This article was originally published on SGX's investor education portal, My Gateway, and is republished with permission.
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As defined by the Global Industry Classification Standard (GICS®), the Packaged Foods and Meats sub industry is a key segment of the food Product stocks that make up the Consumer Staples Sector.
Industry Drivers
As Food&HotelAsia2016, IE Singapore, and the Singapore Manufacturing Federation noted earlier this year, Singapore's food and beverage (F&B) industry is transforming as manufacturers look towards innovation, growth, and internationalisation. Citing a report by Euromonitor (click here) these organisations also highlighted that Asia Pacific is also projected to have the second-highest growth rate for packaged foods in the next five years after the Middle East and Africa combined.
Global Comparisons in 2016 YTD
The 10 biggest Packaged Foods & Meats stocks in Singapore have averaged a 12.6% total return in the year thus far. This has been above the average total return of 8.9% for the world's biggest Packaged Foods & Meats stocks and 10.1% for Asia Pacific's biggest Packaged Foods & Meats stocks. These averaged total returns are dividend inclusive and based in Singapore Dollars. The year's performance contrasts with longer-timeframes which has seen Singapore's Packaged Foods & Meats stocks lag their peers.
10 Biggest Packaged Food Stocks - YTD Average Total Return
Of the 10 biggest Singapore packaged food stocks - Delfi, Japfa, Super Group, Yeo Hiap Seng and Del Monte Pacific, make up more than 90% of the 10 stocks' market capitalisation; in addition to more than 60% of the combined market capitalisation of the sub-industry. Market capitalisations range from S$1.5 billion to S$350 million.
Recent Innovative Initiatives
Extended, refined or redeveloped product lines have been a key aspect of recent innovative initiatives of Singapore's five biggest packaged goods stocks.
Delfi maintains that the key to innovation lies in developing new products and product extensions that meet consumers' desires - in addition to continually introduce new varieties of existing products and new packaging formats to cater to evolving tastes and preferences.
Bags of coffee beans in Super Group's warehouse in Johor, where it has a 3-in-1 coffee packaging plant. NextInsight file photo.Super Group maintain a focus on branding, product innovation and diversification and unveiled a new logo and brand identity in 2013. The company noted in its 2015 Annual Report (click here) that its food ingredients segment has provided the Group with a competitive edge with shorter lead time over product innovation and cost advantage over the production of branded consumer products.
Yeo Hiap Seng also noted in its Annual Report (click here) innovation has always been a key priority. In order to stay ahead of competition, the company has continued to explore ways to raise productivity, innovate and provide value-add to customers. In this regard, the company recently upgraded and expanded its Singapore retort canning line that produces noncarbonated Asian flavored drinks. In a kopi-C in June (click here), Mr. Melvin Teo, CEO of Yeo Hiap Seng noted that consumer tastes change very quickly, and many consumers are keen to experiment, so the company has needed to be more proactive in introducing new products.
Innovative fruit in cups: mandarin oranges in slightly sweetened coconut water. Photo: Del Monte
In their 2016 Annual Report (click here), Del Monte Pacific noted recent innovative initiatives including a healthier range of College Inn broth products, innovative Del Monte juices, innovative fruit in cups sold in the States packed in vegetable and fruit juice, a shift to non-GMO and non-BPA cans, S&W Organic Prune Juice and healthier snacking options for India consumers.
Japfa has also pursued innovation through three key areas of Research & Development (R&D) - feed technology, nutrition, and animal health (click here). In a kopi-C in April (click here), Mr. Tan Yong Nang, CEO of Japfa noted that the company is focused on bio-security, implementing stringent operating procedures while establishing strategic alliances with global leaders in breeding research - adding that - humans shower three times a day to get into a breeding farm, we have a team of vets and our own animal vaccination facility.
Internationalisation & Growth
An average of 84% of the revenue reported by Delfi, Japfa, Super Group, Yeo Hiap Seng and Del Monte Pacific was associated with Asia Pacific, compared to an average of 13% of the revenue associated with Singapore. On a market capitalisation weighted basis, 90% of the revenue report by the broader group of stocks that make up Singapore's Consumer Staples and Consumer Discretionary Sector was reported to Asia Pacific, with a market capitalisation weighted average of 52% reported to Singapore. This reflects the revenue diversity of Singapore-listed consumer stocks.
The five largest packaged foods stocks in Singapore that are covered by research analysts are Delfi, Japfa, Super Group, Del Monte Pacific and Indofood Agri. Bloomberg consensus estimates for the current Financial Year revenue of the five stocks is for an average of 6% and median of 5% increase in revenues from 2015. Note this is gross revenue and does not take into account operational costs.
To see more information on each of the Packaged Foods & Meats stocks in Singapore click on the stock name tabled below to see the full profile in SGX StockFacts.
As noted above the 10 biggest Packaged Foods & Meats stocks in Singapore have averaged a 12.6% total return in the year thus far.
Growth of Trading Activity in Biggest Packaged Foods Stocks
Of Singapore's five biggest stocks that represent the Packaged Foods & Meats Industry, four have seen significant increases in trading activity over the past 12 months. The biggest stock of the five, Delfi saw its daily turnover jump 74% in July 2016 from July 2015, and its best depth value jump 60.0%.
Best depth value represents the amount of potential trade size on the best prevailing bid and best prevailing offer price, averaged throughout the entire trading session. Rather than expressed in terms of the number of board lots - best depth value is expressed in terms of the dollar value of those board lots. The best depth value combines both the dollar size of the prevailing bid and the prevailing offer.
The five biggest stocks that represent the Packaged Foods & Meats Industry, averaged a daily turnover jump 144% in July 2016 from July 2015, which corresponded with their average best depth values jumping 170%. Japfa saw the biggest turnover growth of the five, with average daily turnover of S$1.9 million in July 2016, compared to S$403,000 in July 2015. The biggest growth in best depth value was observed by Del Monte Shares, with best depth value at S$380,000 in July 2016 compared to S$57,600 in July 2015.
Of the five next biggest stocks of the Packaged Foods & Meats Industry, four stocks also saw an increase in their Average Daily Turnover in July 2016, compared to July 2015.
