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Spirit sales outlook remains stable

In developed markets sales of carbonated soft drinks and mainstream beers will remain under pressure, while in emerging markets' sales volumes will grow modestly in all drinks categories

Sales of spirits in most major markets will continue to contribute to slow but steady growth for the global beverage industry over the coming 12 to 18 months, Moody's Investors Service says in a new report. In developed markets sales of carbonated soft drinks and mainstream beers will remain under pressure, while in emerging markets' sales volumes will grow modestly in all drinks categories.

Moody's outlook for the global beverage industry is stable and reflects its expectations for the fundamental business conditions in the industry over the next one to two years.

"A taste for pricier brands and innovations such as new flavours of vodka and whiskey are driving sales growth for spirits companies globally," says Linda Montag, a Moody's senior vice-president. "We expect the spirits sector to maintain its momentum despite excise tax increases, which can dampen volumes, and slowing growth in emerging economies."

Aside from spirits and wine, consumers in developed economies are trading up to craft and imported beers, with sales of mainstream brands under pressure. They are likewise turning away from carbonated soft drinks, particularly in the US, where even diet soda sales are falling after years of growth as consumers more often turn to water and other healthier drinks.

Economic pressures are also taking a toll. In the US still-high unemployment in blue-collar industries is affecting sales of mainstream beers, while in the G20 economies tepid GDP growth is weighing on beverage sales more generally. Cost-cutting will still drive year-over-year growth at companies including PepsiCo Inc. and The Coca-Cola Company, while brewers such as SABMiller Plc and Anheuser Busch InBev SA/NV are bettering their margins through productivity and efficiency initiatives.

Moody's expects continuing, if slower, growth in emerging economies. "Lower GDP growth expectations could constrain the performance of beverage makers that operate in formerly fast-growing emerging markets," Montag says. "In addition, adverse currency movements are likely to erode revenues and profit growth at some of those companies."

by S. C.
13 december 2014, Food & Fun > Business

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