[Kabar-indonesia] Fund View: Emerging market food habits offer opportunities

[Joyo at aol.com]

FUND VIEW: Emerging market food habits offer opportunities

By Sujata Rao

LONDON (Reuters, Fri Sep 1, 2006) - As middle class incomes in emerging 
economies increase and spending on food rises an entirely new spectrum of 
investment opportunities is opening up, Citigroup's wealth management arm said on 
Thursday.

Chief global investment strategist Clark Winter said in a note the burgeoning 
middle class of China, India and Latin America was already boosting demand 
from retail food outlets as well as demand for new dietary and agricultural 
products.

"As the middle class in emerging markets grows and prospers nutritional 
habits are changing. Higher incomes and urbanization have contributed to healthier, 
more varied diets, as well as to a greater emphasis on convenience and 
packaged foods," he said.

"Given this changing landscape we think investors have an entire menu of 
investment opportunities on which to feast."

Winter identified investment opportunities in supermarket, food manufacturing 
and logistics companies in several developing countries, including China, 
Mexico, Brazil, India and Indonesia.

"The power of the urban middle class is visible across the globe," he said.

In an example of how people are spending their food dollars differently, 
Winter said the market for packaged foods will grow 32 percent between 2000 and 
2010.

"When disposable incomes increase in developing markets, consumers show a 
tendency to trade up the food-value chain, buying branded packaged goods," he 
added.

China in particular will emerge as one of the world's largest consumer 
markets by 2025, and double-digit annual economic growth has already been reflected 
in a 50 percent jump in meat consumption in the past decade.

Citigroup forecasts Chinese food spending to rise 6.7 percent annually over 
the next 20 years.

In Latin America, sales of packaged foods are growing at 7 percent a year, 
more than double the U.S. rate. In countries like Mexico the change is being 
driven by higher disposable incomes, modern retail outlets and falling interest 
rates.

Apart from the most obvious plays such as large supermarket chains which are 
expanding aggressively in emerging countries, Winter highlighted logistics 
firms involved in storage and distribution as another option.

He forecast food retailing and distribution store growth of between 300 and 
1000 percent in the next 20 years, estimating the number of supermarkets would 
have to increase fortyfold in China just to match the number in the United 
States.

In Mexico, supermarkets account for over half of all retail food sales, 
compared with less than 5 percent in the mid-1990s.

Consumer goods companies will also be a good play, with even larger 
multinationals delving further into emerging markets to offset sluggish growth in the 
mature developed economies.

Other sectors identified included food processing and packaging machinery, 
trucking and refrigeration services as well as infrastructure, biofuels and 
kitchen equipment.

Winter said palm oil, increasingly chosen over lesser-quality fats, also 
presented an interesting opportunity,

"We think prospects for crude palm oil are attractive in 2007, considering 
that worldwide demand is expected to outpace production," he said, noting for 
instance that Chinese per capita consumption is still half that of developed 
countries.

But drought, floods, pests and disease pose potential downside risks to an 
otherwise rosy scenario, the report warned.

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Joyo Indonesia News Service
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