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World Alcoholic Beverage Companies
Beer, Wine and Spirits 2010-2015 Trends – Corporate Strategies
Report code: 0XIAA03Analysts: Alessandro Ravina and Aurélien Duthoit
Publication: December 2010
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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The 5 phases of Xerfi Global’s Global Markets and Competition reports
Phase 1: Identification of the playing field At Xerfi Global, we believe that international classifications are not the only valid definition of a market. It is the companies that make the sector and not vice-versa. During our first brainstorming session, we strive to give a clear-cut definition of the scope of the report.
Phase 2: Identification of market leaders During the second phase, Xerfi Global’s analysts identify the players who will be studied in the report. Our aim is not only to classify by total sales, but also to detect tomorrow’s movers and shakers, especially those from emerging markets
Phase 3: Identification of the main market indicators Using the best and most up to date international sources, Xerfi Global’s experts handpick the most relevant indicators pertaining to both supply and demand.
Phase 4: Identification of corporate strategies During a further brainstorming session, the Xerfi Global team aims to decipher the main corporate strategies and key future trends.
Phase 5: Identification of the key conclusions Thanks to a final brainstorming session, drawing on the knowledge of all the members of Xerfi Global, the main conclusions are debated and ultimately summed up in no more than a dozen slides. Concision, precision and accurate forecasts are our main aims.
This report was written under the supervision of:
Alessandro Ravina Aurélien Duthoit
Other main contributors include:
Hélène Alary
Alberto Balboni
Marion Boulle
Alexander Law
Laurent Marty
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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Table of contents
0. CONCLUSIONS 7
1. MARKET FUNDAMENTALS 19
1.1. Overview ________________________________________________________________________________________________ 20 Key characteristics 20
1.2. The industry _____________________________________________________________________________________________ 21 What is the business? 21
1.3. Supply and demand _______________________________________________________________________________________ 22 Who are the suppliers? 22 Who are the customers? 23
1.4. Market leaders ___________________________________________________________________________________________ 24 Who are the key players? 24
1.5. Geographic data __________________________________________________________________________________________ 25 Where are the activities located? 25
2. MARKET ENVIRONMENT AND PROSPECTS 26
2.1. Overview of the market ____________________________________________________________________________________ 27 PESTEL analysis 27
2.2. Demand _________________________________________________________________________________________________ 30 Global per capita consumption 30 Per capita consumption by country 32 Consumer prices 35
2.3. Supply __________________________________________________________________________________________________ 36 Beer production 36 Wine production 37
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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Spirits production 38
3. CORPORATE STRATEGIES AND COMPETITION 40
3.1. Competitive environment __________________________________________________________________________________ 41 Driving forces of the industry 41
3.2. Structure of competition ___________________________________________________________________________________ 45 Sales trends 45 Profitability trends 47 Presence by product segment 49 Presence by geographical segment 50
3.3. Corporate strategies _______________________________________________________________________________________ 51 External growth 51 Internationalisation 53 Innovation 55 Portfolio management 57 Brand management 58
4. COMPANY PROFILES 59
4.1. Anheuser-Busch InBev_____________________________________________________________________________________ 60 Presentation 60 Corporate strategy 61 Recent events 62 Key data 63
4.2. Heineken ________________________________________________________________________________________________ 65 Presentation 65 Corporate strategy 66 Recent events 67 Key data 68
4.3. SAB Miller_______________________________________________________________________________________________ 70 Presentation 70 Corporate strategy 71 Recent events 72
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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Key data 73
4.4. Diageo __________________________________________________________________________________________________ 75 Presentation 75 Corporate strategy 76 Recent events 77 Key data 78
4.5. Pernod Ricard____________________________________________________________________________________________ 80 Presentation 80 Corporate strategy 81 Recent events 82 Key data 83
4.6. Kirin____________________________________________________________________________________________________ 85 Presentation 85 Corporate strategy 86 Recent events 87 Key data 88
4.7. LVMH __________________________________________________________________________________________________ 90 Presentation 90 Corporate strategy 91 Recent events 92 Key data 93
4.8. Constellation Brands ______________________________________________________________________________________ 95 Presentation 95 Corporate strategy 96 Recent events 97 Key data 98
4.9. United Breweries _________________________________________________________________________________________ 100 Presentation 100 Corporate strategy 101 Recent events 102 Key data 103
4.10. Wuliangye Yibin _________________________________________________________________________________________ 105
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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Presentation 105 General information 106 Key data 107
5. STATISTICAL APPENDIX 109
6. INFORMATION SOURCES 125
International organisations 126 Corporate websites 127 Market research and consulting firms 127
7. ANNEXES 128
Statistical framework 129 Data 130
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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0. Conclusions
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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Key trends by 2015
Global alcohol consumption per capita is set to be flat by 2015, reflecting the increasingly polarised alcoholic beverage market. In mature markets, consumption per capita tends to decline owing to a particular adverse market environment marked by poor consumer spending, high excise duties and increasingly health-conscious behaviours. This is a major issue given that these markets are, by far, the most important in terms of revenues. To cope with this gloomy market environment, producers will further invest in brand and innovation to stimulate consumption and drive revenues up.
