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FEATURE – Asia’s beverage sector fizzes despite downturn


FEATURE – Asia’s beverage sector fizzes despite downturn

SINGAPORE – july 20 – The crowds drinking beer in the bustling bars of Mumbai and Shanghai underscore the motive behind a flurry of recent merger and acquisition activity in Asia, with forecasts of strong growth for beer and spirits in years to come.

In China and India, as well as smaller markets in Southeast Asia such as Singapore, Thailand and Vietnam, beer drinking is becoming a popular past time due to rising disposable income and relatively young populations who are embracing the party scene.

“I’m a firm believer in the Asia growth story and when there’s growth there’s going to be increased consumption,” said Edward Chia, managing director of Singapore’s Timbre bars.

“My analysis of trends is that people tend to start drinking beer as the first form of alcohol, then move to wines and spirits. That (applies) to both age and maturity of industry.”

Market research firm Euromonitor International says Asia is the most dynamic region globally in volume for beer, with average annual growth of 8 percent between 2003 and 2008. China is the world’s biggest beer market and India’s $12 billion alcohol market has been enjoying 12-15 percent annual growth.

So it’s no surprise that beverage firms, facing slowing sales in mature markets in Europe, Japan and the United States, have heightened M&A activity in the past few month. Analysts suggest there will be more to come given the outlook for rising alcohol consumption across Asia.

In China, per capita consumption of alcoholic drinks is expected to rise to 53.4 litres by 2013 from 37.8 litres in 2008, according to Euromonitor. It sees consumption in Singapore and Thailand rising to 23.1 and 61.4 litres respectively by 2013 from 21.1 and 48.4 litres last year.

“Expect more activity in the years to come as the major brewers establish or reinforce existing operations in the region, in particular outside the mature markets of South Korea and Japan,” said Euromonitor’s Marlous Kuiper.

Beverage firms are focusing closely on China and India as growth is expected to be rapid due to rising disposable incomes in the world’s third and twelfth largest economies, dented by the downturn but still holding up with forecasts for annual GDP growth of 8 and 6.3 percent respectively.

“The beer market (in China) is set for double digit (revenue) growth in coming years. Its growth will be much stronger than other liquor or wine,” said Jiang Guo-Qiang, general manager and director of Chinese brewer Kingway Brewery.

In line with this sentiment, shares in China’s Tsingtao Brewery have soared 65 percent this year, outpacing a 29 percent gain in Hong Kong’s main index.

China’s beer market was valued at almost $30 billion in 2007 compared with about $17 billion in 2001. Japan’s mature beer market is valued at about $42.5 billion, but its size has been steadily declining from about $51 billion in 2004.


Big names such as Diageo, the world’s biggest spirits group, and Japan’s Kirin Holdings are adopting multi-pronged strategies that include mergers and acquisitions and also partnerships with local firms for footholds in markets in India and China which are dominated by domestic firms.

Diageo said in June it had teamed up with Chinese white spirit producer Shui Jing Fang to make a premium vodka in China. It is also in talks to pick up a stake in India’s United Spirits.

Meanwhile, Heineken, the world’s third-largest brewer, in May reached a deal with India’s largest brewer, United Breweries, to bottle and distribute its brands in India.

In fact, eight out of the top 10 brewers in China have some level of foreign ownership, according to Euromonitor.

Analysts say there is a strong correlation between alcohol consumption and industrial output growth, boding well for brewers as the economy recovers.

China’s Snow beer is now the world’s second-biggest beer brand by volume, replacing Anheuser-Busch brands, Bud Light and Budweiser. It is brewed by SABMiller and its Chinese partner China Resources Enterprises Ltd.

“China and India will take the lion share of volume due to huge population growth but opportunities exist in other markets like Vietnam and Thailand,” added Kuiper.

The Philippines, Singapore, Thailand and Vietnam all saw buoyant beer sales in 2008.

