GLOBAL: Brewing giants could force local producers to adapt - study
Regional brewers could be forced to consider their business models as global brewers move in
Regional brewers will be forced to adapt to compete with global players, as well as other local producers, as the economic downturn drags on, a new report has warned.
The Rabobank report – entitled 'Battling the Brewing Giants' – urges local brewers to consider initiatives such as joint purchasing or “co-manufacturing”, if global brewers switch tactics to focus more on volumes than profitability. These measures could bring greater economies of scale for local brewers, the report says.
Rabobank analyst Francois Sonneville said: "Despite the considerable M&A activities, the giants have not seen an acceleration in volume growth because their increased economies of scale have not been passed on to consumers."
But, she added: “Brewing giants have been able to increase their share of profits through efficiency gains and implementation of a premiumisation strategy in emerging markets where premium beer brands are more profitable.”
Sonneville flagged research showing that, in 2011, local brewers accounted for just 25% of the global profit pool, down from a 45% share in 2002.
The report notes that "very few brewers are selling significant volumes" outside their home markets, apart from the global players. Craft brewers, it says, "have only a limited audience, but sell at a premium price and attain above-average margins".
However, Rabobank suggests that regional brewers would not necessarily lose out if pricing wars started. “A local brewer with a strong balance sheet might be in a better position to sacrifice profitability than a giant with a highly-leveraged balance sheet and demanding capital providers,” the report says.
But, it adds: “Local brewers need to consider that the giants, on average, have higher operating margins that could tempt them into battle.”
Sectors: Beer & cider
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