Market prospects are brighter in emerging markets such as Brazil, Mexico, India and China where consumption is trending up, but here again leading producers are confronted with various issues including smuggling, unrecorded consumption, abstinence or focus on low-quality beverages. Growth in these regions for established players will be achieved by targeted acquisitions of local producers and the promotion of high-value, international drinks.
This will be no easy task given the complexity of national markets. Along with food, alcohol is a major component of a country’s culture and each country is a specific market. Consumer tastes, drinking occasions, distribution channels, consumption patterns greatly differ from one country to another. In this respect, producers are more multi-domestic companies than truly global companies.
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Flat consumption figures reflect a particularly adverse market environment
Factors with an adverse impact on global alcohol consumption
Source: Xerfi Global
GLOBAL ALCOHOL CONSUMPTION
INCREASINGLY HEALTH-CONSCIOUS MINDSETS
RELIGIOUS BELIEFS AND CULTURAL FEATURES
EXCISE DUTIES AND POLITICAL INTERFERENCE
WEAK CONSUMER SPENDING IN MAJOR MARKETS
ADVERTISING LIMITATION
UNRECORDED ALCOHOL
CONSUMPTION (HOME PRODUCTION, SMUGGLING, COUNTERFEITING)
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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Consumption patterns vary widely according to the customers
Structure of consumption in selected countries unit: % of per capita consumption
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Russia
China
Japan
France
Italy
Argentina
South Korea
Spain
Sweden
Australia
Germany
UK
USA
Brazil
Mexico
Spirits amateurs
Wine connoisseurs
Balanced consumers
Beer lovers
Beer
Spirits
Wine
Source: Xerfi Global calculations. Primary source: World Health Organisation.
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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Both supply and demand remain strongly regional
Nature of supply and demand in the alcoholic beverage industry
GLOBAL
TY
PE O
F D
EM
AN
D
REGIONAL
REGIONAL GLOBAL
TYPE OF PRODUCTION Source: Xerfi Global
WIN
SPIRIT BEERS
Production of wine and spirits remains strongly local due to the importance of appellations (whisky, vodka, cognac, etc.). Demand for wine is global, with countries including France, Italy, Chile and the US exporting substantial quantities to foreign markets. Demand for spirits is more balanced between local and foreign beverages, particularly in emerging markets.
Demand for beers is more complex, driven by international brands (Guinness, Heineken) owned by international companies and
hundreds of local beverages. Production is however much more global since production can be made under licence.
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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Europe, the Americas and Eastern Asia concentrate alcohol production
Overview: world production of beer, spirits and wines by region unit: the size of the signs is function of the relative contribution of each region in total contribution.
Source: Xerfi Global calculations. Primary source : World Health Organisation, latest figures available
NAFTA Europe Eastern Asia
Latin America
50.0%
34.5%
51.0%
1.6%
28.5%
8.3%
4.8% 15.3 %
8.7%
29.2%
5.7% 21.0%
Beer Spirits
Wine
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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To keep growing, leaders rely on mergers and acquisitions
Selected examples of megadeals in the industry and their objectives
Source: Xerfi Global
SAME MARKETS, SAME PRODUCTS
DIFFERENT MARKETS,
SAME PRODUCTS
SAB Miller
Bavaria (BR)
2005 (LATIN
InBev (BE)
Anheuser Busch (US)
2008 (USA)
2005 2008
Pernod Ricard (FR)
V&S (SW)
Gain access to new
distribution channels
Diversify sources of revenues
Reduce competitive rivalry
Reduce production,
distribution and marketing costs
Exploit synergies in corporate functions
Increase
bargaining power
Pernod Ricard (FR)
Allied Domecq
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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Producers will further focus on high-value added activities
Simplified value chain of the alcoholic beverage industry
Source: Xerfi Global
Product conception, marketing and distribution are by far the most strategic operations of alcoholic beverage producers. Upstream, the capacity of producers to understand fast-changing consumer tastes is the key to launch innovative, successful products.
