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208 posts categorized "Alcoholic Drinks"

April 15, 2014

Diageo Makes Offer for Controlling Stake in United Spirits

Andy TivertonBrownAnalyst Insight  by Andy Tiverton-Brown - Head of Alcoholic Drinks and Company Analysis

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Diageo’s renewed offer to gain a controlling interest in United Spirits confirms its commitment to emerging markets, following a spate of acquisitions over the last 5 years securing access to local brands and all important routes to market. Initial results have been mixed, with sales in the six months to December 2013 softening below expectations, this however is part and parcel of operating in changeable immature markets, over the long term given demographics and economic development this has to be the right strategy.  

Diageo became the largest shareholder in United Sprits in 2012 acquiring a 28.8% stake, exerting considerable influence and gaining a controlling interest has long been anticipated. The attraction for Diageo is clear, by volume India is globally the second largest spirits market behind China and is forecast to experience a 3.5% CAGR between 2013 and 2018, accounting for over 15% of global volume growth. In Diageo’s key whisky category the argument is even more compelling, India is the world’s largest market by volume, almost four times larger than the US in second place. Granted, the vast majority of these sales comprise of low cost local whisky, but there is clear demand for higher value scotch and this will be realised as economic growth continues.  In 2013, only 5% of Indian households had an annual disposable income of over US$10,000, but this still equated to 74million, by 2025 this is predicted to increase to 195million.   

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April 10, 2014

Whiskies: What Does the Future Hold? A Category Snapshot

Spiros_MalandrakisAnalyst Insight by Spiros Malandrakis - Senior Alcoholic Drinks Analyst

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Scotch Whisky Galore

The golden era of Scotch is now in full swing.  The introduction of a stringent and costly if essential and long overdue verification scheme will tighten production methods, cement the category’s clout and draw a line in the proverbial peat for the waves of adulterated and counterfeit products hitting still insatiable emerging markets.

Increased production capacity, ambitious investments and the re-opening of once mothballed distilleries will keep underscoring key players’ resolve while providing a hefty measure of confidence for the category’s long term prospects in the face of on-going developing market volatility.

Immersive retailing ‘embassies’ incorporating local cultural nuances such as the ‘House of Diageo' in Seoul will spearhead the premiumisation offensive while an irreverent reimagining of positioning and promotional campaigns – such as Ballantine’s on-line only feature showcasing a skateboarder interpreting Carmen- will target members of the ever elusive millennial generation in the west.

Rapidly diminishing stocks, a sense of urgency and increasingly more adventurous and irreverent distillers will bring the no-age experiment to the fore. Following the Macalan’s colour coded launches, Glenfiddich’s special cask expressions and Talisker Storm’s embrace of a strong narrative over clinically conservative maturation dates, Scotch will finally get some room for experimentation. Even more leftfield, controversial or niche products like premium single grain or Kosher certified offerings will complement fresh approaches to tasting such as food pairing initiatives. 

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April 1, 2014

New Law in Czech Republic May Raise Spirits Prices

A new law targeting the labeling process of spirits in the Czech Republic was introduced in December 2013, requiring spirits containing over 20 percent alcohol to be labeled with a ‘control strip’, indicating it was produced or imported into the country. The law aims to crack down on illicit liquor, which was responsible for 48 deaths in the country in September 2012.  after methanol was found in certain spirits. The law could have significant impact on small spirits producers who will have to pay registration fees for the control strips and may lead to an increase in spirits prices overall.

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March 25, 2014

Industry Impact of Revised Excise Tax on Alcoholic Drinks in Lithuania

Eurolithuania_Roberta.Kniuipyte_LThumbWith Roberta Kniuipyte, Senior Research Analyst

A revised excise tax for alcoholic drinks in Lithuania is set to begin on April 1, 2014, increasing taxes on wine by 14 percent, beer by 10 percent and spirits by 1 percent. This is good news for the spirits industry, as taxes on spirits will be raised the least, therefore making spirits more affordable to consumers. However, the flow of illicitly traded alcoholic drinks may increase in the country due to the new taxes, which are set to be revised and most likely increased again in 2015.

