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July 7, 2014

Could Weetabix Succeed with Western Breakfast in China?

Pinar HosafciAnalyst Insight by Pinar Hosafci - Food Analyst

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In September 2013, one year on from its acquisition by China’s Bright Food, UK cereal major Weetabix put its Weetabix and Alpen brands on sale in stores in Shanghai. Earlier this month, the company announced plans to open a production facility in China. This appears to be quite a brave move given that cereal with milk is not the way Chinese consumers like to “fuel their day”. According to Euromonitor International, Chinese per capita consumption of RTE cereals is one of the lowest globally, standing at just 7g in 2013. Yoghurt is also not a product that can be considered traditionally Chinese. However, spoonable yoghurt registered 14% volume growth over the last five years, making China one of the fastest growing yoghurt markets globally. Moreover, the category is led by Bright Food’s much-loved Momchilovtsi brand, which has grown twentyfold since its launch in 2009. If Weetabix wants to gain a foothold in the Chinese breakfast cereals market, cross-branding Alpen and Momchilovtsi could be its route to success.

RTE Cereal Per Capita Consumption vs Spoonable Yoghurt Volume Growth in Selected Markets

Source: Euromonitor International

Note:  RTE - Ready to eat. Selected markets refer to the markets where Weetabix is present.

Continue reading "Could Weetabix Succeed with Western Breakfast in China?" »

July 6, 2014

Cities are Driving Employment Growth Worldwide

Kasparas AdomaitisAnalyst Insight by Kasparas Adomaitis - Cities Analyst

Every newly employed person constitutes a new consumer, and a change in the overall employed population is one of the most useful indicators in finding the most prospective markets for sales growth. Over 2005-2013 employment growth was very different across the world, registering a 20% rise in Latin America compared with just a 2-3% increase in North America and Eastern Europe. The key insight, however, lies in highlighting the rapid rate of employment growth in cities. Regardless of the specific region of the world, major cities stand out as generating jobs faster than their respective home countries. Major cities are particularly strong in creating workplaces in Africa and the Middle East, Asia Pacific and Eastern Europe, which is where the world’s new middle-class consumers are emerging.

Growth in Employed Population by Region (Regions vs Regions’ Cities), 2005-2013

Source: Euromonitor International from National Statistics

Urbanisation and Foreign Investment Drive Employment Growth

Over the eight years from 2005-2013 in the aforementioned regions of the Middle East and Africa and Asia Pacific, employment growth was twice as fast in cities as in their respective regions overall. To some extent, the rising number of jobs in cities was both a reason for and the result of an influx in number of immigrants. Asia Pacific, Africa and the Middle East experienced rapid urbanisation. While a couple of decades ago immigration to cities was regarded as a troubling trend leading to overpopulation, in later years (starting from the 1990s) immigration in fact served as a supply of cheap labour for streaming foreign investment in key Asian megacities. Fuelled by the sprawling factories of foreign corporations, Chinese megacities (Shanghai, Beijing, Tianjin and others), Jakarta, Manila, Ho Chi Minh City, Seoul and a number of other cities managed to create between 1-2.5 million new jobs over 2005-2013.

Eastern Europe is in a late stage of demographic transition with an ageing population and a low fertility rate, which means that generally an insufficient workforce is constraining rapid economic growth in most countries in the region. That is not the case in major regional urban areas as Eastern European cities remain dynamic centres of economic development which have performed considerably better than the wider region in terms of employment growth. Namely, over 2005-2013 employment increased by 11% in major Eastern European cities in comparison with 3% growth in the wider region. Urban employment is being boosted both by domestic demand (as cities benefit from growing consumer purchasing power) and foreign investment. For example, Eastern European cities are often perceived as primary destinations for establishing the shared service centres of international corporations. Tholons, a global investment advisory, names Krakow, Prague, Brno, Warsaw, Budapest, St Petersburg, Bucharest and Bratislava among the world’s top 50 outsourcing destinations (along with only Dublin and Belfast in Western Europe).

Rising Employment will Boost Number of Middle-Class Consumers

The rapid growth of urban employment is likely to boost the share of middle-class consumers in cities. In fact, according to the International Labour Organization (ILO), there is an ongoing worldwide structural shift towards more productive jobs (in terms of value added per employee). In 2013, the ILO published a report that anticipates 390 million new middle-class jobs by 2017, most of them in East Asia. These better-paid jobs will be in service industries and it is likely that they will be concentrated in cities, thus boosting the purchasing power of urban populations.

Urban poverty is already on a downward trajectory in many countries, as evidenced by World Bank data. According to the dynamics of poverty rates (see numbers for selected countries below), many of them actually reduced urban poverty over 2003-2011. With poverty in the cities in decline, urban residents are seeking better housing, transportation, services and eating out facilities.