While the majority of sales are generated by well-known and traditional beverages, growth comes mostly from innovative drinks such as cocktails, pre-mixed spirits and other flavoured drinks.
Marketing is also vital for producers in order to stimulate consumption and drive the shift to higher margin beverages. Brand management, in particular, is of paramount importance to build customer loyalty.
Last but not least, the control of distribution channels through regional distribution subsidiaries enables producers to establish partnerships with local points of sales and maintain selling prices.
CONCEPTION PRODUCTION MARKETING & SALES
LOGISTICS DISTRIBUTIO
KEY FACTORS TO GENERATE PROFITS
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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Mature markets: towards higher prices through innovation and brand
Mature markets: how to increase sales when consumption is trending down?
Source: Xerfi Global
INCREASINGLY HEALTH-CONSCIOUS MINDSETS
WEAK CONSUMER SPENDING
ALCOHOL CONSUMPTION TENDS TO DECLINE…
… PRODUCERS TRY TO INCREASE AVERAGE
INNOVATION
Flavoured beverages, carbohydrate and sugar-free drinks, new bottle formats…
MARKETING CAMPAIGNS
Build brand image to improve customer value, increase customer loyalty
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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Emerging markets: all that glitters is not gold
Main flaws of emerging markets
Source: Xerfi Global
Unrecorded consumption is common practice
Demand is price-oriented
Consumer education is poor
Consumers favour local, traditional beverages, so that brand related-advantages built in mature markets can not always be transferred
Local leaders have substantial advantages over foreign groups (market knowledge, distribution agreements, support of regulatory and political bodies, etc.)
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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Leaders have very different business models and product portfolio
Presence of the leading groups in the main product segments unit: squares reflect the importance of each product segment in total alcoholic beverages revenues
GROUPS BEER WINE SPIRITS STRATEGIC GROUP VOLUME MARKET
SHARE IN BRANDED ALCOHOLIC BEVERAGES
ANHEUSER-BUSCH INBEV
>15%
SAB MILLER >10%
HEINEKEN
Beer specialists
>8%
PERNOD RICARD <2%
LVMH
Premium wine and spirit specialists <2%
CONSTELLATION BRANDS* Premium wine specialist <3%
WULIANGYE YIBIN Entry-level spirit specialist N/A
DIAGEO Diversified premium drink producer <3%
UNITED BREWERIES Entry-level diversified producer <3%
KIRIN Diversified producer <2%
Source: Xerfi Global estimates. *also present in beer and spirits through imports
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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Brewers top sales rankings and report the strongest growth in the industry
2009 net sales and 2005-2009 growth in sales of analysed producers unit: billion euros in net sales, vertical scale; 2005-2009 growth rate in sales, horizontal scale
0
5
10
15
20
25
30
-50% 0% 50% 100% 150% 200%
Anheuser Busch - InBev (BE)
LVMH (FR)
Kirin (JP)
Diageo (UK)
Heineken (NL)
SAB Miller (UK)
Pernod Ricard (FR)
Constellation Brands (US)
United Breweries (IN)
Beer specialists dominate the global alcoholic beverage industry, reflecting the global dimension of the beer business and years of industry consolidation
Source: Xerfi Global calculations. Primary source: annual reports. *Xerfi Global estimates based on the net sales of the group’s two alcoholic beverage subsidiaries.
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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1. Market fundamentals
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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1.1. Overview Key characteristics
A highly fragmented market
Three main market segments
Beer, wine and spirits are the three segments which form the alcoholic beverage market. Some
large producers including Diageo are present in all market segments, while others such as
Anheuser-Busch InBev have a strong focus on one type of beverage (beers).
Revenues in developed countries
Revenues generated by alcoholic beverage sales are much higher in developed countries thanks
to cultural features and high available income. Per capita consumption in these regions
however is tending to decline. Conversely, consumption is trending up in emerging countries,
but local demand focuses on entry-level drinks.
