2COFFEE MARKET IN CHINA 2012.PPT
Executive Summary
Market
Drivers & Challenges
Competition
Coffee is one of the fastest growing segments of the beverage sector in China projected to grow with a CAGR of x% to y tons by 20‐‐ from z tons in 20‐‐
Low coffee consumption at only 5 cups per capita per year provides robust growth opportunity for coffee in China
Major Players
Company 1 Company 2 Company 3 Company 4 Company 5 Company 6
Drivers:
Rising Population and Urbanization
Rising Disposable Income
Changing Lifestyles
Young Population Drive Coffee Demand
Low Per Capita Consumption
Challenges:
Rising Labour Costs
High Taxes and Duties
Health Hazards
Retail Chain Expansion
Rising Demand of Instant Coffee
Investment Plans
Trends
3COFFEE MARKET IN CHINA 2012.PPT
•Market Overview• Global
• China
•Supply Chain
•Exports and Imports
•Drivers & Challenges
•Trends
•Mergers & Acquisitions
•Competition
•Key Takeaway
4COFFEE MARKET IN CHINA 2012.PPT
Source:
Global coffee production with a greater emphasis on ‘Arabica’ variety is expected to witness a steep rise
•Global coffee production is expected to increase to x mn (y kg) bags by 20‐‐
• South America accounted for z mn bags of the global coffee production in 20‐‐
•Global coffee production is dominated by the Arabica variety of coffee• Arabica coffee accounted for x% of the coffee produced
in 20‐‐
Global Coffee Market ‐ Overview Growth in Coffee Production
Regional Production (20‐‐)
0
50
100
150X%
20‐‐e
x4
20‐‐
x3
20‐‐
x2
20‐‐
x1
mn bags
Production by Variety
0
20
40
60
B
z2
A
z1
mn bags
D
z4
C
z3
0
20
40
60
80
100
y2
20‐‐
x2
20‐‐
y1
x1 x3
y3
mn bags
20‐‐
y4
x4
20‐‐
BA
5COFFEE MARKET IN CHINA 2012.PPT
Source:
Despite a relatively low share of coffee sales Chinese coffee market is expected to witness a robust growth
•Coffee market in China is expected to grow from x thousand tons in 20‐‐ to y thousand tons by 20‐‐Coffee demand in China is increasing at a rate of z% to y% per year compared to a a world average of mere x%
• X Province is the major coffee growing region in China producing only Y variety of coffeeX accounts for y% of the coffee bean production in China
_ Z Province is the major producer of X coffee with an annual production of y tons
Domestic Coffee Market ‐ Overview Coffee Market Growth ‐ Production
Hot Drinks Market Share (20‐‐)
0
100
200
300
‘000 tons
20‐‐
x1
Z%
20‐‐e
x2
x1
x2
x3B
C
A
X
Z
Coffee Production Hubs in China
6COFFEE MARKET IN CHINA 2012.PPT
Source:
Chinese coffee market accounted for a trade surplus of over USD y mn in 20‐‐
Coffee Market – Exports under HS Codes
Coffee Market – Imports under HS Codes
0
50
100
150
USD mn
Y% Z%
20‐‐
x4
20‐‐
x4
20‐‐
x3
20‐‐
x2
20‐‐
x1
x8
x7x6x5x4
x3
x2
x1
Country 1 is the largest importer of coffee accounting for x% ofChina’s coffee exports
Country 1 is the largest exporter of coffee to
China accounting for x% of China’s coffee
imports
0
20
40
60
80
USD mn Z%Y%
20‐‐
y5
20‐‐
y4
20‐‐
y3
20‐‐
y2
20‐‐
y1
y8y6
y7y5y4
y3
y2
y1
Country 8
Country 7
Country 6
Country 5
Country 4
Country 3
Country 2
Country 1
Countrywise Segmentation
Countrywise Segmentation
Country 8
Country 7
Country 6
Country 5
Country 4
Country 3
Country 2
Country 1
7COFFEE MARKET IN CHINA 2012.PPT
Source:
In volume terms, 20‐‐ witnessed a trade surplus of mere x tons in China coffee market
