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US: Merrill Lynch warns of faddish spirits market

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The US investment bank, Merrill Lynch has warned that the recent strong growth in the US spirits market has been built on short-terms fashions and trends rather than a longer term structural shift in demand.

While the US spirits market has seen strong growth in recent years as consumers have switched from beer, Merrill Lynch said the growth stemmed primarily from changes in fashion. "It's a cyclical thing, not a structural shift," said Merrill Lynch's beverage analyst, David Tovar.

Merrill Lynch also said that recent data from the National Alcohol Beverage Control Association suggested that growth in spirits was slowing.

Interestingly, Merrill Lynch contended that larger companies were not necessarily at such a huge advantage in the US spirits market. The country's three-tier distribution system, which means companies cannot distribute their own products, allows smaller companies to compete more effectively.

Merrill Lynch also suggested that the growing importance in the spirits sector of "viral" marketing, using the internet and word-of-mouth, also meant that scale and muscle were less of an advantage and gives smaller companies a good chance to compete.


Sectors: Spirits

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