Local production
Producers have to operate near consuming markets in order to be profitable. The global market
is therefore marked by a strong proximity between producing and consuming regions. Major
exceptions include appellations (eg Bordeaux or Scotch Whisky) and export drinks.
Complex distribution
The structure of distribution channels vary significantly from one country to another. Major
intermediaries include importers, wholesalers, mass retailers, bars, restaurants and hotels. A
distinction is commonly made between on-premise and off-premise consumption.
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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1.2. The industry What is the business?
An market made of three main categories of drinks
Main products of alcoholic beverage producers
The alcoholic beverage business is generally divided into three main categories:
- Beer. This report includes the two main categories of beer: lagers and ales. Lagers include low temperature brewed, bottom-fermenting yeast beers while ales include high temperature brewed, top-fermenting yeast beers. Beer accounts for almost 50% of global alcoholic beverage consumption. - Wine. This report includes under this category any beverage which is the outcome of fruit fermentation like grapes, the most common fruit utilized, apples, berries, etc. Wine accounts for approximately 30% of global alcohol consumption. - Spirits. The report includes under this category every beverage produced by distilling fermented grain, fruit or vegetables. The minimum alcohol by volume percentage is set at 20%. Spirits account for approximately 20% of global alcohol consumption.
Source: Xerfi Global
Alcoholic beverages
Beer
• Lagers (low
temperature brewing, bottom fermenting yeast)
• Ales (higher temperature brewing, top fermenting yeast)
Wine
• Fruit fermented
beverages (grapes, apples, berries, etc.)
Spirits
• Distilled (grain,
fruit or vegetables) beverages with at least 20% alcohol by volume
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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1.3. Supply and demand Who are the suppliers?
Reliance on commodity suppliers
Main inputs of alcoholic beverage producers
Equipment and raw materials form the two main categories of inputs beverage producers need to operate. - Production, filling and bottling equipment are required to produce alcohol from fruits and grains. The production of bottles is generally outsourced to third part companies (aluminium can and glass bottle producers). - Large producers have long term agreements with the food industry for the supply of raw materials, especially water and grains.
Source: Xerfi Global
Main inputs of
beverage producers
Production, filling
and bottling equipment
Raw materials
(water, cereal grain, hops, yeast, fruits…)
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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1.3. Supply and demand Who are the customers?
Several distribution channels
Main distribution channels of alcoholic beverages
Distribution channels vary wildly from one country to another due to differences in cultural and legal environment. Some general comments can still be made on how drinks are distributed. Producers typically sell their products through regional distribution subsidiaries, and serve two different markets: - The on-premise consumption market includes bars, restaurants, pubs, etc. Prices paid in such places are generally much higher and purchases are made from local wholesalers. - The off-premise consumption market includes mass retailers and specialty retailers.
Source: Xerfi Global
Breweries and distilleries
Distribution centres
Wholesalers
Mass-retailers
Off-premise consumption
On-premise consumption
Specialty-retailers
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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1.4. Market leaders Who are the key players?
Domination of Europe-headquartered groups
Key players of the alcoholic beverage business
COMPANY NAME NATIONALITY
2009 NET REVENUES (BILLION EUROS) MAIN BRANDS
ANHEUSER-BUSCH INBEV 26.38 Stella Artois, Beck’s,
Budweiser
SAB MILLER 18.62 Pilsner Urquell, Peroni Nastro Azzurro, Miller
LVMH 2.70 Dom Pérignon, Krug, Hennessy
KIRIN 5.68 Kirin, Hakusui, Hahn
HEINEKEN 14.70 Heineken, Moretti, Cruzcampo
DIAGEO 8.66 Guineess, Johnnie Walker, Smirnoff
PERNOD RICARD 7.08 Chivas Regal, Absolut, Havana club
CONSTELLATION BRANDS 2.39 Robert Mondavi,
Svedka, Corona
WULIANGYE YIBIN 1.20 Wuliangye, Panama, Panda
The global alcoholic beverage market is dominated by groups with their roots in Europe. It is important to bear in mind that while headquartered in Europe, a great many groups expanded worldwide through mergers and acquisitions and that the management of operations is mostly made at a regional level due to the strong differences in regional markets. Due to a fairly high degree of industry concentration, the groups we have selected are a good reflection of the global industry. However, the wine and spirits markets is more fragmented with thousands of local, specialised producers. In terms of sales, beer specialists top the rankings.
