5
0.6
0.7
0.8
1.0
1.1
1.2
9,499.7
9,160.7
8,821.6
8,482.6
8,143.6
7,804.6
7,465.6
7,126.6
-3.4
-3.6
-3.7
-3.8
-4.0
-4.2
-4.3
-4.5
11,050.6 11,463.8 11,876.9 12,290.0 12,703.1 13,116.2 13,529.3
13,942.4
Corn oil production, tonnes

Corn oil production, tonnes, % yo-y
Corn oil sales, tonnes
Corn oil sales, tonnes, % y-o-y
Corn oil sales, kg per capita
Corn oil exports, tonnes
Corn oil exports, tonnes, % y-o-y
Corn oil imports, tonnes
Corn oil imports, tonnes, % y-o-y
Corn oil balance, tonnes
Corn oil balance, tonnes, % y-o-y
3.9
3.7
3.6
3.5
3.4
3.3
3.1
3.1
-1,551.0
-2,303.1
-3,055.2
-3,807.4
-4,559.5
-5,311.6
-6,063.7
-6,815.8
94.2
48.5
32.7
24.6
19.8
16.5
14.2
12.4
Page 24
Drink
Hot Drinks
Coffee sales (local currency) growth year-on-year (y-o-y) in 2014: +2.4%; compound annual growth rate
(CAGR) to 2018: +1.7%
Tea sales (local currency) growth (y-o-y) in 2014: +3.6%; CAGR to 2018: +3.7%
Due the maturity of the local coffee market, we forecast very modest growth in this segment to 2018.
Coffee sales are expected to increase only by 1.7% (CAGR) in local currency terms, mostly driven by
innovation and continuing openings. Coffee culture is well ingrained in the Singaporean market, which is
not surprising given the presence of big coffee giants such as Starbucks, The Coffee Bean and UK-based
Costa Coffee. Local consumers are also becoming more sophisticated, which is an important growth driver,
particularly for value sales moving forward.
Singapore is arguably one of the most mature coffee markets in the Asia Pacific region. The presence of
established coffee retailers at both the lower end and premium end of the market largely explains the
prevalence of the coffee drinking culture across Singapore. With coffee retailers such as Ya Kun Kaya
Toast and Old Town White Coffee catering to the lower-end segment of the market, and retailers such as
Starbucks and The Connoisseur Concerto (TCC) providing consumers with the indulgence of a 'coffee
drinking experience' at the higher end, local consumers are spoiled for choice.
Despite the maturity of the Singapore coffee sector, we still see scope for growth in the longer term due to
an accelerating premiumisation momentum. The increasingly urbanised lifestyles of local consumers,
accompanied by higher incomes, will translate into a growing appetite for premium-priced Westernised
styles of coffee such as espresso and mocha. Supported by higher purchasing power, consumers are also
likely to develop increasingly sophisticated tastes for coffee and demand greater variety in coffee products
such as Vietnamese coffee and flavoured beverage options.
This premiumisation opportunity means that it remains worthwhile for coffee retailers in Singapore to
expand their product offerings as well as ramp up their store expansions to try and grow their share of the
market. The trend of product innovation is particularly evident among local coffee retailers as they try to tap
into an audience with varied tastes. For instance, yuanyang, a coffee beverage blended with milk tea, is
well received by local consumers.
The continued flurry of marketing initiatives among local coffee retailers will help to encourage coffee
consumption in Singapore as well. TCC, for instance, offers membership discounts to its frequent
customers, and Starbucks often holds sales promotions in a bid to draw greater crowds.
Page 25
Meanwhile, tea sales are forecast to increase by a much stronger CAGR of 3.5% over our forecast period in
local currency terms. The tea sector in Singapore is less developed and less popular than its coffee
counterpart, and as such the main driver of this growth will be due to its smaller base. Premiumisation, as
well as increasing health-consciousness and product innovation will spur on sales.
Hot Drinks
(2011-2018)
3,000
2,000
1,500
2,000
1,000
1,000
500
Coffee sales, tonnes
2018f
2017f
2016f
2015f
2014f
2013e
2012
0
2011
Tea sales, tonnes
Page 26
Table: Hot Drink Value/Volume Sales, Production & Trade - Historical Data & Forecasts (Singapore 2011-2018)
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
2,470.9
2,441.1
2,445.9
2,436.6
2,433.3
2,419.3
2,385.3
2,332.0
0.5
0.5
0.5
0.4
0.4
0.4
0.4
0.4
Coffee sales, SGDmn
76.6
79.1
81.1
83.1
85.4
87.0
87.9
88.1
Coffee sales, USDmn
60.9
64.3
64.9
67.3
70.3
72.5
74.5
76.0
1,607.3
1,562.4
1,554.8
1,566.8
1,577.3
1,594.2
1,613.6
1,637.0
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
31.3
31.8
32.4
33.6
34.8
36.1
37.4
38.9
6.0
6.0
6.0
6.1
6.2
6.3
6.4
6.6
Coffee sales, tonnes

Coffee sales, kg per capita
Tea sales, tonnes

Tea sales, kg per capita
Tea sales, SGDmn
Tea sales, SGD per capita
Alcoholic Drinks
Alcoholic drinks sales (local currency) growth (y-o-y) in 2014: +5.8%; CAGR: 6.8%
Beer sales (local currency) growth (y-o-y) in 2014: +5.9%; CAGR to 2018: +6.5%
Wine sales (local currency) growth (y-o-y) in 2014: +5.9%; CAGR to 2018: +6.6%
Spirits sales (local currency) growth (y-o-y) in 2014: +3.8%; CAGR to 2018: +4.6%
Singapore's population at just around 5.4mn, the country's alcoholic drinks sector will remain heavily reliant
on the tourism industry and inflows of foreign labour. Nevertheless, our outlook for Singapore's alcoholic
drinks sales remains positive, and we are forecasting a CAGR of 6.8% in local currency to 2018.
Rising expatriate levels and a robust tourism scene spell optimism for the sector. However, given that
premiumisation has already occurred, we rule premiumisation out as an avenue for explosive growth in the
domestic alcoholic drinks market.
Beer will continue to dominate the sector, taking up the lion's share of sales and growing at the same rate as
the whole alcoholic drinks market. Overall volume sales are forecast to increase by 20.4% over our forecast
period to 2018 and reach 129mn litres. Aggressive marketing and promotional initiatives from market
leader Asia Pacific Breweries, coupled with the proliferating varieties of beer imports, will continue to
stimulate beer demand over our forecast period. However, with Singaporean consumers already benefiting
from a wide range of beers on offer, domestic brewers will have to continue pouring in promotional
Page 27
investments to capture the attention of the discerning Singaporean consumers and protect their market
shares from erosion.
However, the most dynamic sub-sector will be the fledgling wine industry. As Singaporean consumers have
become more cosmopolitan in their drinking habits, demand for wine has increased considerably, while
wine cellars and boutiques have also sprung up across the island to cater to this growing demand. Domestic
retailers such as NTUC FairPrice and Cold Storage have also jumped on this trend by stocking wines in
their stores. This improved accessibility of wines is certainly supportive of increasing demand.
Exporters from new-world wineries will continue to target Singapore due to its wealth and widespread
alcohol consumption. As regional wine production grows, Singapore will also be a key target for premium
regional manufacturers who cannot necessarily find a market in their domestic territory in the short term.
We are forecasting overall wine sales to grow by 37.7% between 2013 and 2018 in local currency terms to
reach a value of SGD471.5mn, while volume sales are forecast to grow by 20.9% to 8.6mn litres.
Singaporean spirits sector is more mature and therefore is forecast to experience slower value sales growth
that wine or beer. We forecast overall value (local currency) sales to grow by 25.1% between 2013 and
2018, and volume (litres) sales to expand by 10%. As can be extrapolated from this divergence,
premiumisation will be the main driving force behind growth in spirits.
Page 28
Alcoholic Drinks
(2011-2018)
2,000
10
1,500
8
1,000
6
500
Alcoholic drink sales, SGDmn
2018f
2017f
2016f
2015f
2014f
2013e
2012
4
2011
Alcoholic drink sales, SGD, % y-o-y
Table: Alcoholic Drinks Value/Volume Sales, Production & Trade - Historical Data & Forecasts (Singapore 2011-2018)
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
107.7
113.1
116.7
120.1
124.3
129.5
134.7
140.3
6.6
6.9
7.1
7.4
7.6
7.9
8.3
8.6
Beer Sales, USDmn
670.7
753.5
783.2
839.4
908.7
982.7 1,066.0
1,157.9
Beer Sales, mn litres
98.8
103.9
107.1
110.3
114.2
119.0
Alcoholic drinks sales, mn litres

Wine Sales, mn litres
Alcoholic drink sales, SGDmn
123.9
129.0
1,187.3 1,301.9 1,374.3 1,454.1 1,547.5 1,651.7 1,761.6
1,880.9
Spirit sales, SGDmn
47.4
50.6
52.9
54.9
57.3
59.7
62.7
66.2
Alcoholic drinks sales, litres per capita
20.7
21.3
21.6
21.8
22.1
22.6
23.2
23.8
944.2 1,058.4 1,099.5 1,177.4 1,273.7 1,376.4 1,492.9
1,621.4
Alcoholic drinks sales, USDmn

Beer sales, litres per capita
19.0
19.6
Beer sales, SGDmn
843.4
Beer sales, SGD per capita

Wine sales, litres per capita
Wine sales, SGDmn
19.8
20.0
20.3
20.8
21.3
21.9
926.8
979.1 1,036.7 1,104.1 1,179.3 1,257.9
1,343.2
162.4
174.8
180.9
187.9
196.5
206.3
216.4
227.6
1.3
1.3
1.3
1.3
1.4
1.4
1.4
1.5
296.5
324.5
342.4
362.6
386.1
412.8
441.0
471.5
Page 29
Alcoholic Drinks Value/Volume Sales, Production & Trade - Historical Data & Forecasts (Singapore 2011-2018) - Continued
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
57.1
61.2
63.3
65.7
68.7
72.2
75.9
79.9
Spirits sales, litres per capita
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.4
Spirits sales, SGD per capita
9.1
9.5
9.8
10.0
10.2
10.4
10.8
11.2
37.7
41.1
42.3
44.5
47.2
49.7
53.1
57.0
Wine sales, SGD per capita
Spirits sales, USDmn
Soft Drinks
Total soft drink sales (local currency) growth (y-o-y) in 2014: +3.2%; CAGR to 2018: +2.6%
Between 2013 and 2018, we forecast that soft drinks value sales to grow by a modest 2.6% (CAGR) in local
currency terms, which is low by regional standards, reflecting the maturity of the Singaporean market.
Given the relatively small size of the local market, paired with the presence of strong existing players such
as Yeo Hiap Seng, Pokka Corporation and Fraser & Neave (F&N), Singapore can be counted as one of
the least dynamic soft drink markets in the region. Despite this, global brewer Heineken is planning to enter
the market through its local subsidiary Asia Pacific Breweries (APB). Heineken currently markets soft
drinks in its home country of the Netherlands, and will use its deep pockets to finance new and innovative
products for the Singaporean market.
Singapore does have the advantage of high existing spending levels thanks to high per capita income, and
the local consumers' penchant for higher-value soft drinks will remain a major positive for regional soft
drinks manufacturers. Per capita soft drinks consumption is estimated to be around 107 litres in Singapore,
which is well above that of its regional counterparts. Supported by high purchasing power and a growing
shift of consumer preferences towards healthier products, Singaporeans have, and will continue to develop,
a massive appetite for functional soft drinks brands such as energy drinks and fruit juices.
Beverages such as F&N's 100 Plus isotonic drink, Yeo Hiap Seng's chrysanthemum tea and Pokka's lemon
tea are all well received among local consumers and are garnering increasing popularity over the traditional
carbonates brands such as Coke and Pepsi. Clearly, the high existing consumption levels and a sustained
acceleration in premiumisation momentum in the Singapore soft drinks market should continue to provide
some growth momentum to the sector, albeit modest, through to 2018.
Rising out-of-home consumption, which is partly driven by growing consumer affluence, will remain
another major growth driver of overall soft drinks demand in Singapore. The prevalence of organised retail
Page 30
such as convenience stores and supermarkets has provided local soft drinks manufacturers with an extensive
distribution network across Singapore, and it is not surprising that on-trade sales are growing their
proportional share of overall soft drinks sales in the country.
These dynamics mean that it remains worthwhile for companies already present in the market to maintain
their domestic footprint and balance it against their regional growth ambitions. On this front, continued
investment in product launches from domestic soft drinks manufacturers seeking to grow their overseas
presence is likely to bring about positive spill-over effects across the Singapore soft drinks market.
For example, following its expiration of a bottling agreement with US soft drinks giant The Coca-Cola
Company (Coke), F&N plans to invest more heavily in research and development to create new products
and engage in aggressive marketing initiatives across the regional markets of Thailand and Indonesia.
Previously, under the partnership, F&N's expansion plans in the region were bogged down by restrictive
covenants imposed by Coke and it was not allowed to distribute its own portfolio of soft drinks beyond
Singapore and Malaysia. With the termination of its bottling agreement with Coke, F&N can now pursue
growth freely across the region and has recently introduced two new soft drinks to its portfolio, namely noncarbonated beverage 100PlusEdge and carbonated soft drink Clearly Citrus, as it looks to better position
itself in the regional markets. The introduction of these products is likely to have a positive impact on soft
drinks demand in Singapore.
Page 31
Soft Drinks
(2011-2018)
300
5
200
4
3
100
2
Soft drink sales, SGD, % y-o-y
2018f
2017f
2016f
2015f
2014f
2012
2013e
1
2011
Soft drink sales, SGDmn
Table: Soft Drinks Sales, Production & Trade (Singapore 2011-2018)
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
156.5
168.0
171.1
178.6
187.5
194.9
202.4
209.2
Soft drink sales, mn litres
539.54 567.43 577.28 596.50 616.64 637.76 659.90
683.63
Soft drink sales, SGDmn
196.82 206.64 213.85 220.63 227.76 233.86 238.84
242.62
Soft drink sales, USDmn
Soft drink sales, litres per capita
103.9
107.0
106.7
108.1
109.7
111.6
113.6
115.9
Soft drink sales, SGD per capita
37.9
39.0
39.5
40.0
40.5
40.9
41.1
41.1
Carbonated soft drink exports, litres mn
90.0
92.6
93.1
96.0
100.1
104.3
108.6
113.1
Carbonated soft drink imports, litres mn
182.4
184.8
191.7
198.0
204.5
211.5
218.7
226.1
Carbonated soft drink balance, litres mn
-92.3
-92.2
-98.6
-102.0
-104.4
-107.2
-110.1
-113.0
Page 32
Mass Grocery Retail
Total mass grocery retail sales (local currency) growth year-on-year (y-o-y) in 2014: +2.7%; compound
annual growth rate (CAGR) to 2018: +2.9%
Supermarkets sales (local currency) growth (y-o-y) in 2014: +2.5%; CAGR to 2018: +2.5%
Hypermarkets sales (local currency) growth (y-o-y) in 2014: +3.2%; CAGR to 2018: +4.0%
Convenience stores sales (local currency) growth (y-o-y) in 2014: +2.8%; CAGR to 2018: +2.9%
To 2018, Singapore's MGR sector is forecast to experience a modest growth of 2.9% (CAGR) in local
currency terms. The growth will be largely driven by the expanding domestic market and rising disposable
incomes.
Hypermarket sales are expected to expand at a slightly faster pace than other segments. Hypermarkets, with
their ability to offer a complete one-stop shopping experience for both food and non-food goods, are poised
to benefit from the trend of changing consumer habits, which are increasingly geared towards less-frequent
shopping trips and higher spending per trip. The increase in car ownership is fuelling this trend, as it gives
consumers the ability to transport more groceries.
The ongoing expansionary activities of domestic retailers mirror the relatively stronger growth prospects for
the hypermarket sector. NTUC FairPrice, for instance, introduced the new FairPrice Xtra hypermart retail
format in 2006 and has since pushed aggressively into the hypermarket sector - the opening of another
hypermarket outlet in the NEX shopping mall being the latest example. The exit of French retailer
Carrefour in 2012 from the Singapore market due to domestic restructuring pressures arguably opens up
further room for domestic or other high profile international retailers to capitalise on growing demand for
the hypermarket format.
Compared to hypermarkets, the convenience store format will experience somewhat slower value (local
currency) sales growth of 2.9% (CAGR) in the period to 2018. Convenience stores also seem to be well
suited to Singapore as they are perfect for the state's highly urbanised lifestyle. Owing to its small floor
space, convenience stores can be adapted to fit into housing and office complexes, thus reducing consumers'
travelling time.
Dual-income families are already the norm in Singapore, and the increasing prevalence of dual-income
households means that convenience will remain one of the major purchasing determinants. Most of the
convenience stores are also operating on a 24-hour basis, which further cater demand for convenient
grocery retail options.
Page 33
The supermarket sector is reaching saturation point. To 2018, it will expand only by 2.5% (CAGR) in local
currency terms and reach overall sales of SGD3.01bn. Nonetheless, premiumisation remains a viable
avenue of growth, and we would expect supermarket retailers to continue expanding their in-store product
offerings to capitalise on this strong premiumisation opportunity. Examples of this trend include stocking
higher-value organic food ranges and improving the availability of higher-margin non-food items.
Total Mass Grocery Retail Sales