Coffee Market – Exports under HS Codes
Coffee Market – Imports under HS Codes
0
10
20
30
40 Y%x4
20102008
x5
x3
20092007
‘000 tons
x2
2006
x1 x4x1x3
x2
x6
x5
Coffee export volumes remained almost stagnant during 20‐‐ ‐20‐‐, however registered a growth of x% value wise, indicating price
increase
Coffee import volumes rose by x% between 20‐‐and 2010 attributing to a
rise in demand
0
10
20
30
40
‘000 tons
y2y1
2006
y3
y5
2007 2009
Y%
20102008
y4
Z%
y4y3y2
y1
y6y5
Country 5
Country 4
Country 3
Country 2
Country 1
Country 6
Countrywise Segmentation
Countrywise Segmentation
Country 5
Country 2
Country 4
Country 1
Country 3
Country 6
Note:
8COFFEE MARKET IN CHINA 2012.PPT
Drivers & Challenges – Summary
Low Per Capita Consumption
Drivers
Rising Population and Urbanization
Rising Disposable Income
Changing Lifestyles
Young Population Drive Coffee Demand
Challenges
Rising Labour Costs
Taxes and Duties
Health Hazards
9COFFEE MARKET IN CHINA 2012.PPT
Rising population and rapid urbanization to act as the major growth driver for the coffee market in China
•Finding 1
• Finding 2
• Finding 3
• Finding 4
Rising Population and Urbanization Impact
Source:
Rise in Population Increase in urbanization leads to growth of the
coffee market
0
500
1,000
1,500
mn Z%
20‐‐e
z4
y4
x4
20‐‐e
z3
y3
x3
20‐‐
z2
y2
x2
20‐‐
z1
y1
x1
A B
10COFFEE MARKET IN CHINA 2012.PPT
Rising disposable income leading to greater spending increase demand from branded retail outlets
•Finding 1
•Finding 2
•Finding 3
•Finding 4
Rise in Disposable Income Impact
Source:
Urban Disposable Income Urban Consumer Spending
0
5,000
10,000
15,000
20,000
USD bn
Z%
20‐‐e
x3
20‐‐e
x2
20‐‐
x1
0
1,000
2,000
3,000
4,000
5,000
Z%
20‐‐e
y3
20‐‐e
y2
20‐‐
y1
USD bn
11COFFEE MARKET IN CHINA 2012.PPT
Rapidly changing lifestyle is a major contributor to the growth of coffee market in China
•Finding 1
• Finding 2
• Finding 3
• Finding 4
Changing Lifestyles
Source:
Share of Spending
Impact
20‐‐ 20‐‐e
%
0%
x1
y1
60%x2
y2
40%
100%
80%
20%
A B
12COFFEE MARKET IN CHINA 2012.PPT
Low level of per capita consumption provides a huge opportunity for growth to the coffee market in China
Low Per Capita Consumption Impact
Per Capita Coffee Consumption
• Finding 1
• Finding 2
• Finding 3
Source:
0
500
1,000
1,500
x11
Japan
x10
USA
x9
Germany
x8
France
x7
Austria
x6
Denmark
x5
Norway
x4
Netherlands
x3
Sweden
x2
Finland
x1No. of Cups
China
x12
Korea
China’s per capita coffee consumption is the lowest
offering substantial opportunity for growth
Coffee Consumption = Per capita per year
13COFFEE MARKET IN CHINA 2012.PPT
Favorable demographics in China to lead to the growth of the coffee market
Young Population Drive Coffee Demand Impact
Demography ‐ Age Split (20‐‐)
• Finding 1
• Finding 2
• Finding 3
Source: International Coffee Organisation
99%
x3
x2
x1
CBA
Young population is the primary target of the coffee retail outlets in China
A B C
X Y
Major Attractions of Coffee Outlets
Major Purposes Served
14COFFEE MARKET IN CHINA 2012.PPT
High cost of labour is one of the major challenges faced by the coffee market in China
•Finding 1
• Finding 2
• Finding 3
Impact
Source:
Rising Labour Costs
Labour Costs – Emerging Asia
Note: :Per capita Average Annual Salary has been considered
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000
USD
Country 9 x9
Country 8 x8
