New Posts for 2007

BRAZIL RETAILING

AMERICAS: Brazilian retail market is attractive to global retailers.

Spending by Brazilian consumers is large and growing. The country is already the 3rd largest global market for soft drinks, the 4th largest for chocolate and cosmetics and personal care products and the 5th largest for beer. The size and potential of the Brazilian market has attracted foreign financial and strategic investors

In the food retailing sector Carrefour, Makro and Wal-Mart (via the acquisitions of Sonae and Bompreço) are all significant players.

Credit expansion has been a contributory factor in the growth of non-food retailing.

E-commerce grew 32% in 2005 albeit from a low base.

CHINA FOOD

ASIA: The growth in processed food consumption in China is driven by the urban population.

The Chinese processed food market is estimated to account for nearly 5.7% of the global total. Up to 30% of the food consumed in certain urban areas is processed.

The growth in income, which is driving these changes, is evidenced by the fact that approximately 88% of urban households now own a refrigerator. The figure for rural areas is 16% which suggests that it will be many years before the consumption of processed foods reaches significant levels amongst this demographic.

UK PHARMACEUTICALS

EUROPE: ABPI takes issue with NICE recommendations.

The Association of the British Pharmaceutical Industry (ABPI) is taking issue with the process by which the National Institute for Health and Clinical Excellence (NICE) reaches its recommendations. NICE is, inter alia, responsible for evaluating new and existing treatments for use within the UK's National Health Service.

NICE state that they base their recommendations on both clinical evidence (how well the medicine or treatment works) and economic evidence (how well the medicine or treatment works in relation to how much it costs the NHS). The ABPI believes that NICE is applying arbitrary thresholds of 'cost-effectiveness' and, where there is uncertainty in the process, patients are often denied the benefit of doubt.

DAIRY PRODUCTS

AMERICAS: The US dairy trade deficit widens to more than $1 billion.

US dairy imports and exports rose to record levels in 2005 whilst the trade deficit widened to more than $1bn. The growth in exports was driven by strong global demand for skimmed milk products; the US was the only significant exporter with surplus stocks. The value of cheese imported increased 3.7% to $1,006m, more than three-quarters of which originated in Europe. The growth in artisanal cheese making, especially in key dairy states such as Wisconsin, is further evidence of growing demand for quality products in this sector.

JAPANESE RETAILING

ASIA: Ageing population will impact the structure of Japanese retailing.

The Nomura Research Institute recently reported that the Japanese retail industry was approaching its fifth significant 'turning point' since the Meiji restoration. This will be instigated, inter alia, by demographic factors ( ageing population, declining birthrate), polarising incomes and planning reform. It was found that the 'seniors' market is less inclined to travel to shop for specialist and luxury items and is more attracted to the concepts of leisure pursuits and safety. The neighbourhood shopping centre was identified as a key beneficiary.

MANAGEMENT CONSULTANTS

EUROPE: UK public sector expenditure on management consultants continues to grow.

The UK Management Consultancy Association has published figures showing that public sector expenditure on management consultants increased by 23% in 2005 to £2.2bn. The wider drive to contract out services by local and central government and their agencies has been estimated to lead to an outsourcing market that will be worth £64bn by 2009. This is, however, not a risk free environment; Accenture recently quit the controversial NHS IT modernisation project and, in the process, made a provision of £240m against potential losses.

ALCOHOLIC DRINKS

ASIA: The Chinese beer market is huge but far from homogeneous.

China became the largest beer market by volume in 2003 and is expected to show future growth of c.10% per annum; per capita consumption is, however, still low compared to that in Europe and the USA. InBev have forecast that "In the coming 10 years, half of the world's demand for beer will come from China."

It is important to note that the Chinese market is not national but an aggregation of local markets with specific regional variations and preferences. This is reflected in the dominance of local brewers some of whom are protected by anti-competitive legislation preventing the sale of non-locally brewed beers.

Although the vast majority of global players are represented, primarily through production and distribution joint-ventures, premium international brands represent only 3% of the market.

INSURANCE

EUROPE: MiFID offers both opportunities and burdens.

The Market in Financial Instruments Directive (MiFID), to be implemented in November 2007, aims to create a single market for financial services in Europe. Amongst its myriad aims are the creation of genuinely competitive and consistently well regulated markets for financial services throughout the EU.

Although implementation raises significant IT and Compliance burdens it will be important to focus equally on the business opportunities that are offered.

The EU Commission and national regulators envisage that most benefit will accrue to the prime movers. The predicted advantages are the ability to distribute products into other national markets and the uniform regulatory landscape and its concomitant reduction in the costs and difficulties of doing business in non-native markets. However, there is a feeling that it will be hard for retail-focussed institutions to gain significant advantages in the short-term as existing distribution channels will continue to predominate.

M&A ACTIVITY

BRIC: BRIC corporations to significantly increase their impact on global M&A activity

In a PwC study of 1,410 CEOs released earlier this year, nearly 71% indicated that they planned to expand operations in BRIC countries over the next three years.

What is becoming very evident is the increase in high-profile cross-border acquisitions by BRIC domiciled corporations.

In December 2004 Lenovo (China) announced the $1.75bn acquisition of IBM's PC division. Two other significant Chinese acquisitions of US entities failed - CNOOC's offer for Unocal and Haier's offer for Maytag.

Aecelor attempted a white-knight merger with Russian steelmaker Severstal to fend-off the attentions of Mittal Steel. Severstal, together with fellow Russian steelmaker Evraz, Brazil's CSN and Gerdau and Tata Steel of India have all been proposed as potential acquirers of Anglo-Dutch Corus.

The board of Canadian Inco recently recommended that shareholders accept the $17bn offer from Brazilian Companhia Vale do Rio Doce.

These are by no means the only deals, successful or otherwise, to have emerged and I would suggest that it is a phenomenon that will have an increasing impact on global M&A statistics.