The US beer market will avoid the worst woes of Europe, an analyst says

The US beer market will avoid the worst woes of Europe, an analyst says

The US beer market will avoid suffering the same fate as Europe's, as the country's employment-led recovery boosts growth, according to an analyst.

The category has fundamentals “sounder than what many fear” and is not in “secular” decline, said Robert Ottenstein of ISI group in a report earlier this week. An “employment-led rebound” will be followed by long-term volume growth of around 5%, he said. 

Latest figures show that overall US beer market volumes fell by 1.3% in 2011, while global mainstream brewers are losing market share int he country to craft rivals.  

The US beer market had become “stuck in a 1980s world by being commoditised, (and) failing to appeal to women, young drinkers, the upwardly mobile and ethnic groups,” said Ottenstein, a former head of investor relations at Anheuser-Busch InBev

But, he added: “The global beer companies have started to fight back with a slew of innovations; if successful, they could generate upside currently not modelled by investors.” 

Globally, the analyst suggested that Africa “looks like the most promising major growth market for beer for many years”, with SABMiller well placed to benefit. 

On M&A, Ottenstein said that A-B InBev could lead another round of activity in 2015/16 by targeting SABMiller. Long-running talk of a “mega-merger” between the brewers resurfaced last year, but with A-B InBev still waiting to complete its acquisition of Grupo Modelo, many believe this could be some way off.

“SABMiller is by far the most attractive large target,” said Ottenstein. Controlling shareholders at Heineken and Carlsberg are “unlikely to sell”, he added. 

Meanwhile, as the “the end game for major beer industry consolidation nears”, the analyst said this could be a “possible bridge” to A-B InBev making a move in the direction of the Coca-Cola Co.

ISI Group has initiated coverage of A-B InBev, AmBev, SABMiller, Molson Coors and Constellation Brands.