Country 7 x7
Country 6 x6
Country 5 x5
Country 4 x4
Country 3 x3
Country 2 x2
Country 1 x1
Xxx
15COFFEE MARKET IN CHINA 2012.PPT
Trends – Summary
Key Trends
Retail Chain Expansion
Investment Plans Rising Demand forInstant Coffee
16COFFEE MARKET IN CHINA 2012.PPT
High end retail chain expansion has emerged as a major trend in the coffee market in China
•Finding 1
• Finding 2
• Finding 3
• Finding 4
Retail Chain Expansion
Major Coffee outlets to expand their operations in the China market
Source:
Starbucks Expansion Plan Growth of Retail Segments (20‐‐)
0
10
20
30
40
Furniture
x7
Building
x6
Electronics
x5
Food
x4
Clothes
x3
Jewelry
x2
Total Retail
x1
% Retail food sales is one of the highest growing
segment
0
500
1,000
1,500
Outlets
Z%
20‐‐e
x2
20‐‐
x1
Note:
17COFFEE MARKET IN CHINA 2012.PPT
Coffee market in China is witnessing a rapid rise in demand for instant coffee
•Finding 1
• Finding 2
• Finding 3
• Finding 4
Rising Demand of Instant Coffee
Source:
Rising Popularity of Instant Coffee
Product Innovation
Company A Brand X
Company B Brand Y
Instant Coffee Market (20‐‐)
x2
x1 B
A
18COFFEE MARKET IN CHINA 2012.PPT
‐10,000
‐5,000
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Total Income18,00017,00016,000
Net Profit
15,00014,00013,00012,00011,00010,0009,0008,0007,0006,0005,0004,0003,0002,0001,0000
x2x1
Source: Note:
Size of the Bubble represents Market Capitalization in USD bn
Company 2Company 1
Major Public Companies ‐ Summary
19COFFEE MARKET IN CHINA 2012.PPT
Domestic Company – Company 1
Key People
Source:
Products and Services
Company Information Locations – China
YyyStock Exchange
Corporate AddressAddress Line
Tel No. ‐‐‐‐
Fax No. ‐‐‐‐
Website ‐‐‐‐
Year of Incorporation 19‐‐
Ticker Symbol Xxx
Category Products/Services
Beverages Product 1, Product 2, Product 3
Instant Noodles Product 1, Product 2, Product 3
Services Service 1, Service 2, Service 3
Name Designation
Person 1 Designation 1
Person 2 Designation 2
Person 3 Designation 3
Person 4 Designation 4
Headquarters
20COFFEE MARKET IN CHINA 2012.PPT
Source:
Financial Snapshot Key Ratios
Financial Summary
Domestic Company – Company 1
• The company incurred a net profit of USD x mn in FY 20‐‐, as compared to net profit of USD y mn in FY 20‐‐
• The company reported total Income of USD y mn in FY 20‐‐, registering an increase of x % per cent over FY 20‐‐
• The company earned an operating margin of y per cent in FY 20‐‐ a decrease of x percentage points over FY 20‐‐
• The company reported debt to equity ratio of x in FY 20‐‐ an increase of y per cent over FY 20‐‐
Financial Summary
YA
0
1,000
2,000
3,000
0
50
100
150
20‐‐
x4
20‐‐
x3
20‐‐
x2
20‐‐
x1
ProfitUSD mn
Total IncomeUSD mn
Indicators Value (dd/mm/yy)Market Capitalization (USD) x1
Total Enterprise Value (USD) x2EPS (USD) x3PE Ratio (Absolute) x4
Particulars y‐o‐ychange (20‐‐ ‐‐‐)
20‐‐ 20‐‐ 20‐‐ 20‐‐
Profitability RatiosOperating Margin ‐‐ ‐ ‐ ‐ ‐Net Margin ‐ ‐ ‐ ‐ ‐
Profit Before Tax Margin ‐ ‐ ‐ ‐ ‐Return on Equity ‐ ‐ ‐ ‐ ‐Return on Capital Employed ‐ ‐ ‐ ‐ ‐Return on Working Capital ‐ ‐ ‐ ‐ ‐
Return on Assets ‐ ‐ ‐ ‐ ‐
Return on Fixed Assets ‐ ‐ ‐ ‐ ‐
Cost Ratios
Operating costs (% of Sales) ‐ ‐ ‐ ‐ ‐
Administration costs (% of Sales) ‐ ‐ ‐ ‐ ‐
Interest costs (% of Sales) ‐ ‐ ‐ ‐ ‐
Liquidity Ratios
Current Ratio ‐ ‐ ‐ ‐ ‐
Cash Ratio ‐ ‐ ‐ ‐ ‐