UNITED BREWERIES* 0.97 Kingfisher, Royal
Challenge
Source: Xerfi Global. *Estimates based on the net sales of the group’s two alcoholic beverage subsidiaries.
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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1.5. Geographic data Where are the activities located?
Europe by far the largest producer of alcoholic beverages
Overview: world production of beer, spirits and wines
unit: the size of the signs is function of the relative contribution of each region in total contribution. Figures rep
Source: Xerfi Global calculations. Primary source : World Health Organisation, latest figures available.
NAFTA Europe Eastern Asia
Oceania
Middle East
Latin America Africa
Central Asia
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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2. Market environment and prospects
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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2.1. Overview of the market PESTEL analysis
A highly challenging market environment
PESTEL analysis of the alcoholic beverage industry
+
-
Politics Economy Society Technolo Environme Legislation
Influential lobbies
Emerging economies still fast growing
Rising demand for
luxury goods in emerging markets
+ - +- +- +- +- + -
Pressure on healthcare budgets
Political
interference
Weak consumer spending
& High unemployment
Religious beliefs Health-conscious
mindsets
Green taxes
Excise duties
Consumption limitation
Advertising limitation
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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2.1. Overview of the market
Demand hampered by political interference and weak global economy
Further political interference likely
Alcohol is classified as a drug by the World Health Organisation and alcohol abuse has a dramatic
impact on health. Moderate consumption is also estimated to have a negative impact according to drug
specialists. This explains why the industry is subject to frequent political interference resulting in
restrictive laws and extra taxation. In times when advanced countries are cutting into healthcare
budgets to reduce deficits, possible new public health campaigns aiming at reducing consumption as
well as possible new taxes on alcohol are likely. While the alcoholic beverage industry is a
particularly powerful lobby in a great many producing countries, this may not be enough to avoid
further political interference. At least, political risks are high.
Mixed economic prospects
While the recession is over, economic growth has not resumed at the same pace in every region of the
world. GDP growth has a significant impact on consumer spending and consumer confidence, the
industry’s most important demand indicators. In the short run, two trends will dominate in the world
economy:
- Emerging countries are expected to achieve high growth rates, particularly India, China and Brazil.
The extent to which GDP growth will favour consumption depends on national policies. A great many
emerging countries owe much of their growth to their comparative cost advantage, and increasing
consumer spending at the expense of cost competitiveness is generally not welcome. In countries with
a more balanced growth engine such as Brazil for instance, the advent of a middle class has already
become a reality.
- Advanced countries will most likely recover at a much slower pace and unemployment is set to
remain high in the next few years. Combined with lower public support due to high debt levels, this
will have a particularly adverse impact on consumer spending and on demand.
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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2.1. Overview of the market
Laws, health consciousness and religious beliefs are major obstacles
Mixed attitudes towards alcohol
Alcoholic beverages are no normal consumer goods and a great sociocultural factors impact demand for alcohol,
including:
- Religious beliefs: alcohol consumption is either tolerated to a certain extent or prohibited by the world’s most
important religions. Secular states all report higher consumption rates, while countries with State religions are
minor markets. This is very well reflected in consumption figures of countries such as India and regions such as
the Middle East.
- Health-consciousness: people tend to moderate their alcohol consumption due to the various side-effects of
alcohol abuse. Some people also wilfully refrain from drinking alcohol on various non-religious grounds.
It is also important to bear in mind that alcohol remains a discretionary expenditure. The purchase of branded
alcohol, in particular premium drinks, is similar to the purchase of luxury goods. In this respect, economic
development in emerging markets is expected to be a major source of growth for producers provided that
consumption shifts to higher value drinks.
Worries on packaging recycling could result in green taxes
Efforts to reduce waste in advanced countries has resulted in initiatives including bottle bills, a system by which
consumers pay an extra fee when purchasing bottles and cans that is returned when bottles are brought back to
the purchasing point for recycling. Such systems are sometimes blamed for increasing beverage prices and
deterring purchases.
An adverse legal environment
The legal environment for alcoholic beverages is particularly regulated. In particular, laws tend to:
- Limit alcoholic advertising. The characteristics of advertising campaign must generally comply with country-
specific requirements on airtime, message carried, target audience etc.;
- Limit alcohol consumption due to public order, safety (when driving, in the streets, in public places etc.) and
health (costs for national health organisations).
