:. Food Industry News


Japan's Ito En Slashes Outlook, Blames Weak Demand

Source: Reuters
03/12/2008

Tokyo, Dec 3 - Japan's biggest maker of bottled tea drinks, Ito En Ltd, slashed its profit outlook far below the market view on Wednesday, hurt by weak consumer spending and higher marketing costs amid fierce competition.

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"This year's hardship in the beverage market has been brought on not only by the (tough) economy but also by the weather," Ito En CEO Hachiro Honjo told a briefing, saying an unseasonably cool summer sapped demand for soft drinks.

The company, which sees Japan's overall beverage market shrinking about 1 percent this year, said it would increase spending on marketing at the expense of profit to gain market share.

The seller of "Oh i ocha" tea drinks said it now expects net profit of 4.1 billion yen ($44 million) for the year ending next April 30, down 64.4 percent from the previous forecast and way below a consensus of 8.6 billion yen in a poll of 11 analysts by Reuters Estimates.

For the six months ended in October, the firm's main green tea drink sales rose only 1.7 percent, curbed by a slowdown in consumer spending, while it had initially projected 4.4 percent growth for the full year.

The firm was also hit by a steep fall in sales of its vegetable drinks, which it said had been affected by heightened consumer concerns about vegetables imported from China.

Helped by aggressive marketing efforts, Ito En has a share of over one-third of Japan's green tea drink market, which has grown nearly four times in the past decade.

Prior to the announcement, shares of Ito En ended down 1.8 percent at 1,334 yen, underperforming a 1.8 percent gain in the benchmark Nikkei average.



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