US: Beam Inc to eschew M&A for brand building - analyst
Beam is expected to focus on building brands, such as Skinnygirl, this year
Beam Inc will spend the rest of this year focusing on brand building rather than getting involved in more M&A activity, an analyst has forecast.
The Illinois-headquartered spirits firm last week reported a rise in profits and sales, driven by demand for its Bourbon brands and Skinnygirl. The group has been steadily expanding the Skinnygirl range since it acquired it in March 2011, helped by high profile promotions.
Analysts at Nomura noted that the group's planned rise in A&P spend reveals a "strong commitment to building brands and innovation". "With net debt/EBITDA post-Pinnacle (acquisition, in April) over 3x, we see a big focus now on developing existing brands rather than further M&A," it added.
Beam is expected to deliver more "balanced" revenue growth in the next few quarters, according to Nomura, as pricing increases. In Q2, 75% of Beam's sales growth was due to high volumes.
The note added: "We indicated that we saw an acceleration in spirits momentum, driven by premium brands growing faster. This appears to be particularly visible in the key US market."
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