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A very successful endeavour. On 24 September, Belgian‑Brazilian beer giant ABInBev announced that it had raised $5 billion during the IPO of its Asian subsidiary, which is valued at $45.6 billion. The funds raised with this IPO, the second largest of the year behind Uber, will allow ABInBev to reduce its colossal debt: more than $100 billion in 2018.
Since acquiring SABMiller in 2016 for $100 billion, ABInBev has been in the process of debt‑clearing, which is affecting its results. In the 2018 financial year, the owner of Budweiser saw its net revenue drop nearly 15% compared to 2017, to $6.7 billion. But the Leuven‑based group, which sold 567 million hectolitres of beer in 2018, has a solid foundation. Its flagship brands Budweiser, Stella Artois and Corona were up 9% in 2018. And the company, which reacted more quickly to the craft beer phenomenon than its competitors Heineken and Carlsberg, is wise to focus on the non‑alcoholic phenomenon. Twelve new beers from around the world were added to ABInBev’s low‑alcohol (less than 3.5%) or non‑alcohol portfolio last year. The giant is predicting that this market segment will make up 20% of its volume in 2025, compared to 8% currently.
With 2,300 hectares of working vineyards, Advini is one of the rare pure players of wine that is publicly listed. While the company isn’t exactly popular with analysts, it does generate positive results with a 2018 revenue of €257.1 million, up 2.9% compared to 2017. This boost continues into 2019: revenue increased 9.3% in the first half of the year, reaching €130.5 million.
Known for its craft beers, the Boston brewer has bright prospects. The company is expected to benefit from the staggering growth of hard seltzer sales in the United States. Through its subsidiary Truly, Boston Beer is the second‑largest player in the sector behind private company White Claw. This year, sales of hard seltzer have shot up 200%, whereas the share price of Boston Beer has increased by “only” 45%. This differential led Guggenheim Securities to reiterate its recommendation to purchase shares in late September. According to the investment bank, sales of Truly hard seltzer will surge 160% in 2019, and then increase by another 85% in 2020.
When Donald Trump decided to tax steel and aluminium imports, Europe and China responded by sanctioning American whisky. This was unwelcome news for Brown‑Forman, one of the largest US whisky producers with its Jack Daniel’s brand. However, the share price has reached a record high and analysts recommend keeping shares.
This success story should be taught in marketing school. When Campari acquired the Aperol brand in 2003, the transaction seemed like a mistake. The Aperol Spritz, a cocktail invented in the early 20th century, was seen as old‑fashioned and was only served in and around Venice. No one could have imagined that it would expand outside the region.
“At the time, a Spritz was served in ordinary glasses,” recalled Andrea Neri, managing director of brands at the Campari Group, in an interview with financial newspaper Les Échos. “We came up with the idea of serving them in large wine glasses to accommodate our customers who wanted ‘easier’ drinks that had less alcohol but still looked like a fancy cocktail.” With that, the unprecedented Spritz boom began. In just a few years, the orange beverage became the trendy cocktail, perfect for summer drinks outside. Even Madonna and Halle Berry were photographed with a glass in hand. The aperitif was named the “drink of summer 2018” by the New York Times and global sales shot up 28%. And that’s not all: “In North America, the Spritz isn’t as well‑known as it is in Europe,” said Moshmi Kamdar, analyst at Union Bancaire Privée. “So the scope for growth is still significant.”
But instead of resting on its laurels with its star product, Campari, whose portfolio includes about 50 brands including Skyy vodka, Kentucky Wild Turkey whisky and Bisquit cognac, is diversifying. In early September, the Milan‑based group announced the acquisition of Rhumantilles, which owns Martinique rum brands Trois Rivières, La Mauny and Duquesne, for €60 million. With this transaction, which will be finalised in late 2019, Campari is strengthening its position in rum, which wasn’t its specialty. Most analysts agree with this strategy and recommend keeping shares, which are already wellvalued. The share price has increased nearly 190% over the last five years.
