Suntory Beverage & Food reports decline in APAC health supplement business amid inflation woes

By Tingmin Koe

- Last updated on GMT

Suntory Beverage & Food has reported a decline in its health supplement business in Asia-Pacific due to inflation during Q1 this year. ©Getty Images
Suntory Beverage & Food has reported a decline in its health supplement business in Asia-Pacific due to inflation during Q1 this year. ©Getty Images

Related tags essence of chicken BRAND's Suntory Suntory Beverage & Food

Suntory Beverage & Food, the company behind health supplement product Brand's Essence of Chicken, has reported a decline in its health supplement business in Asia-Pacific (APAC) as a result of inflation during Q1 this year.

The Japanese brewery giant, which also runs a beverage and health supplement business, said that revenue from APAC was up 1.7 per cent on a currency neutral basis to JPY$89.9bn (US$659m).

APAC ranks second in terms of revenue contribution to the firm, while the domestic market took the top spot with a revenue of JPY$145.8bn (US$1.07bn), which was an increase of 8.8 per cent as compared to last year.

However, segment profit in APAC was down 6.8 per cent on a currency neutral basis to JPY$11.8bn (US$86.5m), “due to the significant impact of negative revenue growth in the health supplement business,”​ said Noriaki Otsuka, managing executive officer, division COO during the financial results presentation.

Its health supplement business reported a 17.7 per cent decline on a currency neutral basis to JPY$8bn (US$58.6m).

One of the reasons behind the decline in APAC’s health supplement business, was the impact of inflation, which particularly affects higher-priced and high-value added products, the firm said.

“While overall revenue in APAC was strong in the first quarter, one of the factors behind the decline in segment profit was the health supplement business.

“The products in this business are relatively high priced, and the Thai market itself has not fully recovered due to inflation,” ​Otsuka said in response to questions from analysts.

BRAND’S Essence of Chicken is one of the flagship health supplements for the firm in the APAC region, especially in markets such as Thailand and Taiwan.

The firm has double down on the marketing activities for the product since last October.

“We will rebuild the health supplement business under a favourable external environment going forward. We are aware of the risk of a GDP slowdown in Vietnam, but we do not currently expect any immediate major impact,” ​Otsuka added.

In Vietnam, the firm is seeing “robust growth”​ in its beverage business led by energy drink brand Sting and tea beverage brand TEA+.

Similarly in Oceania, the firm is seeing growth from its energy drink brand V.

Japan functional drinks sales up, foot traffic returns

Back home in Japan, the firm said sales volume of its Foods with Function Claims (FFC) and Food for Specified Health Uses (FOSHU) drinks were up 55 per cent in Q1 this year to hit a volume of 8.3 million cases.  

The bestseller was Tokucha – a FOSHU drink that contains quercetin glucoside, a type of polyphenol commonly found in vegetables and fruits such as onions, broccoli, and apples.

The FFC drinks Iyemon Koi-aji (Dark flavor) and Oolong Tea also contributed to sales growth, the firm told NutraIngredients-Asia. ​However, no new FOSHU or FFC were launched in the first quarter of this year.

In Japan, most of these drinks are purchased through vending machines and CVS channels which have been affected by COVID-19 due to decline in foot traffic. However, the firm is seeing a rebound in foot traffic of late.

“We estimate that the supermarket and drugstore market was down about two per cent due to the reactionary decline from last year's stay-at-home demand, but we outperformed the market and last year.

“On the other hand, the CVS market is estimated to have grown about 3 per cent, and we grew in the mid-single digits, outperforming the market. While the overall vending machine market is estimated to be down one per cent, we were flat year on year.

“The channel mix has not improved dramatically, but the CVS and vending machine channels, which were severely impacted by the pandemic, are on the road to recovery and are supporting the Company's performance,” ​said Otsuka.

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