A LOOK AT THE INTERNATIONAL SPIRITS BIZ
A research note by Merrill Lynch analysts Nico Lambrechts and David Tovar claims international spirits companies have a better chance of expanding globally then brewers in the long term.
Spirits companies are much more fractured then brewers, which gives them more room to grow. The top 10 Western spirits groups have only 13% share of the global spirits market, as compared to the top 10 beer companies that control 60% of global beer volume. With that said, Nico and David believe Western spirits companies have a significant opportunity to use their international brands to appeal to consumers that traditionally drink lower-priced domestic spirits.
“China and Russia, where the top 10 Western spirits companies have less than 0.6% volume share, present the major opportunities. This compares to the top 6 brewers which have 75% and 50% share of the Russian and Chinese beer markets respectively.”
While both beer and spirits companies have opportunities to grow in developing regions, spirits have long term potential while brewers dominate in the short term. Furthermore, “we see premiumization today having a greater impact on brewing industry profits than on spirits companies' profits.”
ABSOLUT BIDDING WAR. Speaking of international brands, Merrill Lynch named Pernod, Fortune and Bacardi as the “serious contenders” for V&S. If Fortune succeeds in acquiring Absolut, Nico and David predict that the company will be limited from further consolidation. If Bacardi or Pernod purchase the Swedish group, then Fortune may consider selling its spirits business.
Although Campari is not in the bidding race, a high price for V&S may boost the Italian drinks group by highlighting the value of Skyy vodka and providing it with future acquisition opportunities.
A WEAK U.S. DOLLAR, meanwhile, posts a threat to Scotch, Champagne and Cognac exporters to the US and other US denominated markets.
Spirits companies are much more fractured then brewers, which gives them more room to grow. The top 10 Western spirits groups have only 13% share of the global spirits market, as compared to the top 10 beer companies that control 60% of global beer volume. With that said, Nico and David believe Western spirits companies have a significant opportunity to use their international brands to appeal to consumers that traditionally drink lower-priced domestic spirits.
“China and Russia, where the top 10 Western spirits companies have less than 0.6% volume share, present the major opportunities. This compares to the top 6 brewers which have 75% and 50% share of the Russian and Chinese beer markets respectively.”
While both beer and spirits companies have opportunities to grow in developing regions, spirits have long term potential while brewers dominate in the short term. Furthermore, “we see premiumization today having a greater impact on brewing industry profits than on spirits companies' profits.”
ABSOLUT BIDDING WAR. Speaking of international brands, Merrill Lynch named Pernod, Fortune and Bacardi as the “serious contenders” for V&S. If Fortune succeeds in acquiring Absolut, Nico and David predict that the company will be limited from further consolidation. If Bacardi or Pernod purchase the Swedish group, then Fortune may consider selling its spirits business.
Although Campari is not in the bidding race, a high price for V&S may boost the Italian drinks group by highlighting the value of Skyy vodka and providing it with future acquisition opportunities.
A WEAK U.S. DOLLAR, meanwhile, posts a threat to Scotch, Champagne and Cognac exporters to the US and other US denominated markets.
posted at 9:33 AM
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