Singapore, said analysts, has single-handedly defied the gloomy environment of mature markets such as the UK and United States with drinkers drawn to outlets such as microbreweries.

Despite Singapore’s worst ever recession, foreign beer companies are still moving in.

“People will drink anyway if you offer the right beer,” said Romtham Setthasit, the director of Thailand Tawandang Microbrewery’s Singapore operation, which opened this month.

Volume growth in Asia-Pacific beer markets is expected to outstrip growth in world markets in coming years, with forecasts for annual growth of 7.5 percent in 2009-10 compared with 4.1 percent growth globally, according to Euromonitor.


Japan’s Kirin, the maker of Lager Beer, eyes the ASEAN region for future growth and is in talks with the Philippines’ San Miguel Brewery’s (SMB) parent company to buy its overseas beer business.

Kirin bought a 48 percent stake in SMB earlier this year and snapped up Lion Nathan, Australia’s second biggest brewer, for $2.5 billion.

“We have made good progress in Oceania, so the next is ASEAN and mainland China,” said Makoto Ando, head of Kirin’s investor relations. “ASEAN has a big growth potential,” he said.

Japanese brewer Suntory Holdings, maker of the popular “Premium Malt” beer, says it is mulling a merger with Kirin, a deal that would create one of the world’s largest beverage firms.

In Australia, North America’s Molson Brewing Co last year took a five percent interest in Foster’s Group Ltd, Australia’s largest brewer.

There is talk that Foster’s may separate its struggling wine business from the beer unit, valued at more than $10 billion, in a move that could signal a possible split when market conditions improve and wine earnings recover.

“It is more likely a when, not an if,” said Kristan Walker, retail and beverages analyst at Deutsche Bank. “You are probably looking at two scenarios, either a trade sale or a demerger.”

If there was a split, Foster’s beer operations would likely appeal to brewers such as Molson and Asahi, drawn by a market with healthy margins due to its domination by two big players.


As Asia’s market gains momentum, local brand names may have an edge over imported brands because they can sell at lower price points and have more efficient distribution networks.

In India, rationalisation of import duties has brought down prices of imported alcoholic drinks brands, while a move in 2005 to allow beer and wine to be sold at supermarkets has encouraged demand for liquor and global brands.

India is now the second-biggest market for Ciroc, Diageo’s “superluxury” vodka. Its Black Label whiskey is an “iconic brand” in India, said Diageo’s Asia-Pacific President John Pollaers.

United Spirits Managing Director Vijay Rekhi says Indian consumers have only recently embraced “labels” and per capita consumption has risen. It stood at 2.3 litres in 2008 versus 0.3 litres in 2003 according to the World Health Organisation.

“Brand consciousness amongst consumers has finally permeated into the spirits category as well,” Rekhi said.

It’s being felt elsewhere in Asia, a region where people are so conscious about brands that they pay huge amounts for designer bags, clothes and even alcohol bearing high-end labels.

Singapore’s national beer Tiger is losing popularity among young drinkers who opt for imported beer with brand cachet.

“Younger Singaporeans don’t drink that much Tiger Beer and go for imported beers like Heineken, Erdinger and Kilkenny,” said Tibre’s Chia.

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Apple iPhone 3GS debuts at end of the month


Apple iPhone 3GS debuts at end of the month

MAXIS will offer the Apple iPhone 3GS, in its retail stores beginning July 31, among the first in Southeast Asia to offer the model.

In addition, pricing on iPhone 3G (8GB) will be reduced to RM1,990 (from RM2,540 previously) while the iPhone 3GS 16GB and 32GB will be RM2,490 and RM2,990 respectively.

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Indonesia’s Yudhoyono set for one-round election win


President Susilo Bambang Yudhoyono’s campaign team flash the victory sign in Cikeas, West Java in Jakarta July 8, 2009.

