ASIA A MARKET OR A COMPETITOR

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ASIA - A MARKET OR A COMPETITOR?

• AVEEXPO
• FOZ DE IGUACU
• AUGUST 19, 2009

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CONTENT

• General Information
• The Giants
• Japan
• Thailand
• Issues

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I. GENERAL INFORMATION
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Population in 2009
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Population growth to 2025
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Global population and GDP
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14
3
17
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Protein production as of world
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SOURCE OF METHANE EMISSIONS
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Cow farts collected in plastic tank for global
warming study Scientists are examining cow farts
and burps in a novel bid to combat global
warming.   By Rupert Neate Published 243PM
BST 09 Jul 2008
Argentine scientists are strapping plastic tanks
to the backs of cows Photo REUTERS Experts said
the slow digestive system of cows makes them a
key producer of methane, a potent greenhouse gas
that gets far less public attention than carbon
dioxide. In a bid to understand the impact of
the wind produced by cows on global warming,
scientists collected gas from their stomachs in
plastic tanks attached to their backs.
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GROWTH IN EMISSIONS 2008 -2013
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OF WORLD IMPORTS
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CHINA IMPORTS - 1
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CHINESE IMPORTS - 2
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HONG KONG IMPORTS
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Asia as an exporter

• Chicken
• Thailand 370,000 MT to EU and Japan of cooked
• China 130,000 MT to Japan of cooked
• Pork
• China largest supplier cooked pork to Japan
• Beef
• India major exporter of beef (Buffalo) to Middle
  East

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II. THE TWO GIANTS
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COMPARISON OF THE TWO GIANTS
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DIFFERENCES IN THE INDUSTRY

• CHINA
• Fragmented no really big national company yet
• Sophisticated fast food chains in Metro China
• Exporter/Importer
• Has significant cooked capacity

• INDIA
• Two players dominate Suguna now 7.0 million
  birds a week
• Nearly all wet market
• Looking to be exporter to Middle East
• No Imports
• Very strong protectionist measures

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Many Small Farms
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and Small Processing Plants
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QSR Restaurants in China
Start in China KFC 1987, McDonald's 1990,Dicos
1994
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Shifts in consumer behaviour driven by income
Sales of top 100 chain stores as total retail
sales of consumer goods
Famous fast food chains extend their reach with
new outlets added
Source China Statistics Bureau and China
Chain-store Franchise Association
Source Annual Reports of Yum! and McDonalds,
and Website of Dicos

• Modern middle-class is too busy to cook
• Dining-out and fast food have become increasingly
  popular

• Chain stores play a significant rolein the
  consumer retail market

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Food expenditure accounts for the largest
proportion of disposable income
2005
Projected change inabsolute consumption(US
bil1)
Absolute growth,2004-2025(US bil1)
Productcategory
Education, Cultural and Recreation Services13.82
Housing 10.18
175
Food²
683
Miscellaneous3.50
Transport and Communications12.55
Healthcare and Medical Services7.56
Household Appliances and Services5.62
Food36.69
2004
Clothing10.08
1 Base case forecast, Q1 2006, 1 US RMBV 72
Figures do not sum to total because of rounding.
2025 (est.)
Source China Statistical Yearbook 2006
Source National Bureau of Statistics of China,
McKinsey quarterly
Food-related expenditure accounts forthe highest
proportion but will drop to 20 of total
expenditure in the next 20years
Size of food market for the next 20 yearswill
increase by over US 500 billion
In 2003 Brazil was 20.7 (Low 18 High 27)
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Four Developing Regions in China(2006 GDP per
capita 2,000)
Heilongjiang
Jilin
Xinjiang
Liaoning
Gansu
Beijing
Neimeng
Tianjin
Hebei
Ningxia
Shanxi
Qinghai
Shandong
Shanxi
Henan
Jiangsu
Xizang
Anhui
Shanghai
Hubei
Sichuan
Zhejiang
Jiangxi
Hunan
Fujian
Guizhou
Yunnan
Beijing, Shanghai,Guangzhou/ 7000 -12 growth
Guangdong
Guangxi
Taiwan
Eastern China /2400 10.9 growth
Guangzhou
Mid-China /1300 10.5 growth
Hainan
Western China /1000 9.5 growth
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Chicken per Capita Consumption in China
(broiler meat/ native chicken meat, kg)
Heilongjiang
Mid-China 3/4
Jilin
Xinjiang
Liaoning
Beijing
North China 8/1
Gansu
Neimeng
Tianjin
Hebei
Ningxia
Shanxi
Qinghai
Shandong
Shanxi
Henan
Jiangsu
Xizang
Anhui
Shanghai
Hubei
Sichuan
Zhejiang
Western China 2/3
Jiangxi
Hunan
Fujian
Guizhou
Yunnan
Guangdong
Guangxi
Taiwan
South-east China 4/8
Hainan
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Imported Chicken Meat Sales Areas
Jbo LQ/drumsticks
Jbo paws B
Heilongjiang
Jilin
Xinjiang
Liaoning
Beijing
Neimeng
Gansu
Jbo paws A/Jbo wing tips
Tianjin
Hebei
Ningxia
Shandong
Qinghai
Shanxi
Shanxi
Henan
Jiangsu
Xizang
Shanghai
Anhui
Hubei
Sichuan
Zhejiang
Jiangxi
Hunan
Fujian
Guizhou
Taiwan
Guangxi
Guangdong
Hainan
Yunnan
Large/small paws/Small wing tips
Small LQ/drumsticks
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REASON FOR RAPID GROWTH