Total Mass Grocery Retail Sales 2011-2018
2018f
2
2017f
2016f
2.5
2015f
2014f
2013e
2012
3.5
2011
RETAIL: Total mass grocery retail sales, SGDbn (LHS)

RETAIL: Total mass grocery retail sales, SGD~ % y-o-y (RHS)
Source: Statistics Singapore, Singapore Retailers' Association, BMI
Page 34
Table: Mass Grocery Retail Sales - Historical Data & Forecasts, 2011-2018
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
Supermarket sales, USDbn
2.0
2.1
2.1
2.2
2.3
2.4
2.5
2.6
Hypermarket sales, USDbn
0.6
0.6
0.6
0.7
0.7
0.7
0.8
0.8
Convenience store sales, USDbn
0.8
0.9
0.9
0.9
0.9
1.0
1.0
1.1
Total mass grocery retail sales, USDbn
3.4
3.6
3.6
3.8
3.9
4.1
4.3
4.5
Supermarket sales, SGDbn
2.5
2.6
2.7
2.7
2.8
2.9
2.9
3.0
Hypermarket sales, SGDbn
0.8
0.8
0.8
0.8
0.9
0.9
0.9
1.0
Convenience store sales, SGDbn
1.0
1.1
1.1
1.1
1.1
1.2
1.2
1.3
Total mass grocery retail sales, SGDbn
4.3
4.4
4.6
4.7
4.8
4.9
5.1
5.2
Total mass grocery retail sales, SGD, % y-o-y
2.8
3.0
2.9
2.7
2.4
2.7
3.0
3.4
Page 35
Trade
Exports (EUR) growth (y-o-y) in 2014: +9.3%; CAGR to 2018: +6.4%
Imports (EUR) growth (y-o-y) in 2014: +9.1%; CAGR to 2018: +8.6%
Singapore's food and drink trade balance will continue to widen over the forecast period, as the country
continues to develop a growing dependency on food and drink imports, despite attempts by the government
to develop self-sufficiency. Between 2013 and 2018, food and drink value exports are forecast to increase
by 36.3%, while imports are expected to grow by 37.4%. Consequently, Singapore's negative trade balance
is set to expand by 87.5% and amount to EUR3.40bn by the end of our forecast period.
Through to 2018, export growth will remain vital owing to Singapore's status as trade-dependent market.
The country continues to be used as an important re-export destination, particularly for premium luxury
food and beverage products destined for other high-growth Asian markets. The country's reputation for
high-quality domestically produced products and stringent manufacturing procedures will remain a strong
demand trigger for food and drink exports to overseas markets as well.
However, import growth is expected to outpace that of exports, and this ensures that the food and drink
trade balance remains negative. Thanks to Singapore's highly developed infrastructure and skilled labour
force, it was once a sought-after investment opportunity for smaller-scale regional food and drink
processors. However, as other neighbouring markets have caught up, Singapore has lost the capacity to
differentiate itself and has increasingly been forced to import many of the raw ingredients it once produced
on a small scale.
The Singapore government remains concerned about the increasing deficit in the food and drink trade
balance. As a result, it has put targets in place to reduce the country's self-sufficiency in many popular
staple foodstuffs. Within the next five years, Singapore aims to increase egg production to meet 30% of
local consumption, up from the current 23%; fish to meet 15% of local demand, up from 4%; and leafy
vegetables to meet 15% of local demand, up from 7%. However, as our forecasts suggest, we hold the view
that the country is unlikely to meet these targets, and will import more food than ever before by the end of
the forecast period.
Page 36
Table: Trade Indicators - Historical Data & Forecasts, 2011-2018
Exports of food and drink, EURmn

Exports of food and drink, EUR, % y-o-y
Imports of food and drink, EURmn
Imports of food and drink, EUR, % y-o-y
Balance of trade in food and drink,
EURmn
Balance of trade in food and drink, EUR,
% y-o-y
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
4,131.6
4,689.4
4,429.4
4,843.2
5,285.3
5,670.9
5,879.1
6,035.4
6.7
13.5
-5.5
9.3
9.1
7.3
3.7
2.7
5,690.1
6,536.7
6,240.6
6,805.4
7,523.4
8,217.1
8,796.3
9,432.2
6.1
14.9
-4.5
9.0
10.6
9.2
7.0
7.2
-1,558.5 -1,847.3 -1,811.2 -1,962.1 -2,238.2 -2,546.2 -2,917.2 -3,396.8

4.5
18.5
-2.0
8.3
14.1
13.8
14.6
16.4
Page 37
Macroeconomic Forecast
Macroeconomic Analysis
BMI View: Singapore's economy expanded by a solid 5.1% year-on-year (y-o-y) according to initial real
GDP estimates, with much of the growth driven by strong construction activity. Given our infrastructure
team's relatively sanguine view on the sector, we have incrementally upgraded our 2014 real GDP forecast
to 3.4% from 3.2% previously. That said, we continue to believe that prospects for a substantial trade
recovery over the coming quarters are likely slim, as external demand conditions remain challenging.
Singapore's economy notched another quarter of impressive economic growth in Q114, with initial
government estimates indicating that real GDP expanded by 5.1% year-on-year (y-o-y), or 0.1% in quarteron-quarter, seasonally adjusted, annualised (q-o-q SAAR) terms. That said, the result represented a
slowdown relative to Q413, when the economy achieved a 5.5% y-o-y growth rate (6.1% SAAR), and we
continue to believe that the economy will face headwinds due to challenging external conditions.
Under the economy's sectors breakdown, the major outperformers in the quarter were construction (+10.7%
q-o-q SAAR) and manufacturing (+4.5%), while the services sector fell into contraction at -1.8%. While our
infrastructure team remains relatively sanguine on the outlook for the construction sector over the course of
the coming year, with growth forecasted at a solid 5.5% (matching the sector's 2013 performance), this
nevertheless implies a slowdown from Q114's 6.5% y-o-y clip.
Holding Out Hope In Construction
Indeed, Singapore is in the midst of a nascent real estate correction, with particular weakness seen in the
residential sector. As noted by our infrastructure team, the value of contracts awarded for residential
construction projects in 2014 is set to fall significantly from the level witnessed in 2013. However, given
that there tend to be significant lag effects in terms of when the related construction activity actually takes
place, we could still see relatively robust residential construction growth through H114 and potentially
beyond. With ongoing support from increased government spending on infrastructure, this means that the
bulk of the slowdown in construction activity is now more likely to be pushed into late 2014 or 2015, and
we have incrementally boosted our headline real GDP growth forecast to 3.4% (from 3.2% previously) as a
result.
Page 38
Don't Look Down

Singapore - Real Estate Price Index, All Residential (RHS) & % chg y-o-y (LHS)
Source: BMI, URA
Trade Outlook Not So Bright

At the same time, Singapore has experienced a recovery in its trade accounts over recent months, with nonoil domestic exports (NODX) growing by a solid 9.1% in February. However, we remain somewhat
skeptical that this performance can be maintained over the coming quarters, as the ongoing economic
slowdown in China will take its toll on the regional demand outlook. Likewise, much of the outperformance
in both exports and manufacturing over recent months has been the result of a surge in biomedical
production, which is highly volatile. As such, we continue to envisage only a modest trade recovery over
the coming year, and therefore do not see considerable scope for faster growth in the city-state's
manufacturing cluster.
MAS Stands Pat On Cue

In line with our expectations, the Monetary Authority of Singapore (MAS) chose to stand pat with its
Singapore dollar policy at its bi-annual meeting on April 14. The decision is likely informed by both the
economy's strong growth, which suggests little need for easing, as well as a somewhat middling inflation
forecast. Following an announcement from the Land Transport Authority (LTA) that Certificate of
Page 39
Entitlement (COE) quotas will be raised by 32% beginning in May, we in fact now see downside risk to our
2014 average headline CPI forecast of 2.8%, and may look to downgrade it over the coming months.
Strong Growth Set For Moderation

Singapore - Real GDP, % chg y-o-y & q-o-q SAAR
Source: BMI, Singstat
Looking ahead, even in the event that inflation remains subdued, we see little impetus for the MAS to ease
its policy basket at subsequent meetings. Generally speaking, the Singapore dollar remains relatively
undervalued relative to its regional peers. At the same time, we do not believe that growth is likely to slow
to the extent that would elicit monetary easing from the central bank, especially as core inflationary
pressures continue to build as a result of other economic policies.
Expenditure Breakdown
Private Consumption: Following a 2.7% performance in 2013, we envisage private consumption

accelerating slightly to 4.0% in 2014. However, risks to this forecast are likely to the downside, as the
nascent correction in the Singapore real estate market may take a bite out of domestic demand. Still,
Singapore's labour market remains sound, and we believe that debt levels are within reasonable bounds.
Page 40
Public Consumption: We are forecasting government consumption to grow by 4.0% in 2014 following a
3.0% print in 2013. This will largely be powered by ongoing government initiatives aimed at restructuring
the economy away from its dependence on foreign labour, which will require increased spending in some
areas.
Fixed Capital Formation: We expect fixed capital formation to rebound to grow by 4.5% in 2014
following a 2.6% contraction in 2013. The resurgence will be led by the government's investments in new
public transportation infrastructure.
Net Exports: Despite a rough year in nominal terms, exports chalked up moderate real growth of 3.6% in
2013. For 2014, we see the growth of shipments moderating slightly to 3.0%, while import growth will rise
to 3.4%.
Table: Economic Activity (Singapore 2009-2018)
Nominal GDP, USDbn

Real GDP growth, % y-o-y
GDP per capita, USD
Population, mn
Industrial production, % y-o-y,
ave
Unemployment, % of labour
force, eop
2009
2010
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
190.2
233.3
264.2
290.9
293.0
314.7
345.1
371.5
400.1
430.8
-0.2
15.1
6.0
1.9
4.1
3.4
3.2
3.3
3.3
3.2
38,311 45,943 50,884 54,853 54,142 57,037 61,412 64,975 68,845 73,003
5.0
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
-3.3
29.7
4.8
5.3
6.1
6.0
5.8
5.7
5.6
5.5
2.3
2.2
2.2
1.8
2.0
2.2
2.2
2.2
2.2
2.2
Source: National Sources/BMI
Page 41
Industry Risk Reward Ratings

Asia Pacific - Risk/Reward Ratings
BMI's Food & Drink Risk/Reward Ratings assess a market's attractiveness to industry investors in
comparison with its peers. The reward part of the rating takes into account market size, current consumption
levels, future industry growth prospects (based on our five-year industry forecasts), market fragmentation
(with greater fragmentation indicating higher opportunities) and the size of the youth population.
Meanwhile, the risk part of the rating takes into account the legislative environment, the level of
development of the organised retail sector (with higher development leading to lower risks), as well as
relevant aspects of the economic and political environment.
Japan has re-assumed first place in our Q414 ranking over China as our reward score has been slightly
downgraded on the back of slowing economic growth and tightening credit conditions which will impact
household spending growth in 2014. Japan, on the other hand, maintained its largely more advantageous
risk score thanks to higher food consumption per capita, better distributed wealth, more efficient
administration and better infrastructure. Still, we highlight that China is the only growth-positioned market
in the top six. In fact, the country has a much better risk profile than many of the emerging markets (EMs)
covered in the region, while its reward score is similar to the ones of Pakistan and Indonesia. Positions three
to six are filled by the following comparatively mature and by extension well-developed food and drink
markets: Australia, Singapore, South Korea and Hong Kong.
This tells us that even though our ratings are designed to be biased towards growth, with the reward
component accounting for 60% of the overall score, countries like Indonesia, Vietnam and India (ranked
7th-9th) are not yet in a position to break the mature market (top six) axis ex-China. Weak risk scores and
the discrepancy in scores between the higher ranked markets and the chasing markets ultimately outweighs
the impact of the higher reward scores. Pushing up risk scores would require improvements in areas like
mass grocery retail penetration and regulatory environment. Australia and Japan continue to have relatively
strong reward profiles compared with the other mature markets, which means it will be difficult for other
countries to catch them. However, countries such as Singapore, Hong Kong and South Korea are more at
risk from the likes of India, Vietnam and Indonesia in future.
Page 42
Negative Linear Correlation Apparent

Asia-Pacific Risk/Reward Ratings Q414 (Y-Axis = Reward and X-Axis = Risk)
Source: BMI
Table: Asia Pacific Food & Drink Risk/Reward Ratings Q414
Risk
Industry
Risk
Country
Risk
Food &
Drink
Rating
Ranking
60.7
77.3
80.0
74.5
58.7
62.0
54.7
57.8
55.0
60.7
58.1
44.2
36.0
52.3
75.7
75.0
76.3
56.8
Singapore
35.7
30.0
41.3
84.0
80.0
88.0
55.0
South
Korea
39.3
38.0
40.7
76.0
80.0
71.9
54.0
Hong Kong
38.8
40.0
37.7
75.2
75.0
75.4
53.4
Indonesia
60.2
60.0
60.3
39.5
25.0
53.9
51.9
Vietnam
55.0
68.0
42.0
45.6
30.0
61.2
51.2
India
59.0
54.0
64.0
38.3
20.0
56.7
50.7
10
Thailand
47.7
58.0
37.3
53.1
40.0
66.2
49.8
12
Taiwan
40.3
40.0
40.7
63.5
50.0
76.9
49.6
Reward
Industry
Reward
Country
Reward
Japan
46.3
32.0
China
58.3
Australia
Page 43
Asia Pacific Food & Drink Risk/Reward Ratings Q414 - Continued
Risk
Industry
Risk
Country
Risk
Food &
Drink
Rating
Ranking
60.3
29.8
10.0
49.6
49.2
11
38.0
60.3
45.3
30.0
60.6
47.6
13
40.0
46.3
53.9
40.0
67.8
47.5
14
Reward
Industry
Reward
Country
Reward
Pakistan
62.2
64.0
Philippines
49.2
Malaysia
43.2
Scores out of 100, with 100 highest. The Food & Drink Risk/Reward Rating is the principal rating. It comprises two subratings, 'reward' and 'risk', which have a 60% and 40% weighting respectively. In turn, the 'reward' rating comprises
'industry reward' and 'country reward', which have equal weighting and are based upon growth/size of food/alcohol and
soft drinks industry (market) and the broader economic/socio-demographic environment (country). The 'risk' rating
comprises 'industry risk' and 'country risk', which both have 20% weightings and are based on a subjective evaluation of
industry regulatory and competitive issues (market) and the industry's broader country risk exposure (country), which is
based on BMI's proprietary Country Risk Ratings. Source: BMI
The six factors that make up the reward score in our ratings are: food consumption per capita, market
fragmentation, per capita food consumption (five-year compound annual growth), population size, GDP per
capita, and youth population.
The first indicator, food consumption per capita, reflects the existing spending power of the Japanese
consumer (the country scores 10 out of 10 on this metric), with South Korea, Australia, Singapore, Hong
Kong and Taiwan also achieving high scores. Although these countries show high levels of spending, the
performance of other countries is markedly different, pointing to a clear division between regional peers.
China, for example, scores only 5, indicating scope for income growth. India has the lowest score of 1 while
Pakistan and Vietnam have a score of 2, highlighting even more potential for acceleration despite the
current low reward marking.
Our second indicator, market fragmentation, assesses how relatively developed (less fragmented) or
underdeveloped (more fragmented) a market is. Whereas the first indicator confers strong scores for high
existing spending, the second indicator rewards countries where the long-term scope for growth is the
greatest. These are typically markets where there is significant room for growth, innovation and
development. Unsurprisingly, Japan, with a highly developed, saturated mass grocery retail (MGR) sector,
is comfortably outscored by India, China and almost all the EMs rated.
The third indicator within the reward breakdown of our ratings system is per capita food consumption
growth (five-year compound annual growth). Paired with market fragmentation, this is the joint highest
weighted indicator within our reward score framework. Since our ratings are designed to be forwardlooking, this indicator is one of the main ways we gauge growth and, in combination with some of the other
Page 44
high-weight indicators we look at, informs our preferences for certain markets. Despite lower scores than in
previous quarters, countries such as China, India and Vietnam outscore Japan and Australia, demonstrating
the future promise of these Asian markets in challenging Japan's lead. One notable high scorer is South
Korea, which is forecast to increase per capita food consumption at a similar rate to many emerging
markets. Such growth could see the country move higher up the rankings in the near future.
Population size is the fourth indicator, and China and India unsurprisingly score well, as does Japan, with
its population of nearly 130mn. Paired with our fifth indicator, GDP per capita, large populations and
strong spending power have reinforced Japan's continued dominance in our ratings this quarter. Though
Singapore possesses one of the highest per capita income expenditures and a very good risk score, the
limited size of the market means that the country loses ground on this metric.
The final reward indicator, youth population, was introduced as a way to factor in a more comprehensive
demographic angle to our ratings. Here, Pakistan, Vietnam and the Philippines stand out, with high scores
rewarding the growth potential associated with young populations and poor scores for Japan and Australia
pointing to the restraints that can be presented by ageing populations.
The seven factors that make up the risk score are: mass grocery retail (MGR) penetration, regulatory
environment, short-term economic risk rating, income distribution, lack of bureaucracy, market orientation,
and physical infrastructure.
Our first risk indicator is MGR penetration, which assesses how relatively developed the overall consumer
sector is. Very low MGR scores reflect the ongoing predominance of informal retail, comprised of kiosks
and markets with weak centralised distribution mechanisms. Many of the more mature and developed
markets score well here, including Australia, Singapore and Japan. India, which has very recently initiated
efforts to open up its food retailing sector to multinationals, scores very poorly (1/10). Conversely, China is
much further along in the development of organised retailing channels when compared with other low
scorers such as Vietnam and Malaysia.
The second factor, regulatory environment, evaluates the complexity of regulations such as labelling and
nutrition requirements. It can also be used to gauge the state of the overall business environment. The more
developed and mature markets usually score better here, and that is once again the case in Q314, with
Pakistan, India and Vietnam scoring poorly, highlighting persisting food regulatory hurdles, particularly for
non-domestic producers. Notably, however, China and the Philippines score fairly impressively in this
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metric, hinting that future growth will be encouraged by both of these countries' strong regulatory
environments.
The third factor, short-term economic risk rating, assesses the degree to which the country approximates
the ideal of non-inflationary growth with falling unemployment, contained fiscal and external deficits and
manageable debt ratios. It is principally the candidates towards the top of our ratings that do well on this
criterion, underlining the link between economic stability and the overall attractiveness of the consumer
market. Pakistan's position as the lowest scorer across the region points to continued investor concern, with
its score failing to increase over recent quarters. Again, South Korea posts a very favourable rating here.
The fourth factor, income distribution, is measured by the proportion of private consumption accounted for
by the middle 60% of earners. Unsurprisingly, countries such as Japan, Singapore and South Korea lead the
pack, though developing markets also score relatively well in this regard.
Lack of bureaucracy, our fifth indicator, is a measure of the hurdles that any producer is likely to face in
areas such as starting and closing businesses, paying taxes, dealing with licences and registering property.
Here India continues to score poorly, with its draconian bureaucracy highlighted in the press regarding
multinational grocery retailers. This is paired with our sixth factor, market orientation, which measures
how business-orientated an economy is and measures the level of foreign direct investment protectionism,
tax rates and the level of government intervention. Another low score for India points to the continued
difficulties facing investors looking to enter this market in particular.
Our final risk factor, physical infrastructure, measures the ease and cost of operating in a market from an
infrastructure perspective. Some of our favourite regional economies have a lot of work to do here, with the
reward profiles of high-growth markets such as China and Indonesia facing poor scores. Paired with factors
such as market orientation, regulatory environment and MGR penetration, countries will have to perform
well here if they are to challenge the continuing ratings dominance of Japan.
Table: Asia Pacific Food & Drink Risk/Reward Sub-Factor Ratings Q414 (scores out of 10)
Reward
China
Japan
India
Philippines
Food consumption per capita
5.0
10.0
1.0
3.0
Market fragmentation
8.0
1.0
9.0
5.0
Per capita food consumption,

