USA: Analysts Warn Of Falling Pricing Power Of Beverage Companies
Beverage analysts are warning of a loss in pricing power for the world's major drinks companies as the effects of the US economic slowdown kicks in.
A report out Monday by equity analyst WestLB Panmure said that weak pricing momentum had already affected the results of companies with high exposure to the US.
The analyst said: "There is evidence to suggest that pricing power in both beers and spirits has waned significantly during 2001. Our surveys of key markets in the US, UK France, Spain, Eire and New Zealand displayed weak pricing strength across the board for all but the UK on-trade and US spirits."
The problem is exacerbated in the premium segment, where pricing strength has "fallen further than mainstream spirits."
WestLB cited Brown Forman's recent drop in its estimates for first quarter earnings per share, which were brought down 9%, as evidence of the trend. Brown Forman, which is 81% exposed to the US cited the US downturn and a strong dollar as the causes for the fall.
By comparison Pernod Ricard, which has less exposure in the US and a more mid-scale portfolio, saw first half volume growth of 12.4%.
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