Good news is headed the way of beer, wine, and spirits makers. Those past cost pressures are abating and trends are starting to look up as a report from Moody’s Investors Service on Monday is signaling good news for the growth of the sector. Moody’s even went as far as to raise its outlook for the global beverage industry to “Positive” from its prior “Stable” outlook. Before you get too excited about winners, keep in mind that much of this is due to emerging market growth as well as “easing of commodity pressures” which are expected to be seen over the next 12 to 18 months.
Among the winning beer makers are Anheuser-Busch InBev (NYSE: BUD), Molson Coors (NYSE: TAP), SABMiller, Heineken and Foster’s Group. Wine and spirits makers like Diageo PLC (NYSE: DEO), Beam Inc. (NYSE: BEAM), Brown-Forman (NYSE: BF-B), Pernod Ricard, and Bacardi are expected to benefit as well.
Moody’s went on to say that A more benign commodity environment will help offset headwinds facing the industry. Those cost pressures have been very costly for producers, no pun intended. The headwinds include the following:
- slow growth or declining consumption of mainstream beers in developed markets,
- declining consumption of carbonated soft drinks,
- new excise taxes or consumption and advertising restrictions in some markets,
- and continuing economic challenges in Europe.
Global beer consumption is still growing at the same time that demand for wine and spirits is expected to remain strong. This is in the face of declines in beer sales in the UK and in the face of recent declining trends in the United States. An expanding middle class is expected to boost demand for premium beers, high-end wine and spirits in countries like China and also in parts of Latin America.
Another commodity price abatement will come from all of the hedges rolling off that were put in place when prices were high. The price hikes put in place will also lead to higher profits now that commodity prices are abating.
If you have been a reader of 24/7 Wall St. for long, you know we have tracked these issues in depth. These may be consumer products, but as “favorites” they also end up impacting society’s personal finances. All you have to do is look at the implications of our own piece called “9 Beers Americans No Longer Drink” and you can see how important these issues are. Also, here are the states where people drink the most beers.