five-year compound annual
growth
5.0
2.0
4.0
3.0
10.0
8.0
10.0
7.0
Population size
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Asia Pacific Food & Drink Risk/Reward Sub-Factor Ratings Q414 (scores out of 10) - Continued
Reward
China
Japan
India
Philippines
GDP per capita, US$
4.0
9.0
2.0
2.0
Youth population, %
2.0
2.0
6.0
8.0
MGR penetration
5.0
9.0
1.0
1.0
Regulatory environment
6.0
7.0
3.0
5.0
Short-term economic risk rating
9.0
7.0
6.2
7.4
Income distribution
7.0
9.0
7.0
7.0
Lack of bureaucracy
5.0
8.0
4.2
3.9
Market orientation
4.0
5.6
4.3
6.0
Physical infrastructure
5.5
8.0
6.6
6.1
Risk
Source: BMI
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Singapore Risk/Reward Ratings

Singapore ranks fourth in BMI's Risk/Reward Ratings for the Asia Pacific region in Q414. The city-state
boasts by far the best risk score for the region, but is pulled down by low reward scores due to small
population and high-level of market saturation.
From a risk perspective, Singapore is a clear regional outperformer. Scoring high in all indicators ranging
from business environment to infrastructure, the country remains a stable and secure location for investors
looking to enter the Asia Pacific region. Despite its small size and increasingly mature market, the country
also continues to serve as an impressive launch pad to regional neighbours such as Vietnam and Myanmar,
and a compelling attraction for investors with regional growth ambitions.
However, despite its impressive Risk score, Singapore's Reward profile continues to be dwarfed by larger
regional neighbours. Although a highly developed country with an advanced economy, our ratings weight in
favour of long-term growth opportunity. Consequently, low scores for population and market fragmentation
point to challenges facing investors looking for long-term growth. Unsurprisingly, countries such as
Vietnam with its large population or India with its currently largely undeveloped mass grocery retail
sector, offer far more exciting demographic profiles for investors.
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Table: Q414 Singapore Food & Drink Risk/ Reward Ratings
Score out of 10
Rewards
Food Consumption Per Capita
Market Fragmentation
Per Capita Food Consumption (5 year CAGR)
Population Size
GDP Per Capita, USD
10
Youth Population (%)
Risks
MGR Penetration
Regulatory Environment
Short Term Economic Growth
Income Distribution
Lack Of Bureaucracy
Market Orientation
Physical Infrastructure
10
Source: BMI
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Market Overview
Food
Agriculture
Owing to limited crop production as well as limited space for large-scale manufacturing facilities, the bulk
of food in Singapore is imported, and there are few domestic processing facilities. Outside the region, the
bulk of imported food is sourced from the US, the Netherlands, Australia, New Zealand and Brazil. The
country's small agricultural sector has not suffered as a consequence of imports, and it has benefited in
many ways from the government's desire to diversify the economy and limit import reliance wherever
possible.
Consequently, the need to spur domestic production has come under increasing scrutiny in recent years. The
Agri-Food and Veterinary Authority of Singapore has been co-financing research and development in order
to help upgrade local farms, while also supporting feasibility studies on investments in overseas food zones,
overseas contract farming and other non-traditional sources. Initiatives such as urban rotating vertical
farming systems are under increasing focus; but remain under continued pressure from the influx of
imported foodstuffs.
Even with efforts such as these, production volumes are expected to remain fairly constant. The only subsectors that may succeed in obtaining further growth are the country's small meat-processing industry and
fish-farming industry. Global health scares have hindered the country's meat imports, thus driving up the
value of domestically reared meat, even if volume production cannot be increased.
Food Processing
Owing to geographical constraints, Singaporean companies are required to expand abroad in order to
capture new market share and continue to grow. The country's leading food and drink processors are
increasingly seeking opportunities to become international firms. If a company is to grow, it needs to move
beyond domestic operations and become a leading regional player - although the domestic market remains
an important profit centre for such operators.
Singapore-based agribusiness firm Wilmar clearly recognises this importance, as it has embarked on an
international expansion spree. Wilmar made a strategic capital investment in Blue Pacific Flavors, a USbased developer and manufacturer of natural and organic-compliant fruit flavours. Under the terms of an
agreement established between the two firms, Blue Pacific Flavors will continue to locally produce flavours
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and ingredients for its domestic customers at its facility and research and development centre in California.
Donald F Wilkes, the CEO of Blue Pacific Flavors, said that Wilmar's supply chain will help the US
ingredients group to enhance its capabilities and distribution in the whole fruit and grain-based food
flavouring and natural food ingredients markets. The partnership will enable Blue Pacific Flavors to
exponentially expand its manufacturing and distribution in China and South East Asia to a broader customer
base, Wilkes said.
The food-processing sector in Singapore is relatively small and mostly active in the segments of snack
foods and confectionery, fish processing and traditional regional food products. However, owing to limited
domestic production, virtually all ingredients and raw materials have to be imported. The majority of
domestic food processors are small-scale operations engaged in production for the domestic market. This
could make the market ripe for consolidation, with larger companies subsequently benefiting from
economies of scale.
However, competition from foreign manufacturers remains high, as Singapore has no import tariffs on food
products. The government, acknowledging the threat from lower-cost producers in neighbouring countries,
has implemented policies assisting businesses in automating their manufacturing processes, raising product
quality and becoming increasingly proactive in product development.
Singapore does host a number of industry majors, which continue to contribute considerably to the country's
food and beverage industries. They are currently largely based in the profitable beverage sector and
increasingly focused on overseas markets.
Drink
Soft Drinks
The soft drinks sector in Singapore is highly developed, with those manufacturers who are able to capitalise
on a consumer base susceptible to marketing and product innovation likely to succeed - not just in the
carbonates industry, but also in the juices, bottled water, energy and functional drinks sub-sectors. Readyto-drink tea products have also captured the imagination of the major manufacturers and are now firmly
established in the Singaporean soft drinks market. Industry dynamism has been helped by the presence of a
number of Singaporean beverage giants. Both Fraser & Neave (F&N) and Yeo Hiap Seng have used the
market as a firm base for product development from which to pursue their broader regional growth
ambitions. Heineken is also planning to enter into the soft drinks market, following F&N's decision not to
act on a non-compete clause signed as part of their deal for Asia Pacific Breweries (APB). Heineken will
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benefit from its deep pockets, having the ability to launch new and well marketed products, which we
believe is the best strategy for soft drink producers in Singapore.
Alcoholic Drinks
APB, now fully owned by Dutch brewing giant Heineken, dominates the country's alcoholic drinks sector.
The company's principal brands include Heineken, Tiger Beer, Tiger Classic, Anchor, Raffles Light,
Guinness Stout and APB Stout. These locally produced products compete against the imported Carlsberg
brand, which has proved very popular among Singaporeans and tourists thanks to clever marketing and
promotional campaigns. Carlsberg are keen to expand their influence in the Asia Pacific region, with
speculation around a possible acquisition of Tsingtao Brewery or Beijing Yanjing Brewery. Such an
entrance by Carlsberg into the region will significantly increase the competition Heineken currently faces.
Overall, the country's alcohol industry is very mature, helped by a relaxed attitude towards consumption
among Singaporeans, the presence of a large expatriate community and high tourism levels.
While beer remains the country's dominant alcoholic drink, with the industry highly competitive, wine has
also proved very popular in recent years. This has been both a consequence of the affluence and tastes of
tourists and expatriates, and of Singapore's role as a major regional hub for re-exports from major wine
producing nations to the rest of Asia, which has increased the availability of and consumer exposure to
wine. Premium spirits are also popular in this high-income market, although it has been reported that
consumption rates slowed during the economic downturn.
Hot Drinks
Tea and coffee are both traditionally very popular beverages in Singapore, consumed on a daily basis, and
the market is therefore fairly mature. Tea is the more widely consumed beverage, although coffee has also
grown in popularity and value in recent years, along with the emergence of Western caf culture and an
expanding variety of products on offer both in cafes and in supermarkets. The tea sector is dominated by
Nestl Singapore.
However, Singapore's coffee sector is at saturation point, and domestic hot drinks players' future growth
realistically lies overseas. Faced with a maturing market, Singapore-based instant beverage maker Super
Group is set to make major inroads into China's coffee sector with its flagship Super Coffeemix and Caf
Nova brands. Super Group will benefit from an accelerated push into the Chinese market, given China's
expected outperformance relative to its regional peers over the longer term.
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Mass Grocery Retail

Singapore's mass grocery retail (MGR) sector is dominated by a relatively small number of operators. The
country's limited size and strong competition renders new market entrants an unlikely prospect, except
through mergers and acquisitions, although the likelihood of such opportunities emerging is also slim. Both
the urban and suburban areas of the country are at saturation point, as strong transport links and high levels
of car ownership in this tiny country have prevented the issue of locality being a problem for Singaporean
consumers. Since their arrival, modern retail outlets have been as prevalent outside of the major centres as
they have inside.
In recent years, shopping habits in Singapore have been influenced by the rapid expansion of shopping
malls in suburban areas and by general changes in lifestyle. Together, these trends have transformed
shopping from what was once simply a matter of necessity to a recreational and potentially all-inclusive
family activity.
Modern retail formats are popular with consumers owing to their convenience, long opening hours, broad
range of products and air-conditioned, clean environment. Additional services, such as home delivery, instore bakeries, food service areas and ready-made meals form an integral part of the standard retail offering
in the majority of outlets. Owing to Singapore's limited land mass and somewhat restricted agricultural
sector, the bulk of products stocked in these modern retail stores are imported.
The majority of convenience stores - a particularly strong format in Singapore - are franchise operations.
Consumers frequent the stores for the regular purchase of small quantities of goods, and convenience stores
owe their popularity to their proximity to residential areas. The convenience store scene is dominated by
NTUC FairPrice's Cheers and FairPrice Express fascias, and Dairy Farm International's 7- Eleven
stores. As with supermarkets and hypermarkets, the stores sell mostly imported products. Forecourt
convenience stores located at petrol stations have increased in popularity, and operators are increasingly
developing these stores as one-stop shopping outlets providing an extensive range of products and services efforts that have seen forecourt convenience sales increase dramatically in recent years.
The Singaporean market also features provision shops and traditional non-air-conditioned grocery stores,
which principally sell local produce. These stores charge lower prices than hypermarkets, supermarkets and
convenience stores in an effort to differentiate themselves and attract consumers. Despite this, their market
share has decreased considerably over recent years, as younger consumers in particular favour shopping in
modern MGR outlets. Singapore also plays host to wet markets, which are administered by the Housing &
Development Board, the Ministry of Environment and the Jurong Town Corporation. These are located in
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nearly every neighbourhood and sell mostly fresh produce, such as fruit and vegetables, seafood, meat and
poultry. Prices are very competitive, as the wet markets mostly target low-to-middle-income consumers.
These two formats, although in decline, mean that the non-organised, or independent, sector still accounts
for around 32% of grocery sales in Singapore.
The hypermarkets that are present have obtained phenomenal selling power owing to their vast available
floor space and their ability to incorporate the broadest range of products and services. Likewise, the range
of added-value features, such as cafs, that can be incorporated into these large stores improves their appeal
and compatibility with the concept of shopping as an enjoyable family activity. Another added-value feature
introduced by leading retailer NTUC FairPrice to its Xtra stores is 24 hour openings, increasing
accessibility for consumers.
Unsurprisingly given the limited size of the country, there are not many hypermarkets in Singapore's MGR
sector, and the country's geographical constraints have also deterred industry players from entering the
Singapore market. French retailer Carrefour did see potential in the country for its hypermarkets, pulling
out of Singapore in late 2012.
The limited growth opportunities on offer in Singapore are also prompting more retailers to shift their sights
abroad. Singapore-based leading retailer NTUC FairPrice, for example, has recently announced plans to
launch its supermarket format in Vietnam with its joint venture partner Saigon Co-op. Similarly, Sheng
Siong Group, one of the country's largest retailers, continues to look for a partner to enter Malaysia, with
the country's fast growing population an increasingly attractive prospect for Singaporean retailers over the
longer term.
Table: Structure Of Mass Grocery Retail Market By Estimated Number Of Outlets, 2005-2011
2005
2006
2007
2008
2009
2010
2011
Supermarkets
191
198
205
210
215
220
229
Hypermarkets
11
11
11
12
13
Convenience stores
421
456
493
543
598
653
691
Total MGRs
620
663
709
764
824
885
933
Source: Official statistics, BMI
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Table: Structure Of Mass Grocery Retail Market By Value (USDbn), 2007-2013
2007
2008
2009
2010
2011
2012
2013
Supermarkets
1.38
1.53
1.56
1.81
2.01
2.10
2.13
Hypermarkets
0.40
0.52
0.48
0.53
0.60
0.63
0.65
Convenience stores
0.40
0.48
0.53
0.72
0.81
0.86
0.87
Total MGRs
2.18
2.53
2.57
3.07
3.42
3.60
3.65
Source: Economic Development Board, Department of Statistics, BMI
Table: Structure Of Mass Grocery Retail Market By Value (SGDbn), 2007-2013
2007
2008
2009
2010
2011
2012
2013
Supermarkets
2.08
2.16
2.26
2.47
2.53
2.59
2.66
Hypermarkets
0.60
0.73
0.70
0.73
0.75
0.78
0.81
Convenience stores
0.61
0.69
0.77
0.98
1.02
1.06
1.09
Total MGRs
3.28
3.58
3.74
4.18
4.30
4.43
4.56
Source: Economic Development Board, Department of Statistics, BMI
Table: Grocery Retail Sales By Format, 2012 And 2021 (%)
2012
2021f
Organised/MGR
68
75
Non-organised/Independent
32
25
e/f = estimate/forecast. Source: BMI
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Industry Trends And Developments

