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Hello, my name is Eric Laidlow and I’m a consumer analyst here at Gabelli Funds
Today, I wanted to spend a couple minutes talking about the beer industry
Historically, the beer industry has been a stable, growing business, with global volumes growing consistently over the last decade, compounding over 1% a year during that time to nearly 2 billion hectoliters worldwide, and total retail spend is now over $650 billion.
We expect these trend to continue, and project the market will grow by 130m hectoliters over the next five years, driven by emerging markets, with Asia Pacific contributing nearly half this volume growth, accompanied by strong performances in Latin America and Africa as drinking age populations increase and consumer spending rises.
Over the last 10 years we've seen the industry continue to consolidate as well, with the top 5 brewers controlling close to 60% of the total market, up from less than 40% in 2008.
The scale required to produce this amount of beer provides benefits to large incumbents like AB-Inbev and Heineken, one that we expect will continue to aid them as these emerging markets continue to grow.
We expect these growing regions to continue to be areas of investment, with increased attention on the Chinese market, where despite recent macro concerns, volumes are expected to grow twice the global average over the next 5 years. Heineken's partnership with China Resources will allow it to increase its distribution, and AB-Inbev recently announced it is divesting its Australian operations to increase its flexibility in the region, augment its de-leveraging efforts, while continuing to dominate premium beer in the region, remaining well positioned for future growth.
We expect these markets to continue to benefit from premiumization trends as consumers continue to trade up from local and illicit alcohol to the international brands these companies sell, which come at higher prices, and higher profitability.
Over the long term, we expect the beer market to remain attractive, and we continue to believe that industry characteristics will remain favorable, allowing companies to benefit, generating revenue and earnings growth in the mid-single-digits over the coming years.
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