Indonesia’s Yudhoyono set for one-round election win


Indonesian presidential candidate Susilo Bambang Yudhoyono (C), his wife Kristiani Yudhoyono (R) and his son Edi Baskoro (L) show their ballot papers at a polling station in the Cikeas district in Bogor July 8, 2009.


A man casts his ballot for the Indonesian presidential election in Jakarta July 8, 2009.


A voter dips his finger with ink at a polling station in Cikeas district in Bogor July 8, 2009.

BOGOR, Indonesia (Reuters) – President Susilo Bambang Yudhoyono looked set to win a second term on Wednesday as provisional election results showed there would be no need for a run-off vote, opening the way for a period of quickening reform.

“I think it’s clear now that Yudhoyono has won in one round,” said Kevin O’Rourke, a Jakarta-based political risk analyst.

Political allies flocked to Yudhoyono’s home in Bogor, on Java island, to congratulate the former army general as “quick counts” of votes cast across the archipelago of 226 million people rolled in.

“Continue!” they chanted, using Yudhoyono’s campaign slogan.

With about 94 percent of the LSI polling agency’s sample of votes counted, Yudhoyono’s tally stood at a commanding 60.8 percent. He will need to secure half of the votes to avoid a run-off with the nearest of his two challengers.

The official verdict on the election will come later this month, but “quick count” results have proved extremely reliable in the past.

The election, only the second direct vote for a president in Indonesia, will determine the pace of reform over the next five years and cement the country’s transition to democracy.

Analysts expect that in a second term Yudhoyono would quicken the pace and widen the scope of reforms in Southeast Asia’s biggest economy to attract badly needed foreign investment, create jobs and shore up flagging economic growth.

Indonesian stocks, bonds and the rupiah have rallied this year on the prospect of a Yudhoyono win, and analysts now see them rising further on the results. Jakarta markets were closed for the election.

A decade ago, Indonesia was the sick man of Asia. After 32 years of rule by Suharto, who oversaw a system of entrenched corruption and nepotism, it stood on the brink of political, social and financial collapse.

Yudhoyono’s government has since brought political stability, peace and the best economic performance in a decade. Today, some see the country on another brink — of economic take-off and joining the emerging “BRIC” economies of Brazil, Russia, India and China.

Nevertheless, the world’s most-populous Muslim nation is hardly problem-free: corruption is widespread, infrastructure is in dire need of an overhaul and millions live in poverty.


Analysts say Yudhoyono is likely to pick more technocrats, and fewer politicians from among his coalition partners, to fill his next cabinet so that the government can promote reform.

“He will try to do more to attract investment but at the same time he will be more serious about eradicating corruption. He will prioritize good governance and economic growth,” said political scientist Aleksius Jemadu at Pelita Harapan University.

“He will reform the bureaucracy to make it easier for investors to come here. He will make sure some of the red tape and the bureaucratic obstacles will be removed.”

The LSI vote count showed that Yudhoyono’s challengers, former president Megawati Sukarnoputri and Vice President Jusuf Kalla, were trailing at around 27 and 13 percent, respectively.

Megawati and Kalla adopted a more nationalist tone than Yudhoyono in their campaigns, promising to squeeze more from the country’s rich resources to pay for pro-poor policies.

A controversy over voter lists marred the run-up to the election, with the teams of Yudhoyono’s two rivals complaining about millions of duplicate names and even the names of dead people and children on the electoral rolls.

There remains a small risk that the pair could use the doubt sown about the credibility of the vote to challenge the result.

U.S. President Barack Obama, who lived in Indonesia as a child, is expected to visit the country later this year — a trip that would warm ties that both countries say they plan to raise to the level of “comprehensive partnership.

However, U.S. trade officials and businesses complain about a range of protectionist policies, including judicial and bureaucratic bias favoring Indonesian firms, as well as rampant corruption that distorts the economic playing field.

(Additional reporting by Ed Davies, Sunanda Creagh, Olivia Rondonuwu and Telly Nathalia in Jakarta; Writing by John Chalmers; Editing by Sara Webb)

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