Food
Key Industry Trends And Developments
Sanyo To Pay USD187.5mn For 25% Of Olam's Packaged-Foods Business
In August 2014, Sanyo Foods acquired a 25% stake in Singapore-based food ingredients processor Olam
International's packaged-foods business for USD187.5mn. On completion of the transaction, Olam expects
to register a net cash inflow of USD167.5mn and an addition to reserves of USD80.8mn. The instant-noodle
joint venture between the companies will be a holding company for all of Olam's packaged-foods
businesses incorporated in Singapore, with Olam having the management control. Olam, which sells its
packaged foods mainly in Africa, recorded turnover of USD350mn in 2013.
GIC Inks Exchangeable Loan Agreement With CCC
In May 2014, the Government of Singapore Investment Corporation (GIC) inked an Exchangeable Loan
Agreement with Philippines-based Century Canning Corporation (CCC). As part of the agreement, GIC has
invested PHP3.4bn (USD76.2mn) in CCC, which will be used by the firm to finance the growth and
expansion of existing units, including but not limited to CNPF, probable acquisitions, and venturing into
new businesses. The agreement can be extended by both companies and will be for a term of one year. GIC
can also swap both principal and all accrued interest into 245.5mn issued and outstanding shares of CNPF,
where in it will hold 11% of CNPF's issued and outstanding shares.
Asahi Set To Acquire Etika International
In April 2014, Japan-based Asahi Breweries' Singapore unit said it was set to acquire the dairy product
business of Singapore Exchange (SGX)-listed Etika International Holdings in a USD329mn deal. Under the
terms of the agreement, Asahi Breweries will acquire Kuala Lumpur-based Etika Dairies Sdn Bhd and 11
other companies in the region. The reported sale will provide a good opportunity for the group to boost their
business and to maximise returns for its shareholders, according to a statement from Etika Holdings.
WSH To Acquire Shree Renuka Sugars For USD200mn
In February 2014, Wilmar Sugar Holdings (WSH), an affiliate of Singapore-based agribusiness group
Wilmar International, decided to acquire a controlling stake in Indian sugar company Shree Renuka Sugars
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(SRS) for a consideration of USD200mn. Under the terms of the transaction, SRS will be jointly controlled
by its existing promoters and WSH, with the two parties having equal shareholding and board
representation in SRS. WSH is considering financing the acquisition through a combination of its existing
funds and bank borrowings. The transaction is subject to regulatory and shareholder approvals
Del Monte Pacific Acquires Del Monte Foods
In February 2014, Singapore-based food and beverage company Del Monte Pacific (DMPL) completed the
acquisition of Del Monte Foods' (DMF) Consumer Products business for USD1.67bn. The acquired unit
will now be renamed as Del Monte Foods (DMFI). The acquisition includes Del Monte, S&W, Contadina
and College brands, which generated USD1.8bn in sales and USD164mn in earnings before interest, taxes,
depreciation and amortisation (EBITDA) in 2013. The deal will allow DMFI to boost its international
market presence through DMPL's presence in the Philippines and other Asian markets, while introducing
new products into the US market from Asia.
Nestl Signs R&D Agreement with Government Agency
Nestl and Singapore's Agency for Science, Technology and Research (A*STAR) signed an agreement in
January 2014, that will see collaboration across many areas of food and nutrition research. The agreement
supports one of A*STAR's strategic priorities, to develop its capabilities in food and nutrition research.
From Nestl's perspective, the agreement will help them to optimise their production processes and provide
nutritional foods for their customers - meeting the needs of an increasingly educated and affluent consumer
base.
This is not the first time that the two bodies have worked together. Previous research projects focussed on
understanding nutrition requirements for infants and women during pregnancy, to promote life-long
metabolic health. The new agreement will see the involvement of A*STAR researchers in collaborative
projects with Nestl affiliates worldwide and in turn will allow Nestl access to A*STAR's research
facilities and technology.
Petra Foods in dispute with Barry Callebaut on cocoa unit sale
Singapore's Petra Foods is in dispute with Barry Callebaut after the latter sought a discount in the final
pricing for buying Petra's cocoa business. Swiss-based Barry Callebaut, the world's biggest maker of
finished chocolate products for companies such as Nestl and Hershey, sought a reduction of D98.3 million
in the closing price in September 2013, which Petra Foods considered unjustified. In July, Petra Foods said
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it expected to receive USD860mn from the deal, after it first announced selling its cocoa ingredients
business to Barry Callebaut for USD950mn in December 2012. Petra Foods said that Barry Callebaut's
proposal to reduce the closing price is not compliant with the sale and purchase agreement and the law and
does not have a proper or valid basis.
Haribo Targets Sweetening Confectionery Markets
German confectionery giant Haribo has increased its presence in Singapore as it looks to capitalise on
growing confectionery demand. Having confirmed a deal with expansion services provider DKSH, the
announcement not only signals continuing confidence in the Singaporean confectionery segment but the
strategic benefit of being in close proximity to new markets such as Malaysia, Indonesia and Myanmar markets that continue to offer dynamic potential to both domestic and international confectionery producers.
Singapore's sugar confectionery market is expected to be worth SGD978.6mn (USD829.3mn) by 2017, with
sales (in local currency terms) growing an impressive 19% between 2012 and 2017. Already present in the
market, we expect Haribo to perform well; however, the geographically strategic value of an increased
presence in Singapore is a clear highlight of the proposed new deal.
Petra Foods Looking For Brand Growth In Asian Markets
Singapore-based confectioner Petra Foods is aiming for brand growth in markets across Asia following the
sale of its loss-making cocoa ingredients unit to Swiss chocolate-maker Barry Callebaut, reports Just-Food.
The company offloaded the business division for USD950mn in June 2013, with its weak performance
having led Petra to post a USD10.1mn loss during H113. CEO John Chuang said that the company will now
look to capitalise on 'vibrant economies and fast-growing middle income classes' in the Asian region to
develop brand growth.
Considering the Singapore market's relatively small size, in BMI's view domestic food producers will
increasingly look to neighbouring Asian countries for growth. Countries such as Thailand, Malaysia and
Myanmar are likely to be targeted, with their large populations and rising incomes an attractive pull for
companies looking to secure long-term opportunities.
Nestl Extends R&D Facilities In Singapore
Swiss food group Nestl has extended its research and development (R&D) facilities in Singapore by
investing CHF4mn (USD4.1mn) in the centre. The extension, which created 20 new jobs in 2013, comes at
a time when Asian markets are growing at a rapid pace. The expansion in the R&D centre will allow greater
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focus on the company's fastest-growing markets in the Asia Pacific region. The centre employs about 100
experts from 17 countries specialised in fields of mechanical engineering, analytical chemistry,
microbiology and sensory science. The centre will take the global lead for the company's innovations in
Nescaf coffee mixes and Milo powdered beverages.
DKSH, Lindt & Sprngli Expand Partnership
In April 2013 it was announced that Switzerland-based market services expansion company DKSH and
luxury confectionery firm Lindt & Sprngli had extended their long-term partnership to enter Singapore's
market. Under the agreement, DKSH will help Lindt to sustain its expansion strategy in the country. DKSH
will offer marketing, sales, merchandising, distribution, logistics and back office expertise to Lindt. A
successful partnership between the companies has existed for more than 50 years in Hong Kong, and their
continued partnership will increase Lindt's growth in Singapore, said Thomas Meier, the managing director
of Lindt & Sprngli Asia Pacific.
Baby Boom Presents Commercial Opportunities
In the Chinese lunar calendar, January 23 2012 marked the start of the dragon year. Among the 12 Chinese
zodiac signs, the dragon is believed to bring luck to families. Consequently, many Chinese consider the year
of dragon as the most auspicious year to give birth and adjust family planning accordingly.
Due to such beliefs, BMI expects that the number of babies born during the dragon year in places where the
population is predominantly ethnic Chinese, such as Taiwan, Singapore and Hong Kong, will spike. This
will manifest itself as either the highest number of births and percentage change year-on-year in a 12-year
timeframe, or as higher than the preceding (rabbit) and succeeding (snake) years. Such trends have been
observed in Singapore, where the highest numbers of births within 12-year periods were recorded in 1988
and 2000, at 52,957 and 46,997 respectively. The year-on-year growth was also the highest in these years, at
17.6% and 7.8% respectively, before declining sharply the following year.
In line with our expectations for a birth spike in 2012, BMI believes there could be more sales opportunities
from 2013 for infant formula manufacturers and certain pharmaceutical manufacturers and healthcare
providers. As regional dairy producers increase their production capacity and expand their product offerings
to cater for the forecast surge in dairy demand, companies that are already equipped with strong market
positions and established portfolios of trustworthy brands are likely to find themselves better placed to
leverage on the short-term demand dynamics.
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Strengthening Manufacturing Processes
US-based baby food manufacturer Mead Johnson Nutrition (MJN) is planning to establish a new
manufacturing and technology centre in Singapore in a bid to support its long-term growth strategy in Asia.
The company will invest USD325mn on the new facility, marking its biggest capital expenditure.
According to MJN's senior vice president, Jeffrey Jobe, the new plant will help the company to serve the
future demand for Mead Johnson products as well as enable it to cater to its customers across Asia. Jobe
added that demand for MJN products across Asia has been witnessing double-digit growth for the last
decade and future prospects are also expected to remain strong. The new facility is scheduled to be fully
operational in mid-2014.
Drink
Cool Mountain Targets Singapore
Cool Mountain Beverages (a niche US soda producer) announced in September 2013 that it was entering
the soft drinks markets of Singapore and Malaysia, after partnering with Singapore's FGX International. The
company was founded in 1997 and markets premium soda that is caffeine and high-fructose corn syrup
(HFCS) free. The venture's success, in a relatively stagnant market, is dependent upon the effects of
increasing premiumisation and nutritional awareness of Asian consumers.
Cool Mountain Beverages is a small player in the soft drinks sector, with steady sales and annual revenue
estimated to be in the region of between USD1mn and USD2mn. It has built a reputation as an
environmentally conscious, premium product manufacturer with sales predominantly in the USA and
Canada. The range includes eight different flavours, marketed in glass bottles under franchise and licensing
agreements.
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Heineken To Enter Singapore Soft Drinks Market
Global brewer Heineken will begin to market soft drinks in Singapore following Fraser & Neave's
decision not to act on a non-compete clause signed between the two companies in January. In late 2012,
Heineken bought Fraser & Neave's stake in Malaysia-based Asia Pacific Breweries for USD4.1bn. As part
of the deal, Heineken signed an agreement not to manufacture, distribute or sell soft drinks in Singapore for
two years from the completion of the acquisition. Fraser & Neave has since stepped aside and allowed
Heineken to enter into the market, which is currently dominated by the Singaporean company.
In 2012, Fraser & Neave's soft drinks sales increased 2% year-on-year (y-o-y) to USD3.8bn, with profit
before interest and taxes rising by 1% to USD535mn. This is despite the firm losing in 2010 its licence to
distribute Coca-Cola products in the region, and selling its stake in Asia Pacific Breweries towards the end
of 2012. The company is the market leader in many beverage sectors, with its well-established brands in
Singapore including the 100PLUS isotonic drink, F&N sparkling drinks and the F&N SEASONS Asianinspired drinks and teas.
The Singaporean soft drinks sector is highly developed, with a range of offerings across many types of
products. The market is dominated by Fraser & Neave and domestic firm Yeo Hiap Seng. We believe that
manufacturers who are able to capitalise on a consumer base that is susceptible to marketing and product
innovation are the most likely to succeed, and Heineken will be looking to inject such dynamism into its
own offerings.
Heineken Signs JV To Sell Beer In Myanmar
In May 2013, Heineken, the parent company of Asia Pacific Breweries (APB), announced that it has signed
a joint venture (JV) agreement with the privately owned Alliance Brewery Company to produce and sell
Heineken beers in Myanmar. Through APB Heineken will own 57% of the JV, called APB Alliance
Brewery Company Limited, and will be responsible for overall management, providing brewing and
technical expertise, ingredients procurement and brands licensing. APB Alliance Brewery will build a new
greenfield brewery in Myanmar, representing an investment of USD60mn. The brewery is expected to be
operational by the end of 2014, will create more than 400 jobs, and will give Heineken and APB access to
one of the least saturated beer markets in the region.
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TCC Assets Triumphant In Fraser & Neave Takeover Battle
In January 2013, Thai billionaire Charoen Sirivadhanabhakdi finally won control over Fraser & Neave
(F&N) following a protracted takeover battle with the consortium led by Singapore-based property
developer Overseas Union Enterprise Ltd (OUE). Charoen's SGD13.8bn offer won the backing of 50.9%
of shareholders. In January OUE said that it could not raise its offer of SGD9.08 (USD7.40) a share, made
in November 2012, despite having the backing of Japan's Kirin Holdings. Charoen, who runs TCC Assets,
was named as chairman of F&N. Kirin Holdings, which holds close to 15% in F&N, subsequently
announced that it will sell off its stake to TCC.
Heineken Secures Full Control Of APB
Brewing giant Heineken secured full control of APB in October 2012, after the shareholders of F&N voted
in favour of the firm's SGD5.6bn (USD4.5bn) bid. Heineken has been forced to pay a hefty premium for the
business, at 17 times earnings before interest, tax and amortisation. However, the firm's CEO has stressed
that it was 'worth every dollar', owing to the firm's tremendous exposure to some of Asia's most promising
beer markets.
Heineken previously held a 42.5% stake in APB, which it operated in partnership with F&N. However, a
bid for F&N by ThaiBev put this position under jeopardy and forced Heineken to launch a takeover bid. It
was able to seal full control of APB after reaching an agreement with ThaiBev and its partner TCC Assets
(both linked to Thai billionaire Charoen Sirivadhanabhakdi).
Despite the high price the deal has been welcomed by investors, with Heineken's share price hitting 18month highs following the announcement of the deal. This optimism can be attributed to the acquisition
giving Heineken improved access to a large number of high growth markets; it also puts the firm in a much
stronger position to develop its Asian business. Although questions can be asked about whether Heineken
should have launched a bid earlier to avoid being forced to act by ThaiBev, the firm is likely to be relieved
that it has been able to broker a deal that is acceptable to all parties.
APB has brewing facilities in 13 different high growth markets - Singapore, Malaysia, China, India,
Vietnam, Cambodia, Thailand, Sri Lanka, New Zealand, Papua New Guinea, New Caledonia, Mongolia and
Laos. Its flagship product is its Tiger beer brand. For the year ending September 2011, APB recorded
growth of 18% in its overall revenues, and its operating income increased by 23% to SGD613.9mn
(USD473.1mn). This strong financial showing is indicative of strong organic volume growth across a
Page 62
number of its markets, including Thailand, Cambodia, Vietnam and Indonesia. As long as these markets
continue to deliver on their potential, we believe the hefty premium that Heineken was forced to pay will
soon become a side note in the history books.
YHS And F&N Witnessing Mixed Headwinds
Singapore-based soft drinks manufacturer Yeo Hiap Seng (YHS), which has an extensive presence across
Malaysia, reported revenue growth of 7.2% in its food and beverage division for the year ending December
2011. We remain optimistic about YHS's near-term earnings outlook given its continued focus on
improving production efficiencies.
Notably, YHS's strong revenue growth in FY2011 marks a stark improvement from its recent financial
years. YHS recorded an 8.7% fall in its food and beverage revenues in FY2010 due to the discontinuation of
its distribution of Red Bull energy drink products in Malaysia. However, the expiration also allowed YHS
to sharpen its focus on its more profitable core brands, and we believe this has a part to play in the
company's strong profit growth in FY2011. In 2009, YHS's revenues declined by 6.5%, which the company
attributed to a soft demand environment in China and Malaysia.
YHS's robust revenue showing in FY2011 partly mirrors the underlying healthy demand conditions in its
key markets of Singapore and Malaysia. Strong private consumption growth, increasing retail sales and
higher tourism levels supplied considerable momentum to the mass-market in Singapore and Malaysia in
2011, in turn translating into stronger sales opportunities for YHS's soft drinks products. Moreover, with a
continued focus on portfolio expansion, YHS was able to compensate for the loss of revenues as a result of
the termination of the Red Bull distribution agreement in Malaysia, and better position itself to tap into the
burgeoning soft drinks demand across its key markets.
The company has steadily improved its operating and profit margins, thanks to its consolidation of
production operations and a focus on improving production efficiencies. As YHS completes the
consolidation of its five factories into three, it is likely to benefit from greater economies of scale.
Meanwhile, softening demand conditions across F&N's Asian markets such as Thailand, and the loss of
bottling and distribution rights of The Coca-Cola Company's beverage products in Malaysia and
Singapore, are expected to dampen its near-term sales prospects. Consumer purchasing power in Thailand
came under greater strain due to 2011's floods, as local consumers witnessed damage to their properties and
homes, implying heightened consumer price sensitivity in the near term. Moreover, the expiration of the
bottling agreement between Coca-Cola and F&N will bear an immediate impact on the latter's sales
Page 63
opportunities in its soft drinks division. Given that sales generated from Coca-Cola's beverage brands made
up around 30% of F&N's overall drinks sales in volume terms, the loss of bottling and distribution rights of
Coca-Cola's brands will have a material impact on F&N's headline growth, which is likely to be reflected in
its financial results for FY2012.
International Expansion The Antidote To Domestic Market Saturation
Singapore-based instant beverage maker Super Group is set to make major inroads into China's coffee
sector with its flagship Super Coffeemix and Caf Nova brands, as part of its strategy to increase what is
currently weak exposure to the Chinese market. The company has looked to double its non-dairy creamer
production in its Wuxi plant in China's Jiangsu province and has plans to set up an ingredient manufacturing
centre. Generating only 6.2% of its FY2009 revenues from the combined region of Mongolia, Japan and
China, Super Group will benefit from an accelerated push into the Chinese market, given China's expected
outperformance relative to its regional peers over the longer term.
Despite the relatively modest prospects in the country's coffee sector, we believe that this is a profitable
market for Super Group to exploit, given the popularity of coffee and the intense competition among hot
drinks manufacturers as they grapple for a larger share of the Chinese market. Moreover, the largely
fragmented nature of the market means that Super Group could face lesser challenges in its pursuit of
nationwide presence; put simply, it needs lesser market share to become an industry major.
With this in mind, the company is expected to identify possible partnerships and joint ventures with
domestic industry players so as to leverage off their local expertise and existing distribution networks.
Super Group has also adopted a two-tiered market penetration strategy in response to the highly fragmented
nature of the country's hot drinks market; the company will initially focus its expansion efforts on major
Chinese cities in order to secure a dominant foothold from which to launch a nationwide presence over the
long term.
The company has already benefited from its exposure to Asian emerging markets, including Malaysia,
Thailand and Myanmar, and with developed economies such as Singapore and Taiwan and emerging
markets such as China on its long-term radar, Super Group's goal of sustaining 15-20% growth in its topline is not too far from sight.
Page 64
Mass Grocery Retail

