Preview - Looking ahead but not looking forward to 2009

By | 22 January 2009

January may be the time to look forward to the coming year but few in the drinks industry will be eyeing the coming year with relish. However, given the pessimistic tone of virtually every market and economic forecast, it is hard to imagine 2009 being any worse than is being predicted. Olly Wehring offers his view of what's in store for the drinks market.

The beginning of a new year once again sees the publication of the Euromonitor International/just-drinks outlook for the coming year, which takes stock of the current state of play in the spirits, beer, wine and soft drinks sectors, and looks ahead to what promises to be an interesting year across all four categories. The expected activity in our industry, however, will play out against a background of economic gloom, which looks set to affect all areas of all businesses.

The spirits sector seems likely to be hit worst of all by the downturn. While consumers look to trade downwards, spirits brands that operate at the value end of the market could benefit from the penny-pinching. Spirits brands at the upper end, however, like Patron Tequila, remain confident that monied consumers will continue to spend no matter what. One other notable shift we can expect to continue into 2009 is the move away from the on-trade to at-home consumption as consumers look to economise.

Returning to spirits specifically, Pernod Ricard's successful pursuit last year of Vin & Sprit, which owns the Absolut vodka brand, shaped the spirits industry in 2008. The fallout of Pernod's victory will play out this year, with the French company expected to divest a handful of brands, including Plymouth Gin and Wyborowa vodka. Indeed, as this report went to press, Pernod confirmed the sale of Lubuski Gin to a subsidiary of German firm Henkell & Co. Sektkellerei, and Serkova Vodka, its vodka brand in the Greek market, to Amvyx SA, both for undisclosed sums.

In March of this year, French firm Rémy Cointreau is set to depart the global marketing and distribution alliance Maxxium. With Pernod buying V&S out of the venture, only The Edrington Group and Beam Global remain in Maxxium. With the two companies committed to running Maxxium under joint ownership, it will be an interesting 12 months for the venture.

This year looks set to be a period of calm in the wine sector, although Australia is likely to remain a hotbed of activity. In August last year, Constellation Brands said it intends to divest certain assets at Constellation Wines Australia and will implement changes to its wine portfolio and production footprint in the country. The initiative will involve the sale of three of its ten production facilities and more than 20 vineyard properties, consolidation of bottling operations and rationalisation of more than 30% of the company's Australian SKUs.

Foster's Group, meanwhile, is expected to announce the results of a review of its global wine strategy and operations by mid-February. While general consensus suggests the Australian beer and wine company may have to put its wine operations up for sale, finding a buyer may prove difficult in these troubled times.

The days of global acquisitions in the beer sector seem to be over, following last year's mega-purchase of Anheuser-Busch by InBev. While the Belgium-based company has said it is "contemplating disposals of certain assets to help re-finance the acquisition of Anheuser-Busch", the sorry state of the world's credit markets suggests that there are very few brewers with any money left to spend in 2009.

Despite this, a number of regional deals remain in the pipeline. Speculation suggests Anheuser-Busch InBev (as the company is now known) will offload its Oriental Brewery unit in South Korea. If Mexico's Grupo Modelo, in which A-B holds a 50% non-controlling stake, continues with its seeming objection to InBev's acquisition, we can also expect Mexico to provide some headlines this year. Modelo would be an attractive proposition for any brewers with money in their pockets, while its local competitor, FEMSA, would be under pressure to partner with a larger player were InBev to keep hold of the Modelo stake.

Elsewhere, Foster's aforementioned woes could see its beer operations also on the block. Late last year, Molson Coors confirmed that it had bought a 5% stake in Foster's, which suggests that the North American company - itself the result of a merger in 2005 - could be aligning itself for an acquisitive move. SABMiller, one of the few global brewers with a balance sheet able to cope with acquisitions, has also been touted as a potential buyer.

Japanese brewers, meanwhile, are continuing in their quest to dominate Asia's beer market. Already this year, Kirin, Japan's number two, has begun talks to acquire a 43% stake in San Miguel Breweries, with a deal on the cards by the end of February.

Finally, in the soft drinks market, 2009 will see producers of carbonated soft drinks (CSDs) having to fight hard to keep 'share of throat'. The trend towards healthier drinks looks like it's here to stay, but the historical beneficiaries of the trend, juices and smoothies, will also find this year tough going. With less money in their pockets, will consumers be prepared to fork out for premium-priced smoothies, or will they head to the fruit and vegetable section instead?

In product development, 2009 promises to be the year when stevia sweeteners become household names in the soft drinks industry. The US Food and Drug Administration has endorsed several varieties of natural sweeteners derived from the stevia plant, and Coca-Cola, PepsiCo and Dr Pepper Snapple aim to take full advantage.

This year also looks challenging for bottled water companies. The economic climate will put pressure on the sector, while aggressive 'tap-attack' campaigns suggesting drinking bottled water is a waste of money and bad for the environment, most notably in the US and the UK, will provide continuing headaches.

This feature also appears as the introduction to this month's management briefing, from Euromonitor International, which is free to just-drinks subscribers. To access the full briefing, click here.

Sectors: Beer & cider, Soft drinks, Spirits, Water, Wine

Companies: Pernod, Maxxium, InBev, Anheuser-Busch, Constellation, Foster’s, Modelo, Ricard, Absolut, Wyborowa, Cointreau, The Edrington Group, Beam Global, FEMSA, Molson Coors, SABMiller, Kirin, CSDs, PepsiCo, Dr Pepper

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Preview - Looking ahead but not looking forward to 2009

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Preview - 2009 for the drinks industry

January may be the time to look forward to the coming year but few in the drinks industry will be eyeing the coming year with relish. However, given the pessimistic tone of virtually every market and economic forecast, it is hard to imagine 2009 being any worse than is being predicted. Olly Wehring offers his view of what’s in store for the drinks market.

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