Jan 15, 2013

Multinationals aim for sweet success in Myanmar

Multinational confectionary companies are looking to satisfy Myanmar’s sweet tooth as retail growth rates in developing countries are forecast to greatly outpace developed markets.

The Dutch-Italian merger Perfetti Van Melle announced on November 20 that it would enter Myanmar with the help of market expansion services group DKSH.

“We are very proud to be working with Perfetti Van Melle in bringing their renowned brands at affordable price to the people in Myanmar,” Preman Mahaldayuan, general manager of Business Unit Consumer Goods at DKSH Myanmar, said in a statement issued by DKSH at the time.

Perfetti Van Melle was formed in March 2001 through a merger of Van Melle of the Netherlands and Prefetti of Italy. In 2006 the company acquired the Spanish lollipop brand Chupa Chups and the Smint line of mint flavoured candies. This addition made the company the world’s third largest confectionary group.

Along with Chupa Chups and Smint Prefetti, Perfetti Van Melle produces and distributes recognisable products such as Airheads taffy and the Fruittella line of chewy candies.

Luca Parodi, executive vice president of Perfetti Van Melle Asia Pacific, told The Myanmar Times on January 8 that the company’s products have been available in shops in major cities throughout Myanmar since late December 2012. He said that he was pleased with the initial results.

“At this stage we have launched a very limited number of brands and stock keeping units. We want to get a better understanding of the market first before proceeding in planning a wider assortment,” Mr Parodi said.

Perfetti Van Melle has a nearly 30 percent market share in neighbouring India and subsidiaries operating in both Vietnam and the Philippines.

“There is definitely a focus on ASEAN but with different approaches and strategies in the various markets. From a manufacturing point of view obviously we look at ASEAN as a whole, having clear benefits in sourcing from plants located in this area,” Mr Parodi said.

Mr Parodi said Myanmar’s lack of trade infrastructure is an obstacle to the distribution of a larger product range, but also said that a measured approach would best fit the company’s strategy.

“Of course we plan to grow further also by enlarging the product portfolio but I believe at the moment we need to work on a basic stage first with a limited assortment, with clear focus,” Mr Parodi said.

One major transportation hurdle that Perfetti Van Melle has managed to avoid is the need for refrigerated shipping. The company’s confectionary sugar and gum based products are less susceptible to Myanmar’s tropical heat.

“Myanmar is a very potential market for confectionery products like ours, which do not require a cold chain in distribution and have affordable prices,” Mr Parodi said.

Food giant Nestlé, the maker of KitKat, Butterfinger and Smarties – along with a host of other candy products – upgraded its representative office in Myanmar last year in anticipation for an uptick in business.

According to a company spokesperson, Nestlé works with a number of local distributors who import products directly from other countries, mainly within the ASEAN region.

The company scaled back advertising and marketing in Myanmar during the period of economic sanctions but never fully left, maintaining a small office in Yangon.

Nestlé has kept a low-profile regarding its future plans for Myanmar, choosing not to comment on possible expansion.

But the company’s 2011 annual report shows Nestlé saw 13pc organic growth in emerging markets, where 40pc of the company’s sales were recorded. The growth was driven in part by super consumers India and China’s seemingly insatiable appetite for chocolate.

For both Nestlé and Perfetti Van Melle, growth in developing countries such as Myanmar is promising.

According to data published by market research group Euromonitor International on December 10: “Retail growth for confectionery in emerging markets is expected to be three times faster than that of developed regions from 2012 to 2017.

“[…]In absolute value terms, some 77pc of global growth will stem from developing markets.”

Source: Myanmar Times