In the first half of 2019, Carlsberg generated a solid performance, with revenue up 6.5% to reach 32.990 billion Danish kroner (4.8 billion Swiss francs). But the brewer, which owns the iconic Feldschlösschen in Switzerland, saw its eponymous brand fall 3% over the period. With growth of 17% and 16% respectively, craft beers and non‑alcoholic beers drove the group’s revenue upwards.
“Everyone in the alcohol industry is keeping a watchful eye on developments in the cannabis market,” said Virginie Roumage, food & beverages analyst at Bryan, Garnier & Co. “For the time being, they have adopted a wait‑and‑see attitude, but aren’t ruling out the possibility of getting involved.” So far, only one US company has sown the seeds of development in the cannabis market. In 2017, Constellation Brands, which distributes Corona beer in the United States, announced that it had acquired a 9.9% stake in Canadian cannabis producer Canopy Growth, for $191 million. It now holds 38% of shares. The idea is to eventually develop cannabis‑based drinks.
Two years later, the investment has not been successful. “We remain confident in the cannabis industry and its long‑term potential, but we are not satisfied with Canopy’s recent performance,” said Bill Newlands, CEO of Constellation Brands, in June. Indeed, Canopy Growth reported a record loss of CA$1.281 billion in the quarter from April to June 2019, compared to a deficit of CA$91 million in the same quarter the year before. This poor performance, due to large investments in production and marketing, had quite the impact on Constellation Brands, which recorded a loss of $245.4 million in the first quarter of its financial year.
While the cannabis market was less profitable than expected, Constellation can still recover with hard seltzer. In March 2019, it launched Corona Refresca in the United States, available in three flavours: Coconut Lime, Guava Lime and Passionfruit Lime. With its exotic tastes, this hard seltzer is expected to be popular with young people. Most analysts recommend purchasing shares of Constellation Brands and believe that the cannabis market will be gradually legalised in most countries.
Public health experts cringed at the marketing campaign. In April, Diageo launched a limited edition of its Johnnie Walker whisky inspired by the successful series Game of Thrones. The goal the company won’t admit to? Targeting younger generations who are fans of the universe created by George R. R. Martin. It was a success. According to the group’s annual results, published in July, sales of Johnnie Walker were up 7% over one year. But the global leader in the spirits market, ahead of French group Pernod Ricard, didn’t really need this campaign to generate a solid performance. Owner of Smirnoff vodka, Guinness beer and Lagavulin, Talisker and Caol Ila whiskies, the British giant recorded a 4.6% increase in net profits, reaching £3.16 billion during its 2018/2019 financial year, which closed at the end of June. These numbers were drawn upwards by excellent results in its tequila (+29%) and gin (+22%) divisions. More good news: vodka, which had been on the decline in recent years, saw positive growth (+2%) while Guinness remained steady (+2%). Analysts have mixed feelings about Diageo’s shares. A slight majority recommends purchasing, whereas others recommend keeping shares, as they are already well‑valued after a rise of 80% over the last five years.
Consumers who buy premium alcohol to make cocktails want quality mixers to go with it. Founded in 2004, UK group Fever‑Tree is the first company to understand this and has focused on high‑end tonic water. Its mixers, a luxury Schweppes, if you will, are especially benefiting from the revival of the gin and tonic. In this segment, Fever‑Tree’s market share in Great Britain went from 1.6% in 2014 to 12.6% in 2018, according to Euromonitor International. Over the same period, the market share for Coca‑Cola, which owns the Schweppes brand, fell from 34.8% to 23.4%.
As a result, since its IPO in 2014, Fever‑Tree shares have increased nearly 1,400%. And this could go up even more. In 2018, Fever‑Tree’s profits soared 34%. While the company is particularly dependent on the success of gin and tonics, with tonic waters making up nearly 80% of its revenue, Fever‑Tree also sells other mixers, such as ginger ale, ginger beer and bitter lemon. Most analysts recommend purchasing shares.