MGR Opportunities Slow; Regional Neighbours Gain Pace
Singapore's mass grocery retail (MGR) sector remains a mature and increasingly competitive landscape for
investors looking to benefit from the stability and spending power of the Singaporean consumer. With its
small population and increasingly saturated market, Singapore offers limited opportunities for new entrants,
and the sector remains dominated by a small collection of retailers. With other markets in the region
offering more dynamism - spurred by large populations and rising incomes - domestic and international
retailers will very likely increasingly look beyond Singapore in the pursuit of long-term growth.
Grocery Growth Slows; Short-Term Opportunities Remain
Despite the increasingly saturated nature of the city-state's MGR market, domestic retailers have continued
to report impressive growth over recent years, indicating that growth remains achievable for existing players
in the near term. We forecast that:
Total mass grocery sales (in local currency terms) will increase by 15.1% over our forecast period to
2018. This is significantly slower than the 34.8% rise seen over 2007-2012, indicating that the most
dynamic growth is arguably behind us.
Convenience sales are expected to grow 15.6% to 2018; this is dwarfed by an impressive growth rate of
75.4% between 2007 and 2012.
Supermarket sales are forecast to grow by 13.2% to 2018.
Hypermarket sales will also perform strongly, with a growth rate of 21.0% projected over our forecast
period.
Page 65
Growth Still There

Singapore Selected Retail Sales, USDbn
3
Supermarket
Hypermarket
2018f
2017f
2016f
2015f
2014f
2013e
2011
2010
2009
2008
2012e
Convenience
e/f= BMI estimate/ forecast. Source: Statistics Singapore, Singapore Retailers' Association, BMI
Domestic Retailers Still Strong
The leading retailers operating in Singapore are reflective of the current health of the sector and highlight
the ongoing opportunities for established retailers in the near term.
NTUC FairPrice is Singapore's leading food retailer, operational across the hypermarket, supermarket and
convenience formats. It has continued to reap impressive rewards that accompany its market position. The
retailer runs 270 stores and has its own fresh-food distribution centre and centralised warehousing and
distribution company, pointing to the sophistication of the firm's operations. NTUC FairPrice was the first
Singaporean retailer to launch self-scan technology (February 2014), with a view to increasing productivity
and enhancing customer experience.
Revenue for FY2013 up 5.4% year-on-year (y-o-y) to approximately SGD2.8bn.
Well positioned to push multi-format growth, particularly demand for convenience and hypermarket
formats.
Page 66
Sheng Siong Group is another leading retailer, publicly listed as of August 2011. Sheng Siong operates 33
stores with both 'wet' and 'dry' components, with its competitive low prices appealing to the low-to-middleend consumer audience.
Revenue for FY2012: SGD637mn, up by 10.2% y-o-y; net profits up 53% over the same period.
Well positioned to target lower-income consumers and has pushed hard to capitalise on demand for
convenience, with 28 of its 33 stores now operating 24 hours.
Despite the current success of domestic retailers, the market has become increasingly saturated, with
competition driving retailers to capture remaining market share. Consequently, we believe the opportunities
for non-established retailers, particularly international ones, are limited. For domestic retailers such as
NTUC FairPrice, the small size of the country and already impressive spread of grocery outlets mean longterm opportunities for growth are also arguably hampered, prompting those present in Singapore to look for
international growth opportunities.
Regional Opportunities Brighter?
Given Singapore's small, aging population and highly developed grocery sector, other Asia Pacific countries
can be viewed as increasingly attractive. Countries such as Vietnam and Malaysia arguably offer greater
scope for acceleration, with largely fragmented retail landscapes and large, youthful populations offering
impressive room for development. Unsurprisingly, NTUC FairPrice has recently entered Vietnam with its
joint venture partner Saigon Co-operative, keen to capitalise on growing momentum towards modern,
organised retailing options. Sheng Siong has also announced plans to enter Malaysia, highlighting again the
challenges that could face Singaporean retailers in the long term as the market edges further towards
maximum saturation point. We forecast that Malaysian total mass grocery retail sales will increase by an
impressive 39.7% to 2018.
Page 67
Comparatively Flat
Selected Total Mass Grocery Retail Sales, USDbn
30
20
Singapore
Malaysia
2018f
2017f
2016f
2015f
2014f
2013e
2011
2010
2009
2008
2012e
10
Vietnam
e/f= BMI estimate/ forecast. Source: Statistics Singapore, Singapore Retailers' Association, Company information, Trade press,
BMI
Consequently, despite the current strength of domestic retailers and room for growth in segments such as
the hypermarket format, the increasingly mature and saturated Singaporean mass grocery retail sector offers
limited scope for long-term growth. There is little room for new entrants (domestic or international) to
penetrate the market and low potential for internal mergers and acquisitions activity. In view of this limited
long-term opportunity, we expect retailers to continue to look abroad for growth prospects, focusing on the
larger populations and rising incomes of regional neighbours. Dairy Farm International (which operates
the Cold Storage and Giant brands in Singapore) is a good example of a company that has benefited from
regional expansion and geographical diversification, boasting an impressive portfolio of more than 5,700
retail outlets across Asia.
Page 68
Domestic Retailers Expanding Overseas
In line with our expectations that the limited growth prospects in Singapore will prompt local supermarket
retailer Sheng Siong Group to expand abroad, it is reportedly planning to establish a joint venture to make
its foray into Malaysia. Sheng Siong, which operates 33 supermarkets in Singapore, aims to set up at least
50 outlets in Malaysia over the longer term.
Although we are more optimistic about the growth prospects of the hypermarket sector in Malaysia relative
to the convenience and supermarket sectors, we see strong merits behind Sheng Siong's plan to set up shop
in the Malaysian supermarket sector instead of the hypermarket sector. Should Sheng Siong decide to make
its foray into the Malaysian hypermarket sector, it would face strong competitive headwinds from sector
incumbents such as Carrefour, Tesco and Dairy Farm International. In our opinion, Sheng Siong will face
relative ease in establishing a strong foothold in the Malaysian supermarket sector. On this front, Sheng
Siong's low pricing strategy and expertise in fresh food distribution is likely to equip it with a stronger
competitive position.
More significant about Sheng Siong's expansion plan in Malaysia is the opportunity to leverage on its
Malaysian presence to push deeper into regional economies. With an expanded investment war chest after
issuing an initial public offering on the Singapore Stock Exchange in August 2011 - it raised net proceeds of
around SGD62.6mn (USD48.8mn) - Sheng Siong will only get more aggressive in its overseas expansions.
From a longer-term perspective, the most exciting retail opportunities arguably lie in markets such as
Indonesia and Vietnam, and we would not be surprised if Sheng Siong were to make another foray into
these markets over the coming years.
Retailers Linking Up With Overseas Suppliers
An increasing number of Singapore retailers are linking up with overseas agricultural suppliers and farmers
to meet their local supply needs. Leading Singapore retailer NTUC FairPrice has recently inked two-year
contracts with two farms in Western Australia to supply 52mn carrots, which make up about 80% of the
retailer's overall supply needs in a year.
Given the limited geographical size of Singapore and the severe lack of arable land in the country,
Singapore imports nearly 90% of its overall food consumption needs. As a result, Singapore's food and
drink trade balance is highly negative, with food and drink import growth continuing to outpace export
Page 69
growth. Due to the country's geographical limitations, Singapore retailers have little choice but to link up
with overseas agricultural suppliers to meet their local supply needs.
Interestingly, local retailers are looking further afield for opportunities to tie up with farmers and
agricultural suppliers. The recent contracts secured by NTUC, for instance, mark the first few agreements
the retailer has outside of the South East Asian region. By securing contracts with more suppliers,
particularly in more developed agricultural markets such as Australia, local retailers will able to reap the
benefits of secure supplies, low price volatility and better product quality.
Secure Supplies: By engaging in contracts with a myriad of suppliers, local retailers will be able to
ensure a secure stream of supplies. Moreover, diversification would help local retailers mitigate the
impact of a disruption to a particular supply source due to natural disasters on their overall supply.
Lower Input Cost Volatility: Diversification of supply sources will also help ensure a greater stability in
input prices for local retailers. According to NTUC, its input prices fluctuated by around 15% in 2010;
with the new contracts in place, it expects price fluctuations to be lowered to only 5%.
Better Product Quality: As farmers in the more developed agricultural markets such as Australia and
New Zealand typically have the necessary financial clout to engage in modern farming practices,
products sourced from these markets generally provide better quality than products sourced from
neighbouring agricultural markets such as Malaysia and Indonesia.
These benefits will most likely prompt local retailers to link up with more overseas suppliers, particularly in
the more developed agricultural markets. Local supermarket retailer Sheng Siong, for instance, is currently
contemplating the idea of establishing supply contracts with overseas farmers.
Page 70
Competitive Landscape
Table: Key Players In Singapore's Food Sector
Sub-sector
Sales
(SGDmn)
Food and Beverage - Brewers,

Soft Drinks and Dairy
4,344.1
2,935.8
Food - Confectionery
na
Food - Confectionery, Bakery,

Dairy and Meat
Company
Fraser & Neave Ltd
Employees
Established
Sep-13
17,000
1883
508.8
Dec-13
4,118
1984
1,024.2
na
Dec-13
4,143
1958
Food and Beverage - Snack

Foods and Soft Drinks
566.4
451.8
Dec-12
2,134
1957
Food and Beverage Convenience Foods and Instant

Drinks
557.0
na
Dec-13
1,233
1987
Food - Dairy and Frozen Food
400.2
319.2
Dec-12
315
1997
Food - Bakery Items
447.3
356.8
Dec-12
956
2000
Food - Noodles
na
98.0
Dec-12
na
1986
Sales
Fiscal
(USDmn) year-end
Employees
Established
Petra Foods
QAF Ltd
Yeo Hiap Seng Limited
Super Group Ltd

Etika International
Holdings
Sales
Fiscal
(USDmn) year-end
BreadTalk
TatHui Foods
e = BMI estimate; na = not available. Source: Investor Relations, BMI
Table: Key Players In Singapore's Drinks Sector
Sub-sector
Sales
(SGDmn)
Food and Beverage - Brewers,

Soft Drinks and Dairy
4,344.1
2,935.8
Sep-13
17,000
1883
Beverage - Alcoholic/Brewers
3,350.3
2,264.2
Sep-12
3,167
1931
Food and Beverage - Snack

Foods and Soft Drinks
515.3
na
Dec-13
2,134
1957
Super Group Ltd
Food and Beverage Convenience Foods and Instant

Drinks
557.0
na
Dec-13
1,233
1987
Viz Branz Limited
Beverage - Instant Hot Drinks
167.8
133.2
Jun-13
937
1988
Company
Fraser & Neave Ltd
Asia Pacific
Breweries
Yeo Hiap Seng
Limited
Source: Investor Relations, BMI
Page 71
Table: Key Players In Singapore's Mass Grocery Retail Sector
Parent
Company
Nationality
Sales
(SGDmn)
Sales
(USDmn)
Financial
year-end
Fascia
Format
Outlets Employees
NTUC
FairPrice
Singapore
2,845.7
2,279.8
Mar-13
NTUC
FairPrice
Supermarkets
94
Cheers
Convenience
stores
124
FairPrice
Express
Convenience
stores
23
Xtra
Hypermarkets
Finest
Supermarkets
Cold
Storage
Supermarkets
105*
Market
Place
Supermarkets
Shop 'n'
Save
Discount
supermarkets
Giant
Hypermarkets
7-Eleven
Convenience
stores
549
Sheng
Siong
Supermarkets
33
Dairy Farm
International
Hong Kong
Sheng Siong Singapore
12,244.13
687.4
9,800.6
na
Dec-12
Dec-13
5,000
5,500
na
* Latest available data; na = not available. Source: Investor Relations, BMI
Page 72
Company Profile
Auric Pacific
SWOT Analysis
Strengths
The company has a diversified geographical presence throughout Asia and is

therefore not overly dependent on a single market.
The discontinuation of its non-performing businesses, which struggled to deliver

strong profitability owing to high rental and labour costs, is likely to place it on a
stronger footing to grow its earnings.
Auric Pacific's commitment to improving cost management and profitability is likely to

help mitigate the impact of higher raw material costs.
Expanding sales channels, improving menu and product offerings, controlling

operating costs and introducing new food retailing concepts are likely to help Auric to
lock in stronger growth opportunities over the longer term.
Weaknesses
Due to the company's diversified geographical presence, the company will need to
carefully balance domestic operations with increasingly dynamic international
opportunities.
Primarily engaged in food distribution, food manufacturing and food retailing, Auric is
particularly exposed to commodity price volatility.
Opportunities
We expect consumer confidence to be strong among local consumers and support

domestic demand.
Strong tourism and retail sales growth will provide an impetus to domestic demand.
By strengthening its presence in high-growth regional economies such as China and

Indonesia, Auric could build a better-rounded portfolio with a greater stability in
earnings.
Page 73
Threats
Although global commodity prices will continue to moderate over the coming
quarters, which will provide some relief to Auric's bottom line, we note that they are
likely to remain at relatively elevated levels compared with previous years, suggesting
sustained pressure on margins. .
Company Overview
Auric Pacific is a Singapore-based conglomerate with a wide range of businesses

including the distribution of fast-moving consumer food and non-food products, food
manufacturing and retailing, the management of restaurant and food court operations
and other investments including property. The company has a diversified geographical
presence throughout Asia including Singapore, Malaysia, Indonesia, Thailand, Hong
Kong and China.
Strategy
In terms of strategy, Auric Pacific is likely to continue to push for continued

diversification across its food operations. By seeking to innovate existing products and
offer higher value, premium goods, the firm's broad portfolio leaves it well placed to
continue to secure growth both in its domestic and international markets, while
simultaneously achieving greater profitability.
On the downside, rising competition in the food retail and food court segments could
potentially threaten Auric Pacific's sales opportunities and erode its market share.
Singapore in particular is witnessing a rapid emergence of competition in its food retail
and food court segments as companies such as BreadTalk ramp up their store
expansions. However, with its varied and broad food product offerings and existing
food court operations, Auric Pacific is well positioned to continue to seek growth
moving forward.
Financial Data
Year ending December 2013 - Revenue: USD398.5mn;

Year ending December 2012 - Revenue: SGD389.9mn;
Year ending December 2008 - Revenue: SGD420.6mn.
Page 74
Petra Foods
SWOT Analysis
Strengths
Diversity in terms of markets and products allows Petra to protect itself from
downturns in certain category areas and certain markets.
Exposure to the high-consuming Singaporean market ensures a large audience for

non-essential goods, such as confectionery.
In seeking partnerships to accelerate expansion, Petra protects profits and boosts its
chances of success.
The profitable branded consumer goods division is an important growth channel for
Petra, with the higher prices it can charge helping to offset profitability pressures.
Petra has established a strong distribution and production network in a number of

international markets, buffering it from potential downturns in any one single market.
Weaknesses
Despite having a diverse portfolio, Petra is fairly confined to the confectionery sector,
which leaves it vulnerable to demand fluctuations in the market.
Petra is reliant on cocoa as a key input, which leaves it particularly exposed to

fluctuations in cocoa prices.
Weak global chocolate consumption has recently hit Petra's profits and could
continue as the world economy continues to flounder.
Opportunities
Further product innovation in perceived healthier categories, such as wafers, is likely

to ensure strong consumer interest.
With consumers across the South East Asian region getting more affluent and having
the purchasing power to trade up to higher-value consumer goods, appetite for
Petra's confectionery products will continue to grow strongly.
Exports to high-growth regional markets remain an important growth channel for