Leverage Ratios
Debt to Equity Ratio ‐ ‐ ‐ ‐ ‐
Debt to Capital Ratio ‐ ‐ ‐ ‐ ‐Interest Coverage Ratio ‐ ‐ ‐ ‐
Efficiency Ratios
Fixed Asset Turnover ‐ ‐ ‐ ‐ ‐
Asset Turnover ‐ ‐ ‐ ‐ ‐
Current Asset Turnover ‐ ‐ ‐ ‐ ‐
Working Capital Turnover ‐ ‐ ‐ ‐ ‐Capital Employed Turnover ‐ ‐ ‐ ‐ ‐
Improved Decline
21COFFEE MARKET IN CHINA 2012.PPT
Source:
Key Business Segments Key Geographic Segments
Domestic Company – Company 1
Key Recent Developments
Description News
Overview• Company is primarily a manufacturer of beverage and instant food products. It operates in x provinces of China through different channels of sales and distribution points.
New business
• Company plans to raise its distribution channels in China from x1 to x2
•Due to increased production capacity and distribution channels capital spending of the company is estimated to be around USD z mn
Share Holding pattern • Company 1 operates as a subsidiary of the Y
0%
20%
40%
60%
80%
100%
20‐‐
n3n2
n1
20‐‐
z3z2
z1
20‐‐
y3y2
y1
20‐‐
x3x2
x1
CBA
100%
50%
0%20‐‐
X%
A
The company’s geographic reportable segment is ‘A’
22COFFEE MARKET IN CHINA 2012.PPT
Growing popularity of instant coffee and rapid expansion of retail outlets will lead to robust growth of coffee market
Coffee production is expected to grow with a CAGR of Z% from X tons in 20‐‐ to Y tons in 20‐‐
Rising population and urbanization coupled with a rise in disposable income are major growth drivers for the coffee market in China
Opportunities in the Market Market Size Competitive
Landscape
Challenges
Changing lifestyle and rising demand among young population are major contributors to the growth of the coffee market in China
Low per capita coffee consumption provides a scope for growth thus acting as a major growth driver for the coffee market in China
• Rising Labour Costs
• High Taxes
• Health Hazards
Coffee market in China is dominated by foreign retail coffee players
With retail coffee chains gaining rapid popularity, retail players dominate a greater share of the coffee market in China
Players are diversifying into instant coffee with a view to capture greater market share
0
100
200
300
‘000 tons
Z%
20‐‐e
x2
20‐‐
x1
23COFFEE MARKET IN CHINA 2012.PPT
Thank you for the attention
About NetscribesNetscribes is a knowledge‐consulting and solutions firm with clientele across the globe. The company’s expertise spans areas of investment & business research, business & corporate intelligence, content‐management services, and knowledge‐software services. At its core lies a true value proposition that draws upon a vast knowledge base. Netscribes is a one‐stop shop designed to fulfil clients’ profitability and growth objectives.
The Coffee Market – China report is a part of Netscribes’ Food and Beverage Industry Series. For more detailed information or customized research requirements please contact:
Disclaimer: This report is published for general information only. Although high standards have been used the preparation, Research on India, Netscribes (India) Pvt. Ltd. or “Netscribes” is not responsible for any loss or damage arising from use of this document. This document is the sole property of Netscribes (India) Pvt. Ltd. and prior permission is required for guidelines on reproduction.
Jitendra PunjabiPhone: +91 33 4064 6215E‐Mail: [email protected]