Upsurge Seen In Food & Beverage Sales

The country’s food and beverage industry will benefit strongly from rising consumer spending on the back of expected high economic growth rates in the coming years, says a first quarter sector report by market intelligence firm Business Monitor International (BMI).

With an average annual real GDP forecast of 7% between 2011 and 2015, Ghana is one of 7 African countries in the top-bracket of the world’s fastest-growing economies for the next half-decade, according to IMF estimates – and this growth is expected to be driven significantly by rapidly rising household spending.

Private consumption expenditure on final goods and services – at nearly GH¢30 billion – already constitutes 67% of estimated GDP for 2010, and has been increasing in real terms by more than 4% on average each year since 2006.

“Ghana’s domestic demand story looks increasingly exciting,” the report said. It forecast: “BMI has been putting forward a strong consumer view on Ghana, with its food and drink industry emerging as arguably West Africa’s most promising long-term prospect. We see key food and drink consumption indicators spiking considerably over the coming years…”

Industry data cited show per-capita food consumption went up by 5.69% in 2010 and will reach 84.19% growth by 2015. Additionally, the volume of beer sales, which rose 4.51% last year, is forecast to jump by more than half in the same period; meanwhile, mass grocery retail sales are seen quadrupling in the next five years.

These trends present opportunities for strong sales and earnings growth, especially for established consumer-goods companies as the fruits of breakneck economic growth continue to kick-in, the report emphasised.

Notable company trends include the continued resilient performance of dairy products maker, Fan Milk Ghana Limited, whose latest earnings update reveals strong revenues and profits, as well as a more than 10% year-on-year increase in earnings-per-share.

But breweries, owing chiefly to surging production costs, have faced difficult times despite growing revenues and sales. However, the new spurt of growth amid macro-economic stability should tame the cost situation and generate improved financial outcomes for beer makers.

Describing the economy as a most well-rounded and equitable growth prospect even before the more than 70% upward revision of nominal GDP, the outlook, the report said, now looks even better with the attainment of the important middle-income milestone.

“Given the strength of its economic outlook and the fact that its business environment is fairly attractive by regional standards, Ghana looks increasingly competitive as a destination for multinational consumer-facing investment, with many of the world’s biggest firms looking to increase their African exposure,” BMI analysts reported.

One of such ventures is Wilmar Africa Limited’s near-complete acquisition of Unilever’s cooking-oil business (which includes the latter’s shares in Benso Oil Palm Plantation) as the agribusiness giant aspires to develop a fully-integrated oil palm business – from plantation development to the distribution of high-quality refined edible oil – in Ghana and the sub-region.

Improvements in the climate for doing and facilitating business should help to address any risks to the outlook, with the report pointing out that infrastructural bottlenecks and the less-than-favourable supply of electricity must be tackled to bring down the cost of doing business.