Petra.
Exploiting a foothold in high-spending regional markets also represents an important

means of securing profitability for Petra.
Page 75
Petra has been diversifying its product portfolio, with its recent entry into the
Indonesia drinks market through a joint venture to produce instant coffee and
convenience drinks.
Threats
Rising cocoa costs could undermine Petra's profitability.
Rising competition from regional confectioners threatens sales opportunities.
Petra's strategy of passing on price increases to consumers could eventually result in

consumers switching to lower-priced brands.
Company Overview
Petra Foods is Singapore's leading chocolate confectionery manufacturer, operating

across a number of sub-sectors, including chocolate, wafers and biscuits. As well as
having a strong presence in Singapore, the company distributes to 17 countries
worldwide, with Indonesia being the company's most important international operation.
The company manufactures and distributes its own key brands such as Delfi,
SilverQueen and Ceres, following the sale of its cocoa ingredients division to the
world's largest chocolate manufacturer Barry Callebaut in 2012.
Strategy
Following the company's divestiture of its cocoa ingredients division in 2012,

Petra Foods' near-term strategy is likely to focus heavily on the acceleration of its
branded consumer division. Following a record H113 performance which saw net profit
rise 13% year-on-year, impressive growth offset the impact of severe headwinds
caused by its cocoa division last year.
Consequently, the focus is likely to remain on pursuing innovation across its product
portfolio as it looks to capitalise on evolving consumer confectionery demand. New
product launches are likely to continue, with mergers and acquisition targets also a
possibility following the capital injection gained after sealing its cocoa arm. Although
Singapore sales make up roughly 6% of the company's branded consumer products,
international focus beyond is also likely to accelerate.
Already present across a number of regional markets, the company will continue to
target rising incomes across the region, with increased spending power expressly linked
to increased chocolate and confectionery consumption. Capacity expansions, branding
initiatives and supply chain improvements will remain key tenets of the company's
strategy given that Petra's high-growth markets such as Indonesia and the Philippines
remain fragmented and fraught with distribution challenges.
Page 76
Financial Data
2013 sales: USD508.8mn

2012 Sales: USD471.6mn
Page 77
Fraser & Neave

SWOT Analysis
Strengths
A diverse product portfolio, supported by a strong distribution network, means a very

high presence of F&N brands.
A commitment to product innovation has ensured growth in spite of market maturity.
Product launches are supported by high levels of promotional spending, thus

improving their chances of success.
Weaknesses
Despite being wealthy, Singaporean consumers are price sensitive, and this inhibits
F&N in terms of its pricing structure.
F&N could reap only limited synergies from its businesses.
F&N will need to sustain high levels of marketing expenditures to build its brand
loyalty.
F&N must balance the unique needs of its food and beverage business with the very
different needs of the publishing and property sectors.
The company recently lost its licence to distribute Coca-Cola products in Singapore
and Malaysia.
Opportunities
High tourism levels and a hot climate boost sales opportunities for soft drink
manufacturers.
Perceived healthier beverage channels, such as fruit juices and bottled waters,
represent important growth channels for F&N.
The loss of its Coca-Cola distribution licence allows the company to market more of
its own products in different markets
Threats
Fluctuating sugar prices remain a risk to profitability, particularly within the

carbonates segment, while rising packaging costs threaten profitability across the
board.
Page 78
Intensifying competition in regional markets such as China, Thailand and Indonesia

could threaten F&N's market share in the soft drinks and beer sub-sectors.
Company Overview
Fraser & Neave (F&N) is primarily a food and beverage manufacturer and distributor and
is the leading company in Singapore in these sectors. The company also has property
and publishing interests. Besides being a dominant player in the soft drinks
sector, among the company's most prominent food and beverage brands are F&N and
Meadow Gold, the latter being part of a growing dairy business.
Strategy
Despite domestic challenges and the expiration of its 75-year long bottling agreement
with Coca-Cola, F&N appears to be performing well. Although F&N benefited from the
strong appeal of Coca-Cola's powerhouse brands, its expansion plans in the region
were arguably hampered by restrictive covenants imposed by Coca-Cola. Under the
terms of the partnership, F&N was not allowed to distribute its own portfolio of soft
drinks beyond Singapore and Malaysia. However, following the termination, F&N is free
to pursue expansion across regional high growth markets such as Thailand and
Indonesia.
F&N's extensive distribution network and continued product innovation leave the
company well positioned to pursue growth post Coca-Cola partnership. Its experience
with distribution, gained from a joint venture with Asia Pacific Breweries (Heineken took
over F&N's 40% share in 2012 for SGD5.6bn) should prove a useful platform as it
explores regional opportunities in the pursuit of long-term growth beyond its Singapore
market. Myanmar and Malaysia are likely to continue to feature heavily in the
firm's global strategy, both offering impressive volume and gradual value growth
moving forward.
Financial Data
For financial year ending September:
2013 sales: SGD4.3bn, growth of 19.4%

2012 sales: SGD3.6bn, down 21.7%
2011 sales: SGD4.6bn, down 19.3%
2009 sales: SGD5.1bn
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Asia Pacific Breweries

SWOT Analysis
Strengths
A strong and effective focus on brand building has rewarded APB with a strong
growth trajectory over the past few years.
A proactive approach means APB is driving demand, not following it, giving it a head
start on competition.
A majority premium portfolio leaves it well positioned to capitalise on the growing

premiumisation trend in emerging markets and the high spending levels in developed
states.
A wide regional presence that encompasses high-growth emerging, developed and

frontier markets allows it to deliver market-beating sales and growth.
Weaknesses
A predominantly premium portfolio limits interest among low-income groups.
APB will have to plough in sustained capital expenditures to build up its brand and
distribution networks in its developing markets before it can reap returns over the
long run.
Opportunities
APB's aggressive expansionary activities could take a toll on its profitability.
Presence in the emerging markets of China, India and Vietnam leaves APB well
poised to exploit the surging demand for beer.
Expansions into frontier markets such as Sri Lanka could leave it poised to reap even
more exciting growth as these markets start to mature over the longer term.
APB's emerging markets are relatively free of competition; both Laos and Cambodia
are showing positive early signs, and Indochina remains APB's best-performing
region.
Threats
Entrance into the soft drinks market acts as a new avenue for growth.
Anti-alcohol marketing and advertising legislation in some regional markets such as

Thailand could frustrate APB's brand-building efforts.
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Having lost Corona distribution to Carlsberg, APB will need to be careful that its
Danish rival does not further encroach upon its market share.
Fluctuating barley costs threaten to undermine APB's profitability and capacity for
reinvestment.
Company Overview
Asia Pacific Breweries (APB) has brewing facilities in 14 different markets, including
Singapore, Malaysia, China, India, Vietnam, Cambodia, Thailand and Sri Lanka. Its
flagship product is its Tiger beer brand. In October 2012 Dutch brewing giant Heineken
secured full control of APB after the shareholders of Fraser & Neave (F&N) voted in
favour of the firm's SGD5.6bn (USD4.5bn) bid. In early 2010, APB took over Heineken's
68.5% interest in Indonesian brewery Multi Bintang and its 87.3% interest in Grande
Brasserie de Nouvelle Caledonie in New Caledonia for undisclosed fees, following
Heineken's tie-up with United Breweries in India in late 2009. In November 2013,
Heineken confirmed that they would be entering the Singapore soft drinks market, most
probably through APB, due to F&N choosing not to act on a non-compete clause
signed last year.
Strategy
Trans-Asian brewer APB's prospects looked fairly promising following its acquisition
from global beer giant Heineken. Thanks to its extensive geographical spread in Asia,
APB was able to tap into the underlying robust dynamics in the high-growth beer
markets of Vietnam, Thailand, Cambodia, Laos and Indonesia. Over the coming
quarters, we believe these high-growth markets - in particular Indonesia - which are
relatively insulated from global headwinds, will continue to provide the strongest
support to APB's headline growth.
We expect Indonesia to provide the strongest upward support to APB's near-term
prospects. While consumers in the more external trade-dependent peers such as
Singapore and China will inevitably feel the effects of a protracted slowdown in exports
over the coming quarters, Indonesian consumption is expected to grow at a fast rate
despite the global headwinds and should remain in strong shape in 2014.
APB's success has been built through international diversification, and further
expansions in the emerging and frontier markets remain the brewer's guiding
philosophy. The brewer has expanded a Vietnamese brewing facility, plans to invest in a
brand new plant in China's Guangdong province and is on the lookout for acquisitions
in India.
In May 2013 Heineken, APB's parent company, announced that it signed a joint venture
(JV) agreement with the privately owned Alliance Brewery Company to produce and sell
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Heineken beers in Myanmar. Through APB, Heineken will own 57% of the JV, called
APB Alliance Brewery Company Limited, and will be responsible for overall
management, providing brewing and technical expertise, ingredients procurement and
brands licensing. APB Alliance Brewery will build a new greenfield brewery in Myanmar,
representing an investment of USD60mn. The brewery is expected to be operational by
the end of 2014, will create more than 400 jobs, and will give Heineken and APB access
to one of the least saturated beer markets in the region.
Financial Data
For financial year ending September:
2012 Sales: SGD3.4bn, growth of 11.7%

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Sheng Siong
SWOT Analysis
Strengths
Sheng Siong invests heavily in technology and keeping up with industry best
practices, despite lacking the scale of its rivals.
An emphasis on customer service allows Sheng Siong to differentiate itself from its
competitors despite its smaller scale.
Sheng Siong boasts a substantial market share in Singapore's small market.
28 Sheng Siong outlets now operate 24 hours a day (as at November 2013)
capitalising on this solid avenue of growth, given the increasing number of
Singaporeans working night shifts.
Weaknesses
Sheng Siong lacks the scale of its rivals and as such cannot always compete on
price.
Industry crowding and market maturity could make Sheng Siong's plan to open 10
new stores in the next five years unachievable.
With just one retail format, Sheng Siong's ability to appeal to a diverse range of
consumers and various shopping occasions is limited.
Opportunities
Although a supermarket specialist, a move into 'compact supermarkets' or the

convenience sector may allow for greater growth.
Sheng Siong can look to regional retail markets for future expansion opportunities,
although its relatively smaller scale may prove a challenge for its expansionary
ambitions.
Sheng Siong can exploit Singaporeans' receptiveness to innovation by launching instore sections.
Threats
Shifts of consumer preferences towards added-value products and ethical

consumerism could erode Sheng Siong's ability to compete.
Rising operating costs are a particular threat for a company already operating under
low margins.
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Volatile food prices are a risk for Sheng Siong, with the company likely to struggle to
contain rising prices given its already low profit margins.
Company Overview
One of Singapore's largest retailers, Sheng Siong has established 33 outlets across the
country. In August 2011, Sheng Siong debuted on the Singapore Stock Exchange at
SGD0.32 (USD0.26) per share, 3% lower than its IPO price of SGD0.33 (USD0.27). The
retailer generated SGD116mn (USD95.3mn) from the proceedings. According to Sheng
Siong's prospectus, the IPO involved the sale of 351.5mn shares, which included
201.5mn new shares and 150mn vendor shares.
Strategy
The small geographical size and increasingly saturated nature of the Singaporean
market leaves limited scope for growth over the medium-to-long term, with Sheng
Siong's IPO injection an effective means to spur international expansion moving
forward. Although organised retail makes up 68% of overall mass grocery retail sales in
Singapore, which is still some way off the levels witnessed in the other Asian developed
markets such as Japan (88%) and Australia (85%), organised retail is quickly gaining
prominence in Singapore's retail landscape. The fast-consolidating nature of the
Singaporean market means that domestic retailers such as Sheng Siong would find it
increasingly challenging to grow organically, challenging long-term growth
opportunities.
Malaysia is one market the retailer has consistently been linked to, with reports
suggesting Sheng Siong is looking to establish 50 outlets in the country under a joint
venture agreement. Although Malaysia may not share a similar compelling long-term
retail growth story as that of the other immature and high-growth mass grocery retail
markets such as Vietnam and Indonesia due to its relative maturity, its stronger retail
growth prospects, thanks to a continued middle-class expansion, nonetheless make it
an attractive proposition for Sheng Siong.
However, Sheng Siong's domestic outlook is not without its positives. Amid intensifying
competition from domestic retailers such as Giant and NTUC FairPrice, we believe the
competitive advantages of fresh food distribution and aggressive marketing initiatives
will most likely leave Sheng Siong in a reasonably strong position to protect its market
share. This platform has appealed strongly to the mass-market, in particular the youth
population, as local consumers turn away from wet markets and towards organised
retail stores for their fresh food needs.
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Sheng Siong recently reported that revenue for the group rose 8.5% year-on-year (y-oy) for the nine months to September 30 2013, with gross profit up 13.7% to
SGD118.7mn; highlighting another strong performance for the retailer.
Financial Data
2013 Sales: 687.4mn, growth of 7.9%

2012 Sales: SGD 637.3mn, growth of 10.2%
2011 Sales: SGD578.4mn, decline of 8.0%
2010 Sales: SGD628.4mn, growth of 0.5%
2009 Sales: SGD625.3mn, growth of 2.5%
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NTUC FairPrice
SWOT Analysis
Strengths
Immense scale and domestic market dominance provide NTUC with a large and
established consumer base.
NTUC's convenience retail format, for instance, is well suited to the country's highly
urbanised lifestyles, where the increasing prevalence of dual-income families means
that convenience is one of the major purchasing determinants for Singaporeans.
Multiple store formats, which encompass supermarkets, hypermarkets and

convenience stores, cater well to the diverse needs of the Singaporean consumer.
Commitment to environmental initiatives appeal to increasingly ethical consumerism.
The setting up of 24-hour supermarkets, hypermarkets and convenience stores is a

solid avenue of growth given the increasing number of Singaporeans working night
shifts.
Weaknesses
A commitment to keeping prices competitively low restricts potential profitability.
NTUC carries mostly mass-market products, which could limit its reach to
Singapore's upper income consumers.
Overreliance on a mature mass grocery retail market such as Singapore's restricts

scope for future expansions and growth.
Opportunities
The discount format represents another avenue of growth given the inherent price
sensitivity of the Singaporean consumer.
Expansions of its private label ranges 365 and Pasar Organic can allow it to better
exploit the inherent price sensitivity among Singaporeans.
Expansions into high-growth markets such as Vietnam should provide strong impetus
to its long-term revenue.
NTUC can exploit Singaporeans' receptiveness to innovation by launching various instore sections.
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Threats
Singapore's geographical constraints limit NTUC's scope for expansion, particularly

in large profitable formats.
Relatively late entry into regional markets could make it difficult for NTUC to compete
against the more established players in the market.
Competition from Dairy Farm and Sheng Siong could eat into NTUC's dominant
market share.
The retailer has complained that the manpower shortage in the country has limited its
ability to expand at the rate that it would like.
Company Overview
Along with Hong Kong- based Dairy Farm International, NTUC FairPrice is Singapore's
leading supermarket operator and the country's first co-operative, established in 1983.
The retailer has a network of more than 270 stores comprising FairPrice supermarkets,
FairPrice Finest, FairPrice Xtra hypermarkets, FairPrice Xpress gas mart convenience
stores and Cheers convenience stores.
Strategy
NTUC FairPrice, the leading mass grocery retail player in Singapore, is likely to continue
to lean on the near-term retail potential of Singapore to support its growth. In the
longer term, however, given the geographical constraints of the Singaporean market,
we believe it is imperative for NTUC to continue exploring overseas opportunities to
secure its future growth. NTUC's latest joint venture, with Vietnamese mass grocery
retailer Saigon Union of Trading Co-operatives, marks its latest foray into an overseas
market, and this expansion is likely to provide NTUC with a strong avenue of growth.
Boasting a multi-tiered retail format from supermarkets and hypermarkets to
convenience stores, NTUC is the most diversified mass grocery retail player in
Singapore. The retailer currently operates a network of more than 270 outlets
comprising FairPrice supermarkets, FairPrice Finest supermarkets (which carry a
premium range of products), FairPrice Xtra hypermarkets, FairPrice Xpress
(supermarkets located at petrol stations) and Cheers-branded convenience stores.
This diversified retail format is a major competitive advantage for NTUC and caters well
to the diverse and unique needs of the Singaporean consumer. NTUC's convenience
retail format, for instance, is well suited to the country's highly urbanised lifestyle, where
the increasing prevalence of dual-income families means that convenience is one of the
major purchasing determinants for Singaporeans. Most of the convenience stores are
also operating on a 24-hour basis, which caters very well to the shopping needs of
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consumers who have irregular working hours. On the other hand, NTUC's supermarket
store format (which typically carries non-traditional concepts such as an indoor wet
market) appeal strongly to traditional local shoppers, while its Finest stores successfully
target the affluent crowd in Singapore.
There is potential remaining in the Singaporean mass grocery retail market. However,
given the limited geographical size of Singapore, we note that sales growth over the
longer term will be largely the result of product development rather than being driven by
store expansions. Hence, while NTUC will continue to ramp up its expansionary activity
in the domestic retail sector in the near-to-medium term, a focus on product
development and innovation is likely to be a key feature of the retailer's long-term
domestic strategy.
Longer term, it would be strategically wise for NTUC to expand its portfolio offerings to
successfully exploit the diverse needs of local consumers. In this regard, NTUC will
continue expanding its private label ranges 365 (comprising staples such as biscuits,
bottled drinks, flour and soups) and Pasar Organic (its organic food brands). Although
already enjoying high levels of income, the Singaporean consumer is generally
characterised by a high degree of price sensitivity, contributing to the strong demand of
private labels, which are perceived to be cheaper alternatives. NTUC's plan to increase
its 365 private label range to more than 3,000 items by 2015 and to stock its organic
brand at 50 of its stores by 2013 will most likely allow the retailer to build on the
success it has enjoyed in the private label arena - demand for NTUC's private label
products has been accelerating by more than 10% year-on-year (y-o-y), according to
the company.
Singapore remains a relatively small market, and NTUC will need to look further afield to
secure future growth opportunities against the backdrop of domestic market saturation.
NTUC and Saigon have inked a joint venture agreement to establish a chain of
hypermarkets in Vietnam as they look to ride the exciting emerging market demand
story that is expected to play out in Vietnam over the next decade.
Financial Data
For financial year ending March:

