THE consumer sector, especially the food and beverage (F&B) sub-sector, is anticipated to show single-digit growth for 2003 in line with the projected gross domestic product (GDP) growth for the year even though the health and growth of the consumer sector is really dependent on a whole host of factors, ranging from world commodity prices to local consumer spending habits.
Although the Prime Minister has now quoted a lower GDP growth of between 4% to 5%, for this year, compared with an earlier projection of between 6% and 6.5% during the tabling of Budget 2003 in Sep- tember, economists said the revised figure was closer to their own projections of the countrys growth.
CIMB Securities economics head Lee Heng Guie is looking at a 4.3% growth while Lee Soo Kai of OSK Research Investment said his estimate was a 5% growth.
Whether the GDP grows at 4% or 6%, the consumer growth would only be shown later, as the sector normally lags the economic cycle by three to six months.
The consumer sector comprises food and beverage, and retail. In the food and beverage segment, analysts are projecting single-digit growth in sales in 2003 for consumer market leaders Nestle Malaysia Bhd and Fraser and Neave Holdings Bhd (F&N).
According to the Multex Global Estimates, analysts polls are projecting 5.02% growth in sales for Nestle and 5.91% for F&N. However, they see Nestle being affected by rising raw material costs, especially for cocoa and palm oil.
The average price of cocoa surged to US$1,776 per tonne in 2002, from US$1,081 per tonne a year ago. With the shortage in the world supply of cocoa, prices have now climbed to above US$2,000 per tonne, which most likely means an even higher average price for 2003, an analyst from Mayban Securities said.
The rise in the crude palm oil (CPO) price also meant higher raw material cost although lower prices in milk solids and coffee should help to mitigate some of the rising cost, she said.
Even then, she added that prices of milk solids appeared to have bottomed out since last August and the risk of an upside for coffee prices was also there as the prices had crashed since 1997.
Nevertheless, foreign workers coming back into the country again since the last quarter of 2002, should benefit Nestle.
With an estimated 370,000 foreign workers returning, this should also boost sales for Nestles products, another analyst said. Since the repatriation of the foreign workers in the 3rd quarter of 2002, its leading beverage sales of Milo had declined, the analyst noted.
The shift in consumer preference towards non-carbonated drinks and healthy snack bars is also evident. According to Mayban Securities, Power Bars, available at gym and fitness outlets under Nestles distribution is gaining in popularity. Although it forms only a small segment of Nestles sales, nevertheless the shift towards healthy lifestyle means good potential for another niche market.
F&N is also seeing an increase in the sales for its Season drinks featuring local and traditional beverages soya bean and chrysanthemum, and its isotonic drink 100 PLUS.
Despite competition from local and foreign players, Jaya Jusco Stores Bhd is a favourite pick in the retail segment among consumer analysts. Nine out of 10 analysts have a buy or outperform call on the counter.
Although Tesco opened its outlet in May last year in Puchong, which is also in the vicinity of Jaya Jusco, the suburban retailers sales strategy is helping chart sterling sales growth.
The best is yet to come as the fourth-quarter sales would capture sales for year-end and festive celebrations Hari Raya and Chinese New Year, the Mayban Securities analyst said.
In addition, analysts said the opening of a new outlet in Taman Universiti Skudai in Johor and better sales performance from the refurbishment and extension of its retail area at the flagship 1 Utama outlet in Bandar Utama, should boost Jaya Juscos revenue further.
In the 1st half of its current financial year, Jaya Jusco reported a 17.2% jump in sales to RM611mil from RM521mil previously, and a 34.2% surge in net profit to RM17.6mil.
For the financial year to end-February 2003, the market consensus for Jaya Jusco is RM1.3bil in sales and RM61.2mil in net profit.
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