Laws include measure on the legal drinking age, selling points, taxes on revenues, drinking and driving
conditions, etc. They have a particularly adverse impact on the industry.
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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2.2. Demand Global per capita consumption
Slight rebound of per capita consumption since 2000 after 20 years of decline
Global unweighted average recorded alcohol consumption, 15+years of age unit: litres per capita
Global recorded alcohol consumption is estimated to have reached 4.7 litres per capita and per year in 2010. Alcohol consumption increased markedly during the 1960s before taking a dive between the second half of the 1970s and 2000. This was mostly due to government efforts to reduce consumption due to alcohol-related concerns including public order, safety and health. Consumption has somewhat picked up since 2000, under the combined effect of innovation in mature markets which has offset the structural decline of consumption and rising demand in emerging countries.
4,0
4,2
4,4
4,6
4,8
5,0
5,2
5,4
65 70 75 80 85 90 95 00 05 10
Source: Xerfi Global. Primary source: World Health Organisation.
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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2.2. Demand
Falling consumption impacted all market segments
Index of global unweighted average recorded alcohol consumption, 15+years of age unit: consumption index. 1980=100.
Alcohol consumption has been trending up since the beginning of the 2000s after twenty years marked by a substantial decline in major markets, including Europe, Japan and North America. It is essentially emerging markets that contributed to offset this long term trend and further increase global consumption in years to come.
75
80
85
90
95
100
1980 1985 1990 1995 2000 2005 2010E
Beer Spirits Wine
Source: Xerfi Global. Primary source: World Health Organisation.
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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2.2. Demand Per capita consumption by country
European countries and countries with European roots are the top consumers
Unweighted average recorded alcohol consumption, 15+years of age in selected countries unit: litres per capita
The analysis of per capita consumption by country underlines huge differences among the world’s largest markets: - The largest European markets (Germany, UK, Spain, France and Italy) report very high consumption figures, reflecting the deeply rooted cultural dimension of alcohol in the region; - Non-European countries with European roots (Australia, USA, Brazil, Mexico) also report above the average consumption figures; - Conversely, consumption per capita is lower in Asian countries. Obviously, differences in consumption volumes reflect variations in the consumption mix to a certain extent. Countries with a strong consumption of spirits will generally report lower unweighted alcohol consumption per capita.
0 1 2 3 4 5 6 7 8 9 10 11 12 13
Mexico
China
Brazil
Sweden
Japan
South Korea
Italy
Argentina
USA
Australia
Russia
France
Spain
UK
Germany
Source: Xerfi Global. Primary source: World Health Organisation.
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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2.2. Demand
Huge differences in consumption patterns underline the importance of culture
Structure of consumption in selected countries
unit: % of per capita consumption
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Russia
China
Japan
France
Italy
Argentina
South Korea
Spain
Sweden
Australia
Germany
UK
USA
Brazil
Mexico
Spirits amateurs
Wine connoisseurs
Balanced consumers
Beer lovers
Beer
Spirits
Wine
Source: Xerfi Global. Primary source: World Health Organisation.
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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2.2. Demand
Consumption down in developed countries, up in emerging countries
Selected countries’ total recorded alcohol consumption, 15+years of age
unit: litres per capita Selected countries’ total recorded alcohol consumption, 15+years of age units: litres per capita
4
6
8
10
12
65 68 71 74 77 80 83 86 89 92 95 98 01 04 07 10
Europe Japan USA
0
1
2
3
4
5
6
7
65 68 71 74 77 80 83 86 89 92 95 98 01 04 07 10
Brazi l China India
Source: Xerfi Global estimates and forecasts. Primary source: WHO. Source: Xerfi Global estimates and forecasts. Primary source: WHO.
The trends in alcohol consumption differ from region to region. The graphs above show the litres per capita consumption for Europe, USA and Japan (chart 1) and for Brazil, China, India (chart 2). In Europe there has been a stabilisation of total alcohol consumption from the mid 1980s; nowadays consumption still manages to be around 10 litres per capita per year. Interestingly, developing countries (China, India, Brazil) have achieved significant growth rates in their total alcohol consumption in different periods with respect to western countries: this growth trend is still ongoing. Generally dramatic increases or decreases in alcohol consumptions are rare and are associated with natural disasters or conflicts.