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Naujų akcizinių mokesčių įtaka alkoholinių gėrimų vartojimui Lietuvoje

Eurolithuania_Roberta.Kniuipyte_LThumb

Roberta KniuipytėVyresnioji rinkos analitikė

Nuo šių metų balandžio 1 d. Lietuvoje įsigalios alkoholinių gėrimų akcizų pakeitimai. Didindama akcizinius mokesčius, Vyriausybė siekia išlyginti apmokestinimo skirtumus tarp skirtingų alkoholinių gėrimų kategorijų. Vyresniosios rinkos analitikės Robertos Kniuipytės teigimu, naujieji akcizai paskatins pirkėjus persiorientuoti nuo silpnųjų alkoholinių gėrimų prie stipriųjų ir turės įtakos dar didesniam nelegalios alkoholio rinkos augimui šalyje.

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Suntory/Beam – Significant Problems to Overcome to Make it a Success

Jeremy_Cunnington0Analyst Insight by Jeremy Cunnington - Senior Alcoholic Drinks Analyst

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Following Beam’s special shareholder meeting today, Suntory will now assume control of Beam. However, the key question is, how can this Japanese company with such huge debts make the acquisition of a company with serious weaknesses, such as a narrow geographical spread and 40% of its portfolio accounted for by low value and low growth brands, pay off?

Suntory will inherit some good brands, such as Jim Beam, Sauza, Courvoisier and Maker’s Mark, but it will also inherit a large number of brands such as Larios Gin, DYC and Windsor Supreme which are at best stagnating and in many cases seeing volume declines, as well as having lower profitability. Such brands account for over 40% of Beam’s portfolio.

While Japanese-centric Suntory has become more internationally focused through this acquisition, it will still be reliant on a small number of markets due to Beam’s narrow focus. 73% of volumes will come from two markets, the US and Japan, with the next three biggest, Spain, Mexico and Canada, accounting for a further 13%. Only 9% of volumes will derive from emerging markets, with a large proportion of this coming from Mexico, where Beam has been performing poorly thanks to high volumes of low-growth brands.

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March 20, 2014

Wine - Key Trends for the Year Ahead

Spiros_MalandrakisAnalyst Insight by Spiros Malandrakis - Senior Alcoholic Drinks Analyst

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Flux, Turmoil and Equilibrium

While hysterical proclamations suggesting the imminent breakdown of supply lines and production capabilities under the enormous – and all too real - weight of emerging market consumption growth will continue to provide material for panic-stricken headlines, a tight equilibrium remains the most probable and realistic scenario in the short to medium term. There will be no wine shortages.

China’s terrestrial gravitational pull will inevitably exert severe pressure on existing stocks and vineyards, but production does not merely remain static. As wine consumption continues to shift eastwards, wine production will continue to expand northwards, both as an indirect reaction to creeping climate change and due to blooming if still embryonic industries in emerging markets themselves.

However, profit margins will have to face a different kind of problem. Expected macroeconomic ripple effects emanating from the imminent unwinding of the massive US stimulus programme will be hitting the shores of a large number of emerging nations, with severe exchange rate volatility raising its ugly head again after years of relative calm.

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March 12, 2014

Campari Boosts Whisky Portfolio with North America Centric Acquisition

Jeremy_Cunnington0Analyst Insight by Jeremy Cunnington - Senior Alcoholic Drinks Analyst

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Campari’s €121 million acquisition of Forty Creek Distillery is an attempt to boost its range of whiskies, primarily in North America by buying into the resurgent Canadian whisky category. The acquisition will have the immediate effect of boosting the company’s position in Canada, an increasingly important market following its acquisition of Appleton rum. More importantly though it will allow it to exploit its existing strong distribution in the US to boost the brand’s presence in the largest and fastest growing market for the category. Despite this, Campari still has gaps in its whiskies portfolio to fill.