Share of Urban Population in Poverty According to National Poverty Definitions

Geographies 2003 2004 2005 2006 2007 2008 2009 2010 2011
Argentina 54.7 40.2 33.8 26.9 20.6 15.3 13.2 9.9 6.5
Peru - 48.2 44.5 37 30.1 25.4 21.3 20 18
Ukraine 15.7 12.2 6.3 5.1 2.9 2 - - -
Turkey 22.3 16.6 12.8 9.3 10.4 9.4 8.9 - -
Serbia - 10.4 - 5.2 4.3 - 4.9 5.7 -
Russia 13.1 10.1 8.1 7.4 - - - - -
India - - 25.7 - - - - 20.9 -
Indonesia 13.6 12.1 11.7 13.5 12.5 11.6 10.7 9.9 9.2

Source: Euromonitor International from World Bank

Turkey: The Engine of European Juice Growth

Howard TelfordAnalyst Insight by Howard Telford - Beverages Analyst

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Turkey has been a bright spot of the retail juice market in Western Europe, partially offsetting a negative volume performance for the continent as a whole since 2008. Over the next five years, Turkey is expected to continue to be the focal point of juice volume growth in Europe, with innovation primarily emerging from nectars (Turkey is Europe’s second largest nectar market, after Germany) and juice drinks. While refreshing, flavourful juice drinks are driving volume, the category could still benefit from greater investment in higher value, wellness positioned juices that appeal to Turkey’s younger, health-conscious consumers.

Source: Euromonitor International

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EU-Japan Free Trade Deal: Influx of Japanese Imports Could Lead to Strategic Alliances

Justinas_LiuimaAnalyst Insight by Justinas Liuima - Industrial Analyst

The European Commission has expressed a will to continue negotiations with Japan with regard to a free trade agreement (FTA). However, the deal is facing strong opposition from European car producers due to fears of a price war, driven by an influx of Japanese imports. If a free trade agreement is reached, European producers could seek strategic alliances with their Japanese counterparts. 

Fear of Japanese Imports Leads to FTA Opposition

Despite the expressed political support from the European Commission, the European Automobile Manufacturer’s Association (ACEA) is opposed to a free trade agreement. The EU has consistently faced a trade deficit with Japan in terms of motor vehicles, with the value of imports reaching €9.1 billion in 2013 compared to exports worth €7.8 billion.

ACEA fears that an FTA would hinder business in its home market, particularly for volume producers in Italy and France. FTA would provide better positions for Japanese producers to leverage overcapacity and flood the European market with cheaper imports. This could spark a price war in the EU, which would be disastrous for car makers in France and Italy, which are already struggling with overcapacity and low profit margins.

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July 5, 2014

Gluten-Free Mania to Liven Up Fresh Food

Simone_BarokeAnalyst Insight by Simone Baroke - Consulting Analyst

Gluten-free eating is taking the world by storm. But it is not just all about gluten-free pasta, bread and biscuits. Exciting new opportunities are also emerging for fresh food, including starchy roots, vegetables and pulses. The new generation of gluten-free consumers is really not that difficult to cater for as it cares less about purity and more about choice and variety. For fresh food industry players, this means training their focus on foodservice, particularly in countries where packaged gluten-free food sales are already high.

Gluten - the Enemy of Wellness

Our health and wellness data show that global value sales of gluten-free packaged food soared by 75% over the 2008-2013 review period, reaching US$2.1 billion in 2013. In the past, the only people avoiding gluten were those individuals suffering from coeliac disease, an auto-immune condition in which the consumption of gluten causes the body to attack its own digestive tract.

Nowadays, however, a growing number of consumers are eschewing gluten because they believe that their bodies are sensitive to this cereal protein in some way. They attribute a wide variety of persistent symptoms to gluten sensitivity, such as persistent fatigue, skin rashes, weight gain, digestive complaints (including irritable bowel syndrome), poor memory and hormonal imbalances.

In essence, a branch of modern health and wellness philosophy which is continually gaining in popularity is that any unexplained symptoms may be down to a food intolerance, and gluten is one of the first candidates for an experimental elimination diet.

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To Gain in the USA, Premium Carmakers Invest in Mexico

Neil-KingAnalyst Insight by Neil King - Automotive Analyst

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According to a Reuters news report on June 27, “Daimler AG and Nissan Motor Co are jointly investing $1.36 billion to develop premium small cars and build a factory in Mexico, the companies said on Friday, in a step that deepens cooperation between the Mercedes-Benz and Infiniti brands.” This was swiftly followed by a report on July 1, which stated that “Munich-based BMW said on Monday it would make an announcement in Mexico on July 3, all but confirming a widely expected decision to build a new factory to meet growing demand for premium cars, shortly after its rival Daimler announced similar plans.” Back in early 2012, before talk of the MINT economies, I identified Mexico as one of the MITE hotspots of future autos demand - along with Indonesia, Turkey and Egypt - and so these investment decisions hardly come as a surprise.


