US: Standard & Poor's predicts drinks sector consolidation
Cork set to pop on drinks consolidation, according to Standard & Poor's
Ratings agency Standard & Poor's has added its voice to those anticipating a fresh wave of drinks industry consolidation in the near future.
Competitive pressure in the wine and spirits sectors, particularly in the relatively mature US and European markets, as well as the need to expand into new countries, will drive a fresh round of mergers and acquisitions, according to Standard & Poor's (S&P).
"We believe the likely outcome of these trends will be a continuation of consolidation for the global alcoholic beverage group, as companies look to build economies of scale and global capabilities, as well as improve pricing flexibility," said S&P this week.
In a review of the wine and spirits industry, it said that both sectors have positive outlooks over the longer-term. In the US, it said: "With demand for premium beverages expected to rise, we think companies offering high-end products and a selection of imported wines will benefit, allowing these companies to capture market share from domestic brewers."
But, S&P said that the short-term outlook is more mixed. "In the short-term, we think certain premium categories could be challenged as consumers increase savings rates," it said.
S&P's comments on industry consolidation echo those of other analysts in recent months. Several drinks industry assets could become available in 2011, including Beam Global Spirits & Wine, Brown-Forman's Fetzer wine brand and Foster's Group's Australian wine and beer operations. Remy Cointreau's Champagne business is already up for sale, while Constellation Brands announced the divestment of wine operations in Australia, the UK and South Africa.
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