Sat, Jun 15, 2013 - Page 14 News List

Recent food scandals to hit food, beverage sector

By Kevin Chen  /  Staff reporter

The recent food scandals involving the use of potentially dangerous chemicals in several food products is certain to erode consumer confidence in the food and beverage (F&B) sector, affecting the sector’s sales outlook this year, Fubon Securities Investment Services Co (富邦投顧) said in a report released yesterday.

The impact could be bigger and could last longer than a food scare in 2011, when some beverage suppliers were found to have used plasticizer as a clouding agent, as the situation remains fluid and new information surfaces daily, the report said.

The report said both the F&B sector and convenience store operators were under sales pressure amid sliding consumer confidence after investigators last month found that several upstream food producers were selling illegal ingredients to middle and downstream producers.

These illegal ingredients include maleic anhydride-modified industrial starch, used in food starch products and industry-grade preservative EDTA-2Na.

The starch was used in a number of food products, including tapioca balls, hot-pot ingredients, rice noodles and tofu puddings.

“The F&B sector will remain under pressure until the investigation is completed,” Fubon Securities analyst Chloe Wu (吳家瑋) said in the report. “Large national brands will remain the first choice for consumers.”

Last week, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said in its manufacturing purchasing managers’ index (PMI) report that the latest food scandal had caused the sub-index for the food and textiles industry to fall the most among all the sub-indices.

In addition, a recent TVBS poll conducted between May 30 and June 3 showed that as many as 72 percent of respondents said they would dine out less due to the public health risk.

Fubon Securities did not estimate how the scandal would impact the nation’s GDP this year.

Government data showed that the nation’s food industry produced NT$635 billion of output last year, accounting for 4.5 percent of the nation’s GDP, while the catering and dining out sector generated NT$385 billion, or 2.7 percent of GDP.

However, Fubon said the impact on leading F&B firm Uni-President Enterprises Corp (統一企業) should be limited to less than 1.5 percent of the company’s F&B sales in Taiwan, or 0.15 percent of its consolidated sales.

The Greater Tainan-based company is expected to see higher earnings from this year through 2015 on the back of its enhanced its product mix and improved channel strategy in China, Daiwa Capital Markets said in a note on Monday.

In addition, profitability of the company’s non-F&B businesses, such as President Chain Store Corp (統一超商), ScinoPharm Taiwan Ltd (台灣神隆) and Ton Yi Industrial Corp (統一實業) are estimated to further improve over the next three years, Daiwa analyst Christine Wang (王琦清) said in the note.

Shares in Uni-President rose 0.69 percent to NT$58.3 yesterday.

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