Analysis

Brewing Sector Goes Flat

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No-one is sure what toblame it on but it looks like beer drinking is going out of fashion. Profit warnings inthe brewing sector are now commonplace and the gloom is extending to City analysts. Theirview of the brewing and pubs sector is not a jolly one.

The reasons for the fall inbeer consumption are not clear. All classes of beer consumption seem to be down exceptpremium draught and there is no single explanation for the decline. The weather, the WorldCup, and economic recession will all have played a part in the demand for beer. Therecession is likely to be a key part of the story though but it has come as surprise tomany that the cutback would be so hard. Beer consumption seems to have been hit almost ashard as the textile sector.

Now analysts are talkingabout too much capacity in the brewing sector and too many regional breweries. So expectmergers and acquisition talk to dominate the trade and City press. Or even share buy backsif some of the brewers cannot face the pressure for rationalisation. If the brewing sectordoes restructure that should cheer up the City folk - unfortunately that will onlybenefit the champagne bars. On the ground, if the punters don't return to the pubsand off licences this summer everyone will be hoping for a heck of a Millenniumcelebration to put some sparkle back into the brewing sector.

Apart from the party of the Century theonly other hope is that the rumours about progress on duty free booze smuggling are true.If the new initiatives planned by the Customs & Excise and the wholesale trade succeedwe may see a fillip in the trade this year as consumption goes legit. But that'sanother story which we can look at in more depth at a later time.


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