2010 Sales: SGD2.0bn; growth of 12.2%
Page 88
Global Industry Overview

Consumer confidence in the developed world, which was particularly affected in the US following
especially tough weather in Q114, continued to improve steadily in Q2. We highlight the UK as the likely
outperformer in Western Europe, with improving confidence boosting companies across the food and drink
spectrum. For companies with a lot of emerging markets exposure, improving confidence in key markets
like India and the accompanying appreciating domestic exchange rates will be a boost following major
exchange-rate related losses over recent quarters. Touching on food prices, our agribusiness and wider
commodities team expect grains prices to consolidate in the third quarter of 2014, following heavy selling
action in the second quarter.
Prices Expected To Consolidate In Q314

S&P GSCI Grains Index
Source: Bloomberg, BMI
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Government legislation will play an increasing role in marginalising unhealthy food and beverage
products.
The likelihood of governments in Western markets in particular enacting policies targeting unhealthy foods
continued to grow in Q2. We noted in June 2014 that the food and drink industry was likely to be forced to
reduce sugar content in its products as the UK government cracks down on unhealthy eating habits. The
government is becoming stricter on its recommendation for sugar intake (following the change in guidelines
from the World Health Organization) as well as advertising. However, we see it likely that the government
will adopt measures such as taxes on soft drinks to tackle rising obesity numbers.
Health authorities in the UK have singled out sugar-rich diets as the main risk to disease burden and
healthcare costs over the coming 30 years. In fact, Public Health England indicated that the country's high
sugar intake is threatening to double obesity related healthcare costs to GBP9.7bn by 2050. Concerns over
sugar intake in the UK have risen after the World Health Organization's proposal to slash the daily
recommended intake for sugar to 5.0% of an individual daily calorie intake, from 10% previously. Recent
health reports show that all age groups in the UK exceed the previous 10% limit and that children and
teenagers consumer 50% more than this limit daily. Most sugar consumed by children and teenagers in the
UK comes from soft drinks and cereals/cakes/biscuits.
We believe tighter recommendations from health bodies and increased information about the risks of highsugar diets will force food manufacturers to reduce sugar content in their products. This will come as
consumers increasingly read food labels and demand healthier products. Recent data from Mintel show that
72.0% of consumers say there should be a healthier alternative (ie, sugar/calorie free) for energy and
carbonated soft drinks. As a result of this, soft drinks manufacturers have widened their low/no/reduced
sugar offering since 2012, with product development in that category increasing by 63.0% over the same
period.
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Teenagers On Sugar High

UK - Daily Added Sugar Intake By Age Group (grams) & % Of Daily Food Energy
Source: National Diet & Nutrition Survey, rolling programme 2008-12
Hypermarkets will underperform in developed markets, where convenience, discount and online
retailing are the strongest opportunities.
For a number of years now, hypermarkets have been becoming less popular across many Western countries,
particularly in Western Europe. We have held the view that some of these large retailers with strong
hypermarkets arms such as France's Carrefour would look to diversify. Having stabilised its French
operation under new management since 2012, Carrefour has acquired the loss-making French arm of the
Spanish discounter Dia for around EUR600mn. We view this as a good move by Carrefour as it provides an
opportunity for the company to pursue a new format and also nicely complements management's more
active focus on lowering prices since taking over in mid-2012. Carrefour had earlier spun off the entire Dia
business in 2011 as part of an objective to sell businesses internationally to strengthen its balance sheet and
deploy more resources to turning around what was then an ailing French business.
The discount format is less developed in France compared with Germany, Portugal and Spain (and probably
a number of other European markets) due to the competitive landscape, the structure of the retail sector and
Page 91
different tastes and preferences. Pound-for-pound, price is arguably a less important determinant for food
spending in France compared with most of continental Europe. The sector is extremely competitive, with
powerful global retailers like Carrefour and Casino particularly strong in the hypermarket format, which
has historically been very popular in France. Tastes and preferences have certainly evolved over recent
years, with convenience stores becoming increasingly popular; the leading French retailers have largely
used their power and local knowledge to lead in pursuing new opportunities provided by mediums such as
e-commerce.
Subdued economic conditions initially gave discounters a strong position in the French market, with local
industry sources predicting in 2009 that discounters would increase their share of the retail market to about
25.0% by 2012. This did not happen, however, and discounters' market shares have actually fallen over
recent years, from about 15% in 2009 to 12.4% as of Q313.
We believe the online food retailing market in the UK and France will have the strongest growth
opportunities in Europe as it continues on its current high-reward trajectory. Retailers that have invested
early in the format will be at an advantage over others as online retailing will boost consumer loyalty and
spending.
The UK and France have seen the largest growth in the online food retailing market over the past years and
we expect growth to strengthen further in the coming years. This is in contradiction with other retail formats
that have been affected by weakening growth. In fact, the UK and France have seen their shares of online
retail (as a percentage of total retail sales) grow from almost nothing in 2009-2010 to 4.9% and 3.9%
respectively in 2013. This is very much ahead of other countries in Europe (for example Spain and
Portugal) where retailers are still trying to establish a model to make their online platform more profitable.
We believe the tremendous growth observed in the UK and France is linked to increasing demand for
convenience from consumers as lifestyles have become busier and cutting household expenditures has
become a priority. In a context of lengthening working hours and generally less time to dedicate to the
weekly shopping, online food retailing offers the best option for consumers looking for convenience and
flexibility. Also, the 'drive format', particularly popular in France and also picking up in the UK, offers
consumers the option to pick up their delivery in the most convenient spot (ie, tube stations in London) at
no extra delivery cost. Finally, shoppers using online retailing platforms indicate that they feel more in
control over their budget when they buy online rather than in-store as they tend to replicate the same
shopping list at each of their visits and do not get tempted by promotions.
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Still, we believe that the online channel will offer higher loyalty from consumers as well as increased
spending over the long term. As a result, retailers that have moved early to develop that channel, mainly
Tesco and Casino, will have an advantage over others. Data from Kantar Worldpanel show that, contrary to
retailers' concerns, having a presence online increases consumers' loyalty towards retailers. In fact, in the
UK, online retail provides retailers additional revenues compared with offline shoppers. For an average
Waitrose shopper, Waitrose represents 14.6% of their annual shopping budget, while for an online
Waitrose shopper this rate goes up to 37%. Similar trends can be observed for other retailers in the UK.
Companies will divest brands that are perceived to be at risk from private label substitution.
The view that food companies will look to divest brands that are underperforming or perceived to be more
vulnerable to private label substitution has continued to play out. Recent sales by Unilever of its Ragu and
Bertolli brands marked another step in its efforts to decrease its exposure to slow-growing food categories.
Sales growth in Unilever's food division has been lower (or negative) compared with personal, home care
and refreshments. If operating margins have been relatively strong in the company's food division, margins
for pure personal/home care players (we consider P&G and Reckitt Benckiser as such) are still much
higher (between 18-26% compared with 14-16% for food producers). The company's sale of Ragu and
Bertolli follows the sale of Unilever's Skippy peanut butter brand to Hormel Foods in January 2013 and of
its Peperami brand to Jack Link's in February 2014.
Bottled water, juices and energy drinks will be outperformers in global soft drinks.
Battling declining volumes in its core carbonated drinks business, The Coca-Cola Company (Coke) has
been behind PepsiCo (Pepsi) in addressing the weakening industry structure; Pepsi has a leg-up on Coke
with its successful snacks business (see 'Global Company Strategy - The Coca-Cola Company,' April 14).
We expect per capita carbonated drinks sales in the US to decline to 147 litres over our five-year forecast
period to 2018; this compares with about 160 litres in 2013 and, going back further, nearly 200 litres in
2004.
Coke's key strengths include: 1. Coca-Cola being by far the most globally popular soft drink; 2. having a
highly profitable business model that involves selling its secret recipe to its franchise bottlers; 3. Coke is a
cash cow - it generates relatively more free cash flow than any of its peers and 4. Coke is extremely strong
in emerging markets where, barring a few exceptions, it is dominant. However, for all its international
strength, the US still accounts for more than 45% of its business and this is not growing.
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The most recent major undertaking to improve Coke's positioning in the US came in February 2014 when it
agreed to purchase a 10% stake in Keurig Green Mountain (then known as Green Mountain Coffee
Roasters) for around USD1.25bn (see 'Both Coca-Cola And Green Mountain To Benefit From Tie-Up,'
February 6). Coke increased this to 16% in Q214 in a move that is being seen as further verification of the
do-it-yourself soft drinks market as it launches a machine later in 2014 which will provide Coke with yet
another avenue to push its brands.
Global Food Majors: Trends In R&D And Advertising Spending
The global food industry is proportionally one of the lowest-spending sectors on research and development
(R&D), with around 1.5-2.0% of total sales spent annually by the largest pure food companies such as
Nestl and Danone. This compares with more than 10% for pharmaceuticals (mainly on developing new
drugs) and consumer electronics (on new products).
A much lower spend (as a percentage of sales) in the food industry is not surprising, as there is less need for
cutting-edge breakthroughs from a product development perspective than in higher-value industries. Indeed,
in other industries, companies focus on far fewer product lines, and in the case of pharmaceuticals, for
example, companies' drugs are at risk of a major sales drop-off once they go off-patent. Organic growth in
the food industry tends to focus on incremental improvements to product lines and investing capital in
brands through advertising and marketing campaigns. Branding is hugely important, as the best-positioned
food companies are the ones that are able to counter the growing prominence of private label substitutes
through the power of their brands.
Power Brands And Selling Breakfast Cereal To The Chinese
In food, the major players are often managing power brands that have been around for decades (such as
Nestl's Kit Kat chocolates); these brands have tremendous brand equity behind them. That said, innovation
is still critical. For companies such as US-based Kellogg or UK-based Weetabix, which both focus on
breakfast products, growth markets in Asia represent a terrific opportunity. However, both are somewhat
constrained by the fact that their core business, breakfast, is perceived completely differently in these
markets. In China, for example, cold milk on top of sugar-infused cereal contrasts with consumers'
preference for warm and savoury foods.
Therefore, the challenge for these companies is to see to what degree they can leverage off the goodwill
inherent to well-known Western food brands. Indeed, in a market such as China, these companies are
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generally held in high regard owing to perceptions of their better food safety standards. Therefore, Western
companies would benefit from innovating and adapting in order to scale their breakfast ranges to Asian
markets via R&D spending.
Table: Select Food Companies - R&D And Advertising Financials
R&D/net
sales ratio
Gross
margin, %
12/31/2011
12/31/2012
12/31/2013
12/31/2011
12/31/2012
12/31/2013
12/31/2013
Unilever
2.2
2.1
39.9
40.2
41.3
Nestl
1.7
1.6
1.6
47.3
47.2
47.9
Mead Johnson
2.5
2.4
2.4
63
61.9
63.5
15
Danone
1.2
1.2
1.3
50.6
50.1
48.5
25
Advertising and marketing as % of sales
Health consciousness is a key theme in the food industry and is increasingly influencing policy. This is
occurring mainly in the developed world, with the recent move by the US to revamp its food labelling
policy a prime example (see 'Obama Administration Announces Major Food Labelling Overhaul' February
28). It is being suggested that some of the biggest food companies will increase their R&D spend to best
position themselves as nutrition becomes an increasingly important driver of spending. Clearly, the majors,
some of which we have mentioned, operate in what is an extremely fluid environment where they sell and
interact with the market continually. They have been positioning their businesses to this end for years, so
are all largely on the front foot, in our opinion.
Another driver of R&D spending is the need to increase organic growth to maintain some of the earnings
momentum that food companies in the US in particular built up in the 2010-2013 period by reining in costs.
With the US economy improving and cost-cutting not being a sustainable long-term driver of earnings
growth, successful new product launches will be key. We note that data compiled by Bloomberg shows
R&D spending in by a sample of ten of the largest food companies in the US increased by a median rate of
9% year-on-year in the first quarter of 2014. We see this trend continuing through the rest of the year.
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Baby Food Attracts Greater R&D Spend
Of the four companies we are looking at in terms of R&D and advertising spending, Nestl and Danone are
the most comparable. That said, a lower proportion of Nestl's sales are accounted for by food (it is strong
in beverages and hot drinks). Nestl and Danone both spend less than 2% of their sales on R&D, and their
gross margins are also comparable.
Unilever is split between its food and drink operations and its household and personal care fast-moving
consumer goods (FMCG). Unilever spends more on R&D than Nestl and Danone but has also lower
margins. The higher R&D spending is very likely to be attributed to its major presence in FMCG, where
companies generally spend more on R&D. Also, its margins are lower, which may suggest that it needs to
spend more on R&D as some of its products (especially in food) have been more vulnerable to private label
substitutes over the past few years.
Mead Johnson is a pure-play infant formula company. Mead Johnson's high gross margins reflect the
appeal and premium nature of the infant formula market, which has been growing very strongly globally
over the past few years. This is a fast-growing market (much more so than the wider food sector) that is
attracting interest from Nestl and Danone as well, so it is not surprising that Mead Johnson spends the most
proportionally on R&D.
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Table: Food And Drink Core Views
Short-Term Outlook
We expect grain prices to consolidate over the third quarter of 2014 following heavy selling action in the second quarter
Consumer sentiment in Western Europe (particularly the UK) and the US (following harsh winter in Q114) expected to
improve through 2014.
Long-Term Outlook
Companies with strong emerging market exposure will largely continue to outperform in sales growth, although the best
opportunities may now be beyond the BRIC countries.
Multinationals will increasingly pursue opportunities in frontier markets.
Traceability will become increasingly important, particularly in Western Europe following the 2013 horse meat scandal.
Discount retailing will continue to outperform supermarkets and hypermarkets across much of Europe.
Emerging market-based firms will increasingly pursue developed market investments for the purposes of diversification
and access to stellar brands.
Western food companies will look to take advantage of shifting diet trends, particularly in Asia.
Private equity interest in food and drink companies in frontier regions such as Sub-Saharan Africa will increase.
Hypermarkets will underperform in developed markets, where convenience, discount and online retailing are the
strongest opportunities.
Conversely, hypermarkets remain a great opportunity in less-developed retail markets, particularly adjacent to shopping
centres/malls.
Investment in innovation will increase as producers seek differentiation; emphasis will be placed on protecting
innovations.
Companies will divest brands that are perceived to be at risk from private label substitution.
Bottled water, juices and energy drinks will be outperformers in global soft drinks.
Government legislation will play an increasing role in marginalising unhealthy food and beverage products.
Governments will increasingly pursue alcohol as an effective means of raising revenue through higher taxes.
Whisky, particularly Scotch whisky, will be an outperformer in global premium spirits.
Functional foods and energy drinks will provide considerable opportunities globally.
Food safety concerns will increasingly affect food and drink spending, particularly in China.
Craft beer will outperform mainstream beer in many mature beer markets.
Consolidation will continue to take place in the global alcohol industry, particularly in Asia.
Page 97
Demographic Forecast
Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model. Not only is
the total population of a country a key variable in consumer demand, but an understanding of the
demographic profile is key to understanding issues ranging from future population trends to productivity
growth and government spending requirements.
The accompanying charts detail Singapore's population pyramid for 2013, the change in the structure of the
population between 2013 and 2050 and the total population between 1990 and 2050, as well as life
expectancy. The tables show key datapoints from all of these charts, in addition to important metrics
including the dependency ratio and the urban/rural split.
Population Pyramid
2013 (LHS) And 2013 Versus 2050 (RHS)
Source: World Bank, UN, BMI
Page 98
Population Indicators
Population (mn, LHS) And Life Expectancy (years, RHS), 1990-2050
Source: World Bank, UN, BMI
Table: Singapore's Population By Age Group, 1990-2020 ('000)
1990
1995
2000
2005
2010
2013e
2015f
2020f
3,016
3,483
3,918
4,496
5,079
5,412
5,619
6,057
0-4 years
229
299
256
259
262
278
290
306
5-9 years
212
247
303
296
290
276
272
298
10-14 years
207
229
283
306
329
313
298
278
15-19 years
253
224
254
304
355
371
370
330
20-24 years
310
273
255
294
333
395
430
426
25-29 years
345
333
321
344
367
384
404
483
30-34 years
338
370
349
376
402
414
421
445
35-39 years
282
362
388
409
431
437
439
449
40-44 years
223
303
376
396
416
441
455
457
45-49 years
138
238
315
375
435
433
431
465
50-54 years
123
147
249
328
408
435
442
435
55-59 years
103
129
150
243
335
383
408
440
60-64 years
85
106
133
196
258
300
330
401
65-69 years
61
84
107
129
150
208
249
318
70-74 years
46
57
82
103
125
127
140
232
Total
Page 99
Singapore's Population By Age Group, 1990-2020 ('000) - Continued
1990
1995
2000
2005
2010
2013e
2015f
2020f
75-79 years
33
39
48
68
88
102
109
124
80-84 years
20
24
30
42
54
63
71
89
85-89 years
13
14
19
28
33
37
50
90-94 years
10
14
16
22
95-99 years
100+ years
e/f = BMI estimate/forecast. Source: World Bank, UN, BMI
Table: Singapore's Population By Age Group, 1990-2020 (% of total)
1990
1995
2000
2005
2010
2013e
2015f
2020f
0-4 years
7.58
8.58
6.53
5.76
5.15
5.14
5.16
5.05
5-9 years
7.02
7.10
7.72
6.59
5.72
5.11
4.84
4.92
10-14 years
6.86
6.57
7.21
6.80
6.47
5.79
5.31
4.59
15-19 years
8.38
6.44
6.47
6.77
6.99
6.86
6.59
5.44
20-24 years
10.28
7.83
6.51
6.54
6.55
7.30
7.65
7.04
25-29 years
11.43
9.58
8.19
7.65
7.23
7.09
7.20
7.98
30-34 years
11.19
10.63
8.91
8.35
7.92
7.65
7.50
7.35
35-39 years
9.36
10.40
9.89
9.10
8.48
8.07
7.82
7.41
40-44 years
7.40
8.70
9.59
8.81
8.20
8.15
8.09
7.54
45-49 years
4.56
6.84
8.04
8.35
8.57
8.00
7.67
7.67
50-54 years
4.09
4.23
6.34
7.30
8.03
8.04
7.86
7.18
55-59 years
3.43
3.72
3.84
5.40
6.59
7.07
7.26
7.27
60-64 years
2.83
3.05
3.40
4.36
5.09
5.55
5.87
6.62
65-69 years
2.04
2.42
2.73
2.86
2.95
3.83
4.44
5.25
70-74 years
1.53
1.65
2.08
2.29
2.45
2.36
2.49
3.84
75-79 years
1.10
1.12
1.23
1.51
1.73
1.89
1.95
2.04
80-84 years
0.66
0.68
0.77
0.93
1.06
1.17
1.26
1.47
85-89 years
0.20
0.37
0.36
0.42
0.55
0.61
0.65
0.82
90-94 years
0.05
0.09
0.15
0.16
0.20
0.25
0.28
0.36
95-99 years
0.01
0.02
0.03
0.05
0.06
0.07
0.08
0.12
Page 100
Singapore's Population By Age Group, 1990-2020 (% of total) - Continued
100+ years
1990
1995
2000
2005
2010
2013e
2015f
2020f
0.00
0.00
0.00
0.00
0.01
0.01
0.02
0.03
Table: Singapore's Key Population Ratios, 1990-2020
1990
1995
2000
2005
2010 2013e
2015f
2020f
Dependent ratio, % of total working age
37.1
40.0
40.4
37.7
35.8
35.6
36.0
39.8
Dependent population, total, '000
816
996
1,128
1,230
1,338
1,420
1,488
1,726
Active population, % of total
72.9
71.4
71.2
72.6
73.6
73.8
73.5
71.5
Active population, total, '000
2,200
2,487
2,790
3,265
3,740
3,992
4,130
4,331
Youth population, % of total working age
29.4
31.2
30.1
26.4
23.5
21.7
20.8
20.4
Youth population, total, '000
647
775
841
861
881
868
861
882
Pensionable population, % of total working age
7.7
8.9
10.3
11.3
12.2
13.8
15.2
19.5
Pensionable population, total, '000
169
221
287
370
458
552
628
844
Table: Singapore's Rural And Urban Population, 1990-2020
Urban population, % of total