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July 4, 2014

Event Preview: WWD Digital Forum London 2014

Ashma.kundeAnalyst Insight by Ashma Kunde - Apparel and Footwear Analyst

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It is evident that technology has shaken up every aspect of the apparel and footwear industry, from the way consumers discover and purchase products, to the way they interact with brands and peers. The WWD Digital Forum, taking place on July 10th 2014, brings together top executives across fashion, beauty and retail industries to address the most pertinent issues businesses face in this ever-evolving digital landscape.

The Omni-Channel Agenda

Omni-channel retailing has become a ubiquitous term in the strategies of apparel brands across the board. With no established playbook, it is evident that the rules are still being written with new technologies and innovations. Arguably the most important part of omni-channel retailing is that each piece of the omni-channel puzzle should connect to provide a single narrative.

Kate Spade has been held up as a poster child for a successful omni-channel strategy, which is completely in tandem with the brand’s target consumer. In 2013, Kate Spade Saturday launched digitally-enhanced window displays in four Manhattan locations, in partnership with eBay. Consumers were able to browse products and make instant purchases on the touchscreen windows, with the option of free one-hour delivery.

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July 3, 2014

Instant Coffee: Versatility and Convenience Drive Growth


Although fresh coffee dominates the overall coffee industry, instant coffee continues to gain share, thanks in large to its appeal amongst new coffee drinkers. The convenience, versatility, and branded experience of instant coffee make it an attractive consumer product in emerging coffee markets, while in established markets, instant coffee seeks to shed its commodity image to sustain consumer interest.

Purchase the full global breifing here

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July 2, 2014

Chinese Companies’ Overseas Acquisition Spree Picks up Pace, Part 1

Hope.LeeAnalyst Insight by Hope Lee, Senior Beverages Analyst

All industry analysts will no doubt be aware of Chinese companies’ ongoing overseas shopping spree, with the latest story being Sanpower’s proposed acquisition of the British-based House of Fraser department store. While Chinese consumers appear to be the global growth drivers of luxury goods, Chinese companies and private investors are eyeing up foreign targets and buying their assets. Like it or loathe it, the hungry and thirsty Chinese dragon is coming.

These Chinese acquirers take various forms, for example sovereign wealth fund corporations, state-owned conglomerates, wealthy private entrepreneurs and publicly-listed companies. All are armed with substantial foreign reserves which have been accumulated during three decades of strong domestic economic development and they are eager to strengthen their domestic positions as well as expand internationally. In 2014, China’s gross national savings will be close to US$5 trillion, while US savings will be only US$3 trillion. The industries in which they are interested include natural resources, automobiles, real estate, banking, retail and agribusiness. Today’s list is long but tomorrow’s could be even longer.

Financially, China is the US’ largest creditor, with the majority of investment in one single currency generally being seen as a risk. Understandingly, China and Chinese companies are keen to spread the known financial risks and balance their assets in a basket of currencies and geographies. They just need to find the right targets in the right continents.

Continue reading "Chinese Companies’ Overseas Acquisition Spree Picks up Pace, Part 1" »

Has the Time Finally Come for Silicone in Homewares?

Damian ShoreAnalyst Insight by Damien Shore - Contributing Analyst

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In spite of predictions that it would transform the market in the wake of its introduction in the late 1990s, consumers have long been lukewarm towards silicone. However, its convenience and health and wellness advantages are increasingly being appreciated by consumers, particularly those living alone.

Clear Advantages but Underwhelming Sales

Silicone enjoys several important advantages over more traditional materials, such as ceramic, glass and metal, in the kitchen. It is more flexible (if bent, the mould regains its shape), more durable, easier to clean (it is dishwasher safe and less prone to sticking), more versatile (it can be taken from an oven/microwave and placed immediately in a fridge-freezer or vice versa) and requires little storage space as it can be rolled up. Silicone also enables manufacturers to provide consumers with more options in terms of colour, shape and design than traditional cookware materials.

In spite of these advantages, silicone accounted for a mere 11.1% of ovenware value sales in the US in 2013, down from 11.7% in 2009. However, silicone is growing in popularity in some Western European markets, particularly the UK, where its share of ovenware value sales increased from 8.2% to 12.5% over the same period.

Continue reading "Has the Time Finally Come for Silicone in Homewares?" »


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