• IN 1980 RURAL/URBAN RATIO 80/20
• IN 2005 CHANGED TO 68/32
• RURAL POPULATION CONSTANT AT 800 MILLION FOR 25
  YEARS
• URBAN POPULATION GREW FROM 200 TO 500 MILLION

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TOGETHER WITH DIET CHANGES

• IN 1930 97 CALORIE INTAKE WAS FROM PLANT BASED
  FOODS
• BY 2002 THIS DROPPED TO 63

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JAPANTHE NUMBER ONE IMPORTER OF ANIMAL PROTEIN

• OVER US 8 BILLION PER ANNUM
• US 4 BI PORK, 3 BI BEEF, 2 BI CHICKEN

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Self sufficiency beef
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Self sufficiency pork
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Self sufficiency chicken
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Japan chicken imports 000 MT
Source Japanese customs data
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Japan raw imports 000 MT
Source Japanese customs data
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Japan cooked imports 000 MT
Source Japanese customs data
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Japanese Issues

• Declining and ageing population
• If Japan were to open up raw imports again to
  Thailand, Brasil would lose up to 50 of its
  exports to Japan.
• This would be equivalent to LEGS FROM ABOUT 5 TO
  6 MILLION BIRDS PER MONTH

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Demographics Japan
127 million today 118 million in 2025
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Demographics Japan
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THAILAND The only real competitor (in some
markets)
Exports in 000 MT
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TYPICAL THAI BROILER FARM FOR EXPORT
WITH ACP AUDITING NOW OBLIGATORY FOR EXPORTS TO
UK, THAI BROILER GROW OUT AMONGST MOST BIO SECURE
IN WORLD
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DETAILS OF BROILER HOUSES Width 12 meters,
length 120 meters(1,440 sq.meters) 1 Farm 16
houses (11 farms 174 houses)
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Three main issues for Asia

• Bio Security
• Food Safety
• How to Grow

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The Two Extremes
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Grading of Chicken before Marketing
Brooding
Unload from Car
Live chicken Marketing door to door
Live chicken Market
Traditional defeathering Machine
Broiler Sales Centre
Broiler Sales Centre
Floor Rearing
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Loss of Chinese market share
Source Japanese customs data
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SOY VS HOGS

• VOLUME OF SOY

• NUMBER OF HOGS

CHINA TAKES 50 OF WORLD SOY EXPORTS
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China Where will the feed come from?
POPUL./WATER BRASIL 3/13 USA 5/6 ÍNDIA 18/3
TOTAL ANIMAL PROTEIN 30
Source USDA,Economic Research Service
calculations using USDA AND FAO.
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CONCLUSIONS

• Asia is obviously more of a market than a
  competitor.
• How much will be animal protein and how much
  vegetable protein will depend on Asian countries
  strategic decisions
• Fine line between cheaper food (imports) and
  employment for rural labour
• OBRIGADO