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Emerging markets remain at the forefront of strategic planning amongst the world’s leading alcoholic drinks companies. Faced with moribund prospects in the traditional bastions of Western Europe and North America, industry leaders are increasingly looking East and South. Moreover, they are not just shipping more products to Asia Pacific, Latin America, Eastern Europe and Middle East and Africa. Rather, going local is very much the order of the day.
In beer, for example, Anheuser-Busch InBev has announced that it is set to further consolidate its position as the leading global brewer with the acquisition of the remaining 50% share in Grupo Modelo, the largest Mexican brewer, for US$20.1 billion. The deal will significantly enhance A-B InBev’s already dominant position in Latin America, complementing its strong foothold in Brazil with one in Mexico, the second largest market in the region.
A-B InBev, just like other major brewers, has been looking to increase its presence in high-growth emerging markets, and the Mexican market offers potential for the company as beer volumes are forecast to increase by over one billion litres (3% CAGR) over 2011-2016 thanks to economic development and growing disposable incomes. Competition, however, is intensifying in the market as Heineken became the second largest brewer in 2010 following its acquisition of Modelo’s major rival FEMSA, and is committed to consolidating its position.
International spirits companies’ interest in emerging markets also continues to grow strongly. Many are now looking to acquire local spirit brands as a means to become more thoroughly embedded. The most active multinational player in terms of moving into local spirits has been Diageo, which in 2011 developed its own Indian whisky brand (Rowson’s Reserve), acquired the local Turkish spirits giant Mey Içki and gained a majority stake in the Chinese baijiu producer Sichuan Quanxing. In 2012, it has so far purchased Ypióca, the Brazilian cachaça producer. It is also rumoured that the company is set to acquire at least large minority stakes in Grupo Cuervo and United Spirits, UB Group’s spirits division.
Meanwhile, Rémy Cointreau is considering developing a premium local Indian brandy. So long as mature Western economies continue to hold back overall growth for the likes of Diageo and Rémy Cointreau, we can expect such activity to continue. However, entry into local emerging market spirits categories will remain limited, at least initially, and focused on specific economies such as the major growth markets of India, Brazil and China.
Eastern Europe may also represent an opportunity for the expansion of non-traditional spirits. For example, Irish whiskey is moving strongly into the likes of Russia and Czech Republic, and generally surpassing previous growth expectations.
Elsewhere, cider has retained, and indeed further solidified, its booming growth in South Africa. In wine, a number of international players continue to make significant gains in Asia Pacific. As discussed in the global briefing Wine: BRICs and the Western Wall of Maturity, the rapid rise of China’s middle classes continues to have global repercussions for the wine industry.
Regardless of the category, emerging markets are now where it’s at for global alcoholic drinks. Industry leaders will need to adapt their strategies accordingly.