Stronger in North America

Canadian whisky is sold predominantly in two markets, the US and Canada, accounting for 78%  and 16% of global volumes respectively. These two markets are also the key growth drivers of the category with provisional Euromonitor data indicating that North American volumes of Canadian whisky will increase by 2% CAGR (20 million litres) between 2013-2018, with the US accounting for 95% of that growth. As in bourbon/other US whiskies the category is being driven by flavoured variants as well as more premium offerings such as Forty Creek.

The region, and in particularly the US, is key to the prospects of international spirits companies due it is premium nature. It accounts for 9% of global volumes but 16% of global value sales. Campari’s primary strength in the US, which accounts for 90% of Campari’s regional volumes based on brands such as Skyy vodka. However, this is down from 95% prior to its 2012 acquisition of Appleton Rum which more than doubled Campari’s volume share of the Canadian market to 3%. This acquisition will boost that share in the short term, so much so that it has enough strength to set up its own distribution operations in Canada in 2015. More importantly with Campari’s increasing strength in the US, where it is the country’s ninth biggest player with a 2.5% volume share it should be able to exploit the dynamic growth of Canadian whisky in the US.

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February 28, 2014

Global Brewers’ 2013 Performance: Champions and Disappointments

Amin AlkhatibAnalyst Insight by Amin Alkhatib - Alcoholic Drinks Analyst

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According to Euromonitor International, global beer value and volume sales grew by 7% and 2% respectively in 2013, reflecting a trend towards net revenue outstripping volume sales. However, the growth in global volumes was not reflected in the performance of the top four brewers, as much of the growth was derived from the low-base development of smaller brewers, and growing demand in China. Global Brewers’ performance in 2013 was mixed, as A-B InBev observed strong margins and revenue sales growth, albeit with some volume decline. Conversely, Heineken NV slumped in some of its key performance indicators. Across the board, there was a decline in global volumes for the big four brewers.

A-B InBev’s global beer performance in 2013 was strong relative to the next three top brewers. However, the company’s performance in volume terms was drastically affected by regulatory changes in Russia and political instability in the Ukraine, resulting in a consolidated 16% decline in these two markets. In addition, two of its key markets, the US and Brazil, witnessed weak economic conditions, which placed pressure on disposable incomes, witnessing a decline of around 3% each in volume sales. Despite all of this, such drastic declines were reduced by a 9% volume sales gain in China during 2013.

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February 21, 2014

Blue Point Brewery: Will A-B InBev be Able to Sell its Craft Image?

Amin AlkhatibAnalyst Insight by Amin Alkhatib - Alcoholic Drinks Analyst

View Amin Alkhatib's profile on LinkedIn

Craft beer purists would be expected to be worried upon hearing about the acquisition of the oldest craft brewer in Long Island, the US, earlier this month. Blue Point Brewing Company, famous for its Toasted Lager brand, has been purchased for a reported US$24 million by Anheuser-Busch InBev. Thus, there will be concern among craft enthusiasts that some of their favourite tipples could become mass-market and ‘watered’ down versions.

The purchase of over a 25% stake in a craft brewer by a non-craft brewer means that Blue Point now falls outside the Brewers Association’s definition of an independent craft beer maker. The general definition of the Brewers Association stipulates three main characteristics - small, independent and traditional. This acquisition will put an end to the brewer’s independence but how much of an impact will it have on its volume sales?

Continue reading "Blue Point Brewery: Will A-B InBev be Able to Sell its Craft Image?" »

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Recent Posts

Diageo Makes Offer for Controlling Stake in United Spirits

Whiskies: What Does the Future Hold? A Category Snapshot

New Law in Czech Republic May Raise Spirits Prices

Industry Impact of Revised Excise Tax on Alcoholic Drinks in Lithuania

Naujų akcizinių mokesčių įtaka alkoholinių gėrimų vartojimui Lietuvoje

Suntory/Beam – Significant Problems to Overcome to Make it a Success

Wine - Key Trends for the Year Ahead

Campari Boosts Whisky Portfolio with North America Centric Acquisition

Global Brewers’ 2013 Performance: Champions and Disappointments

Blue Point Brewery: Will A-B InBev be Able to Sell its Craft Image?