When publishing its 2018 results, the Dutch brewer announced that the brand had generated its “best performance in more than a decade”. This is particularly due to the success of its non‑alcoholic beer Heineken 0.0.
Besides Koreans, very few people know of soju. But this rice alcohol is the best‑selling spirit in the world, far ahead of vodka and whisky. Why? Koreans drink a lot of soju. In 2017, the leading brand Jinro produced nearly 700 million litres of the drink, selling it for less than €3 per bottle.
The Rugby World Cup, held from 20 September to 2 November in Japan, will boost sales of Kirin beer. A partner of Heineken (the official sponsor of the competition), the Japanese company expected to increase production by 80% in September. Beyond the rugby competition, Kirin is one of the most consumed beers in the archipelago alongside its competitors Asahi, Sapporo and Suntory.
The third‑largest champagne group in the world behind LVMH and Vranken‑Pommery Monopole, Lanson BCC saw its revenue grow 6.1% in 2018, compared to the previous year. 2019 began less well, with a 9.9% drop in revenue in the first half of the year. But as 50% of champagne sales occur during end‑of‑year holiday parties, Lanson BBC is hoping to make up the difference in December.
As a recognised Champagne specialist, with its famous vintages Grand Siècle and UltraBrut, Laurent Perrier continues its upmarket trajectory. Currently, 40% of the group’s revenue (€249 million in 2018) comes from high‑end champagne.
Marie Brizard Wine & Spirits (MBWS), which owns William Peel whisky and Sobieski vodka among others, is currently struggling. After recording a loss of €67.3 million in 2017, the company remained in the red the following year with a deficit of €62 million. But MBWS has bounced back slightly in the first half of 2019, with losses of only €7.7 million.
“I have no doubt. Hard seltzer is here to stay.” In August, CEO of Molson Coors Brewing Company Gavin Hattersley was confident: hard seltzer is not just a trend. And Molson Coors hopes to capitalise on it. The result of a merger of Canadian brewer Molson and US brewer Coors in 2005, Molson Coors launched its Henry’s Hard Sparkling Water brand in 2018.
In 2012, US magazine Forbes ranked Pernod Ricard 15th in its list of the most innovative companies, ahead of tech giants like Google (24th) and Apple (26th). This recognition garnered a chuckle in France, where Pernod is still highly associated with its aniseedflavoured aperitif which is considered oldfashioned. But the French group, ranked second globally in the spirits market behind British giant Diageo, is bursting with creativity. In addition to launching new products, such as Beefeater Pink rosé gin and Jameson Caskmates whisky aged in dark beer casks, Pernod Ricard began a partnership last year with Chinese tech giant Tencent, which owns social network WeChat.
The goal: to seduce Chinese millennials. While alcohol sales are sluggish or falling in Europe, they continue to rise in Asia. Pernod Ricard hopes to capitalise on this growth, particularly with targeted marketing campaigns authorised by its partner Tencent. The strategy seems to be working. In the 2018/2019 financial year, which closed in August, the French group recorded a 21% increase in revenue in China and 20% in India. Conversely, its global sales were up only 6%.
However, Pernod Ricard hasn’t forgotten its traditional markets. This year, the group quietly acquired Spanish e‑commerce company Bodeboca, the leading online wine seller in Spain. Last year, it acquired Uvinum, a European specialist in online alcohol sales. Most analysts recommend keeping shares of Pernod Ricard, which is already well‑valued, as the share price has gone up 78% over the last five years.
Owner of premium cognacs Rémy Martin and Louis XIII, the Rémy Cointreau group is enjoying the phenomenal success of this alcohol, of which 97.7% of the production is exported out of France. But Donald Trump’s threat of taxing French wine and alcohol, if it actually comes to fruition, could hurt the group’s results. The United States is the top global market for cognac.