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Future of Malaysia food & drink market

The Malaysian economy is continuing on its path to recovery, with GDP expected to expand 4.3% in 2010 before accelerating to 5.6% in 2011 as the recovery gathers pace. The improving economic conditions and reasonable food and beverage consumption growth forecasts bode well for the country's food, drink and mass grocery retail (MGR) sectors, and a number of the country's producers have posted positive results in the previous quarter.

Following some disappointing results in early 2009, brewing majors Carlsberg Malaysia and Guinness Anchor Berhad (GAB) have both experienced a reversal in fortunes. In February 2010, Carlsberg announced that for Q409 its net profit had more than doubled to MYR19.86mn, while revenue for the period had risen an impressive 46% to MYR300.4mn. GAB's revenue rose by 15.1% to MYR378.1mn and net profit climbed by 26.4% to MYR43.8mn for its Q210, ending December 2009. However, despite these promising results the Malaysian beer market is likely to remain stagnant, with volume sales growth of just 20.6% through to 2014 - one of the lowest growth figures for the Asia Pacific region.

In contrast, the country's soft drinks sector continues to be hugely dynamic and we forecast growth of 42.2% in local currency terms to MYR7.73bn to 2014. Seeking to take advantage of such impressive prospects, F&N Beverages Marketing has entered into an agreement with Allexcel Trading to market and distribute the Red Bull energy drink in Malaysia. The agreement is expected to enable F&N to achieve revenue of MYR120mn in its first full year.

Elsewhere, retailers continue to invest in expansion plans despite the maturity of the sector and restrictive store opening legislation. Carrefour opened three new hypermarkets in Malaysia in February 2010, taking its total number of stores to 22. In March, Tesco announced plans to open five hypermarkets in the country during 2010, taking its total number of stores to 38. These type of expansion plans help ensure that Carrefour and Tesco are well placed to take advantage of the expected increase in sales through hypermarkets, which are forecast to increase by 52.7% to MYR6.32bn by 2014.

With the economy continuing to recover and some positive results posted in the last quarter, Malaysia looks set to remain an attractive investment opportunity despite the small size of the market.

by S. C.
25 may 2010, World News > Asia