Rural population, % of total
Urban population, total, '000
Rural population, total, '000
1990
1995
2000
2005
2010
2013e
2015f
2020f
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
3,016
3,483
3,918
4,496
5,079
5,412
5,619
6,057
Page 101
Glossary
Food & Drink
Food Consumption: All four food consumption indicators (food consumption in local currency, food
consumption in US dollar terms, per capita food consumption and food consumption as a percentage of
GDP) relate to off-trade food and non-alcoholic drinks consumption, unless stated in the relevant table/
section.
Off-trade: Relates to an item consumed away from the premises on which it was purchased. For example, a
bottle of water bought in a supermarket would count as off-trade, while a bottle of water purchased as part
of a meal in a restaurant would count as on-trade.
Canned Food: Relates to the sale of food products preserved by canning. This is inclusive of canned meat
and fish, canned ready meals, canned desserts and canned fruits and vegetables. Volume sales are measured
in thousand tonnes as opposed to on a unit basis to allow for cross-market comparisons.
Confectionery: Refers to retail sales of chocolate, sugar confectionery and gum products. Chocolate sales
include chocolate bars and boxed chocolates; gum sales incorporate both bubble gum and chewing gum;
and sugar confectionery sales include hard-boiled sweets, mints, jellies and medicated sweets.
Trade: In the majority of BMI's Food & Drink reports, we use the UN Standard International Trade
Classification, using categories Food and Live Animals, Beverages and Tobacco, Animal and Vegetable
Oils, Fats and Waxes and Oil-seeds and Oleaginous Fruits. Where an alternative classification is used due to
data availability, this is clearly stated.
Drinks Sales: Soft drink sales (including carbonates, fruit juices, energy drinks, bottled water, functional
beverages and ready-to-drink tea and coffee), alcoholic drink sales (including beer, wine and spirits) and tea
and coffee sales (excluding ready-to-drink tea and coffee products that are incorporated under BMI's soft
drinks banner) are all off-trade only, unless stated.
Mass Grocery Retail

Mass Grocery Retail: BMI classifies mass grocery retail (MGR) as organised retail, performed by
companies with a network of modern grocery retail stores and modern distribution networks. MGR differs
from independent or traditional retail, which relates to informal, independent-owned grocery stores or
traditional market retailing. MGR incorporates hypermarket, supermarket, convenience and discount
retailing, and in unique cases cooperative retailing. Where supermarkets are independently owned and not
classified as MGR, BMI will state so clearly within the relevant report.
Page 102
Hypermarket: BMI classifies hypermarkets as retail outlets selling both groceries and a large range of
general merchandise goods (non-food items) and typically more than 2,500m in size. Traditionally only
found on the outskirts of town centres, hypermarkets are increasingly appearing in urban locations.
Supermarket: Supermarkets are the original and still most globally prevalent form of self-service grocery
retail outlet. BMI classifies supermarkets as more than 300m, up to the size of a hypermarket. The typical
supermarket carries both fresh and processed food and will stock a range of non-food items, most
commonly household and beauty goods. The average supermarket will increasingly offer some added-value
services, such as dry cleaning or in-store ATMs.
Discount Stores: Although most commonly between 500m and 1,500m in size, and thus of the same
classification as supermarkets, discount stores will typically have a smaller floor space than their
supermarket counterparts. Other distinguishing features include the prevalence of low-priced and private
label goods, an absence of added-value services, often called a no-frills environment, and a high product
turnover rate.
Convenience Stores: BMI's classification of convenience stores includes small outlets typically less than
300m in size, with long opening hours and located in high footfall areas. These stores mainly sell fastmoving food and drink products (such as confectionery, beverages and snack foods) and non-food items,
typically stocking only two or three brand choices per item and often carrying higher prices than other
forms of grocery store.
Cooperatives: BMI classifies cooperatives as retail stores that are independently owned but club together
to form buying groups under a cooperative arrangement, trading under the same banner, although each is
privately owned. The arrangement is similar to a franchise system, although all profits are returned to
members. The term is becoming more archaic, with fewer cooperatives remaining that conform to this
model. Most cooperative groups now have a more centralised management structure, operate more like
normal supermarkets, and are thus classified as such in BMI's reports.
Page 103
Methodology
Industry Forecast Methodology
BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and
causal/econometric modelling. The precise form of model we use varies from industry to industry, in each
case being determined, as per standard practice, by the prevailing features of the industry data being
examined.
Common to our analysis of every industry is the use of vector autoregressions. Vector autoregressions allow
us to forecast a variable using more than the variable's own history as explanatory information. For
example, when forecasting oil prices, we can include information about oil consumption, supply and
capacity.
When forecasting for some of our industry sub-component variables, however, using a variable's own
history is often the most desirable method of analysis. Such single-variable analysis is called univariate
modelling. We use the most common and versatile form of univariate models: the autoregressive moving
average model (ARMA). In some cases, ARMA techniques are inappropriate because there is insufficient
historic data or data quality is poor. In such cases, we use either traditional decomposition methods or
smoothing methods as a basis for analysis and forecasting.
BMI mainly uses ordinary least squares estimators. In order to avoid relying on subjective views and
encourage the use of objective views, BMI uses a 'general-to-specific' method. BMI mainly uses a linear
model, but simple non-linear models, such as the log-linear model, are used when necessary. During periods
of 'industry shock', for example when poor weather conditions impede agricultural output, dummy variables
are used to determine the level of impact.
Effective forecasting depends on appropriately selected regression models. BMI selects the best model
according to various different criteria and tests, including but not exclusive to:
R2 tests explanatory power; adjusted R2 takes degree of freedom into account
Testing the directional movement and magnitude of coefficients
Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value)
All results are assessed to alleviate issues related to auto-correlation and multi-collinearity
Page 104
BMI uses the selected best model to perform forecasting.
Human intervention plays a necessary and desirable role in all of BMI's industry forecasting. Experience,
expertise and knowledge of industry data and trends ensure that analysts spot structural breaks, anomalous
data, turning points and seasonal features where a purely mechanical forecasting process would not.
Sector-Specific Methodology
Within the Food & Drink industry, issues that might result in human intervention might include but are not
exclusive to:
Significant company expansion plans;
New product development that might influence pricing levels;
Dramatic changes in local production levels;
Product taxation;
The regulatory environment and specific areas of legislation;
Changes in lifestyles and general societal trends;
The formation of bilateral and multilateral trading agreements and negotiations;
Political factors influencing trade;
The development of the industry in neighbouring markets that are potential competitors for foreign direct
investment.
Example Of Food Consumption Model

(Food Consumption)t = 0 + 1*(GDP)t + 2*(inflation)t + 3*(lending rate)t + 4* (foreign exchange
rate)t + 5*(government expenditure)t + 6*(food consumption)t-1 + t
Sources
BMI uses the following sources in the compilation of data, developments and analysis for its range of Food
& Drink reports: national statistics offices; local industry governing-bodies and associations; local trade
associations; central banks; government departments, particularly trade, agricultural and commerce
ministries; officially released information and financial results from local and multinational companies;
cross-referenced information from local and international news agencies and trade press outlets; figures
from global organisations, such as the WTO, the World Health Organization (WHO), the UN Food and
Page 105
Agricultural Organization (FAO) and the Organisation for Economic Co-operation and Development
(OECD).
Risk/Reward Rating Methodology

BMI's Risk/Reward Ratings (RRR) provide a comparative regional ranking system evaluating the ease of
doing business and the industry-specific opportunities and limitations for potential investors in a given
market. The RRR system divides into two distinct areas:
Rewards: Evaluation of sector's size and growth potential in each state, and also broader industry/state
characteristics that may inhibit its development. This is further broken down into two sub categories:
Industry Rewards: This is an industry-specific category taking into account current industry size and
growth forecasts, the openness of market to new entrants and foreign investors, to provide an overall
score for potential returns for investors.
Country Rewards: this is a country-specific category, and the score factors in favourable political and
economic conditions for the industry.
Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic
profile that call into question the likelihood of expected returns being realised over the assessed time period.
This is further broken down into two sub categories:
Industry Risks: This is an industry-specific category whose score covers potential operational risks to
investors, regulatory issues inhibiting the industry, and the relative maturity of a market.
Country Risks: This is a country-specific category in which political and economic instability,
unfavourable legislation and a poor overall business environment are evaluated to provide an overall
score.
We take a weighted average, combining industry and country risks, or industry and country rewards. These
two results in turn provide an overall Risk/Reward Rating, which is used to create our regional ranking
system for the risks and rewards of involvement in a specific industry in a particular country.
For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall
rating a weighted average of the total score. Importantly, as most of the countries and territories evaluated
are considered by BMI to be 'emerging markets', our rating is revised on a quarterly basis. This ensures that
the rating draws on the latest information and data across our broad range of sources, and the expertise of
our analysts.
In constructing these ratings, the following indicators have been used. Almost all indicators are objectively
based.
Page 106
Table: Food & Drink Risk/Reward Rating Indicators
Rewards
Industry rewards
Food and drink consumption per capita, US$
Indicator denotes overall breadth of market. Wealthier markets

score higher.
Per capita food consumption growth, fiveyear compound annual growth, %
Lead Food & Drink growth indicator. Scores based on compound

annual growth over our five-year forecast period.
Market fragmentation
Subjective score reflecting how relatively developed the industry

is. Higher score reflects a more fragmented industry.
Country rewards
Population size, mn
Indicator denotes size of market.
GDP per capita, US$
Proxy for wealth. Size of population is important but needs to be

considered in relation to spending power. High-income states
receive better scores than low-income states.
Youth population, %
0>15%, % of total working age population. Younger populations

are generally considered to be more desirable.
Risks
Industry risks
Mass grocery retail penetration, %
The proportional contribution of the organised food retailing

sector; higher scores reflect better developed routes to
consumers and more efficient internal trade systems.
Regulatory environment
Subjective rating based on the industry-specific regulatory

environment and the presence of potentially restrictive legislation.
Country risks
Short-term economic growth
Rating from BMI's Country Risk Ratings (CRR). It evaluates likely

growth trajectory over a two-year forecast period, based on
BMI's forecasts and projections of business and consumer
confidence.
Income distribution
Middle 60% of population, % of total spending. Higher score is

an indicator of incomes being spread more equitably.
Lack of bureaucracy
From CRR. It evaluates the risks to business posed by official

bureaucracy, the broader legal framework and corruption.
Market orientation
Subjective rating from CRR to denote predictability of openness

to foreign investment and trade.
Physical infrastructure
From CRR. Poor power/water/transport infrastructure act as

bottlenecks to sector development
Source: BMI
Page 107
Weighting: Given the number of indicators/datasets used, it would be inappropriate to give all subcomponents equal weight. Consequently, the following weights have been adopted:
Table: Weighting
Component
Weighting
Rewards
60%
- Industry rewards
30%
- Country rewards
30%
Risks
40%
- Industry risks
20%
- Country risks
20%
Source: BMI
Page 108
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Q4 2014

Singapore Food & Drink Report Q4

Part of BMIs Industry Report & Forecasts Series

Business Monitor International

2014 Business Monitor International

Singapore Food & Drink Report Q4 2014

Industry Forecast .............................................................................................................. 15

Canned Food ........................................................................................................................................ 19

Oils And Fats ........................................................................................................................................ 23

Alcoholic Drinks .................................................................................................................................... 27

Soft Drinks ............................................................................................................................................ 30

Mass Grocery Retail ................................................................................................................................ 33

Macroeconomic Forecast ................................................................................................ 38

Table: Economic Activity (Singapore 2009-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Industry Risk Reward Ratings .......................................................................................... 42

Business Monitor International

Singapore Food & Drink Report Q4 2014

Market Overview ............................................................................................................... 50

Alcoholic Drinks .................................................................................................................................... 52

Industry Trends And Developments ................................................................................ 56

Competitive Landscape .................................................................................................... 71

Company Profile ................................................................................................................ 73

Global Industry Overview .................................................................................................. 89

Demographic Forecast ..................................................................................................... 98

Business Monitor International

Singapore Food & Drink Report Q4 2014

Glossary ........................................................................................................................... 102

Methodology .................................................................................................................... 104

Table: Food & Drink Risk/Reward Rating Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Business Monitor International

Singapore Food & Drink Report Q4 2014

BMI Industry View

Headline Industry Data

Latest Industry Trends & Developments

Business Monitor International

Singapore Food & Drink Report Q4 2014

Business Monitor International

Singapore Food & Drink Report Q4 2014

The food-processing sector, although small, is efficient and works at maximum

The government aims to increase Singapore's food production capabilities.

Importers can operate freely without concern over discriminatory taxes.

A small population and limited domestic processing facilities force Singaporean

Singapore's limited natural resources mean it is dependent on imports of raw

There is little room for development of the agricultural sector.

Singapore's absence of tariffs on food products means domestic producers face

Competition from low-cost neighbouring countries is on the increase, and its

Business Monitor International

Singapore Food & Drink Report Q4 2014

SWOT Analysis - Continued

Sales of packaged food and 'healthy' products have increased as a result of

Well developed infrastructure and a competitive business environment make

Consumers are interested in branded, premium and added-value goods, rendering

Wealthy, time-poor consumers are susceptible to the launch of processed and

The food-processing industry is threatened by competition from low-cost neighbours,

Business Monitor International

Singapore Food & Drink Report Q4 2014

Importers can operate freely without concern over discriminatory taxes.

Alcoholic drinks are widely consumed thanks to a relaxed attitude towards

A small population and limited domestic processing facilities force Singaporean

Consumers are interested in branded, premium and added-value goods, rendering

Business Monitor International

Singapore Food & Drink Report Q4 2014

SWOT Analysis - Continued

High commodity costs threaten manufacturers' profit margins, potentially resulting in