Preview of the Year - 2011 – Part IV: Beer
By Jeremy Cunnington and Spiros Malandrakis at Euromonitor International | 13 January 2011
Euromonitor International considers the year ahead for the world's brewers
The fourth part of this month's management briefing, written and compiled by Euromonitor International, previews 2011 for the brewers amongst us.
Key trends - Small brewers of the world unite
Microbreweries and craft beers will continue to rewrite the rulebook. As mainstream beer brands face a toxic mix of maturity, saturation, unfavourable demographics and consumer retrenchment in austerity-gripped Western markets, boutique, small batch offerings will be the industry’s last defence against plummeting sales. Small-scale, independent and experimental producers will pave the way for the multinationals to follow.
Low ABV, low calorie and low carbohydrate content will increasingly enter the mainstream. Diametrically opposite to the full-flavoured, often stronger microbrewery offerings, light varietals are primarily spearheading attempts by the brewing behemoths to lure a female audience as well as increasingly health-aware young male urbanites. At the same time, low ABV products will provide an essential corporate responsibility halo in the face of increasingly prohibitionist rhetoric dominating public discourse.
Companies to watch
Following the peak of activity in 2008 and 2009, 2011, like 2010, is likely to be another quiet year. This will be due to a combination of most of the major brewers still needing to repair their balance sheets as well as a lack of available major targets. The exception to the former is SABMiller, while the exception to the latter is Foster’s Group’s beer operations, Carlton & United Breweries.
The two would certainly make a good fit, with Australia a fast growing and key target market for SABMiller. Even though Molson Coors seems to have pulled out of the running following the divestment of its stake in Foster’s Group, SABMiller is likely to face stiff competition from the major Japanese brewers Asahi and Suntory as they look to expand outside their low-margin and low-growth domestic market. Japanese companies have a growing presence in the country in other categories such as soft drinks, where Kirin and Asahi are major players. Following its acquisition of Lion Nathan in 2009, Kirin is now the country’s second biggest brewer.
Otherwise, acquisitions in the brewing industry are likely to be limited due to the factors mentioned earlier. One interesting trend which started in 2010 was companies moving into rivals’ core territories, such as SABMiller with its Isenbeck acquisition in Argentina (a core market for Anheuser-Busch InBev) in late-2010. The next possible target market for such a move could be Brazil, which has a number of reasonably-sized private companies which would be tempting targets, not just for SABMiller but also a company like Grupo Modelo, which has expressed an interest in expanding into Brazil amongst other markets.
One other company worth watching - if only to see how long it can remain independent for - could be the world’s second biggest cider producer, Ireland's C&C Group. It would be no surprise to have seen it swallowed up by A-B InBev or SABMiller by the end of 2011. Cider is already offering significant premium growth in markets such as the UK and has the potential to do the same in North America. This offers brewers the opportunity to grow volume and value sales in declining or slow-growing beer markets. Achieving this, particularly in the US, will require substantial support. This is something C&C Group cannot offer. Of the big two brewers, A-B InBev is undoubtedly the favourite despite its high debt as the purchase would be relatively small and SABMiller’s focus is likely to be elsewhere.
Brands to watch
Budweiser is a brand that is worth continuing to watch. Despite global volumes posting recent declines, when excluding its main US market the brand has actually seen some good growth. Whether that was due to the football World Cup effect or A-B InBev getting to grips with the brand will become apparent in part in 2011.
Another interesting one to watch is the leading brand in Eastern Europe, Carlsberg’s Baltika. Having seen rapid growth up until 2008 thanks to its booming home market, Russia, the brand has been in decline as the Russian market has struggled due to tax hikes. Although Baltika had already started to export its eponymous brand to other markets, 2010 has seen a more dramatic increase in pushing the brand internationally in order to mitigate declines in its core market. The key focus during 2010 was on emerging markets, notably the Middle East and Africa and Latin America. The impact in the short term, at least, will be relatively small, especially as Carlsberg currently lacks distribution muscle in many of these regions. However, it is interesting to see how a formerly rapidly-growing emerging market brand is now looking to exports to drive growth.
Sectors: Beer & cider
SABMiller's entry into Belgium's speciality beer market makes sense and more niche deals are likely across Europe's craft beer sector....
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