GLOBAL: Emerging markets to account for 70% of beer volumes by 2016
Beer volumes are set to soar in many emerging markets
Emerging markets will account for around 72% of global beer volumes by 2016, due to fast-growing populations and GDP growth rates, analysts have predicted.
In an analysis of the future beer market, UBS has forecast that the global beer profit pool will hit US$47.7bn in the next four years. Brazil, China, Mexico, Japan and the US will "drive" 50% of that profit pool, it predicts.
Latin America (LatAm) and Africa will offer the "sweet spot" of growth and high profitability, the report says. "LatAm in particular offers defensibly high margins with visibility from cost savings in Mexico," UBS said.
But, Western and Eastern Europe will remain a struggle, the report has predicted. Despite "decent" volume growth, off-trade pressures are "intensifying", UBS said.
Of the global brewers, UBS said Anheuser-Busch InBev is its "top pick" and remains a "buy" recommendation. "It combines strong EM growth, best-in-class pricing power and cost-savings potential in Mexico and the US," UBS said. It predicts A-B InBev will have 39% of the global beer profit pool by 2016.
SABMiller is top pick among UBS' "neutral" ratings, it said, as it is in the sweet spot for volume growth and high earnings. But, UBS warned: "We see some margin headwinds in the short term."
On overall M&A activity in the beer industry, UBS said it predicts a "pause" after the Asia Pacific Breweries ownership situation is resolved, as "leading industry consolidators digest and deleverage". But, it added: "Given their highly cash-generative characteristics, we would expect to see appetite for large-scale deals resume from 2014 onwards."
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