Milk drinks or noodles? Both are bigger in Asia, notably China, than other parts of the world. Better earnings from the former drove Want Want higher on Wednesday while Tingyi and Uni-President China, the noodle kings embroiled in a price war, both slipped. Step back however and all three have more in common than their snack specialities suggest. They all enjoy high valuations and face slowing organic growth.
Growth in sweets and chocolate sales has dropped below 10 per cent for the first time in a decade, according to Standard Chartered. Growth in instant noodle consumption per capita is heading the same way, having been nearer 20 per cent three years ago. Juice drink sales are rising at less than half the rate three years ago. There are various explanations including China’s slowing economic growth and a rise in health consciousness among its 1.3bn consumers (bottled water sales are still rising 16 per cent a year).
Yet all three companies are trading on between 26 and 28 times expected earnings – a premium to European and American rivals such as Nestlé and Kraft Foods on 19 and 17 times respectively. None of those sector growth rates are a disaster for the Asian snack groups. But they will face pressure to justify ratings more usually equated with Hermes or Michael Kors than companies battling over beef noodles, chocolate milk and rice crackers.