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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2.2. Demand Consumer prices
Prices pushed up by rising excise taxes
Growth rate of consumer prices of alcohol in the European monetary union
unit: annual % change Growth rate of excise taxes on alcoholic beverages in the EMU unit: annual % change
0%
1%
2%
3%
4%
5%
2006 2007 2008 2009 2010
Beer Spirits Wine
-10%
-5%
0%
5%
10%
15%
2008 2009 2010
Beer Spirits Wine
Source: Xerfi Global. Primary source: Eurostat. Source: Xerfi Global. Primary source: CEPS.
Besides variations in global private consumption levels, revenues are obviously correlated to alcohol prices. It is important to keep into consideration the role of excise duties on alcohol consumption as they can have a great effect on retail prices: an increase in excise taxes (shown in the right graph) can modify drinking patterns by reducing demand for alcohol, especially for price-sensitive consumers. The graph to the left shows the growth rate of consumer prices in the European Monetary Union from 2005 onwards: the price growth trend of the three products is always on but the price growth rate in 2009 remained consistent with the price growth rate in 2008 for beer and spirits while it actually decreased for wine.
World Alcoholic Beverage Companies – 2010-2015 Trends – Corporate strategies – December 2010
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2.3. Supply Beer production
World beer production trends up
Global beer production unit: million hectolitres
Global production of beer has kept increasing since the beginning of the millennium. Despite different trends in important markets, a positive growth rate has been achieved even at the dawn of the recession. Globally, in the 2000-2008 period, production went up by 31.1%. Interestingly, the most important changes, in the same period, were recorded by China and India: China augmented its production by 84.1% passing from 223 million hectolitres to 411 million hectolitres, in India by 141%, passing from 5 millions to 13 millions. On the other hand, US production fell by 1.3% over the same period, while it grew by 0.5% in the Eurozone and lost 13.7% in Japan.
1 300
1 400
1 500
1 600
1 700
1 800
1 900
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E
Source: Xerfi Global. Primary source: Canadean.
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2.3. Supply Wine production
World wine production is highly volatile
Global wine production unit: million hectolitres
Wine production has been falling since 2005, reflecting producer attempts to avoid overproduction and maintain price levels. Moreover, consumption figures have been picking up since the beginning of the 2000s. This decline in global production is mostly due to a general downward trend among traditional producing countries, while conversely production soared in countries including Argentina, Chile, China and South Africa. 2005 figures are mostly accounted for by record yields due to favourable weather.
270
275
280
285
290
295
300
305
310
2004 2005 2006 2007 2008 2009 2010E
Source: Xerfi Global. Primary source: Wine institute.
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2.3. Supply Spirits production
Growth slowed down in 2009 after a decade of steady increase
US spirits gross revenues growth rate
unit: annual % change US spirits volumes growth rate unit: annual % change
0%
2%
4%
6%
8%
10%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E
0%
1%
2%
3%
4%
5%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E
Source: Xerfi Global. Primary source: DISCUS. Source: Xerfi Global. Primary source: DISCUS.
US spirits production suffered from the recession: spirits volumes grew 1.4% in 2009 whereas gross revenue growth was flat, according to trade association DISCUS. Spirits accounted for about one third of total revenues generated by alcohol sales in the US in 2009. The US spirits market has been growing at a continuous pace since 2001 with annual sales growth rates oscillating between 2% and 9%.
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2.3. Supply
European spirits production revenue is subject to sudden fluctuations
EU27 spirits production revenue growth unit: annual % change
In Europe, revenues from the production of spirits declined in 2008 (-0.6%) and 2009 (-6.6%) after seven years of firm growth. It is set to rebound moderately in 2010. The world’s largest producer of spirits, Europe also ranks among the largest markets with spirits consumption particularly high in many countries including Czech Republic, Hungary, Ireland, France and Spain. Europe also exports a significant share of its production globally.
-10%
-5%
0%
5%
10%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E
Source: Xerfi Global. Primary source: Eurostat
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3. Corporate strategies and competition
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3.1. Competitive environment Driving forces of the industry
High profitability levels thanks to fairly low pressure on margins
Competitive forces of the alcoholic beverage industry
Source: Xerfi Global
0 1 2 3 4 5
New entrants
Substitutes
Customers
Suppliers
CompetitiveRivalry
Beers Wines and Spirits
Very strong differentiation possibilities
Favourable position against suppliers
Diversity of distribution channels maintains pressure low
Alcohol is a discretionary expense
Distribution is the major barrier to entry
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Competitive rivalry fairly low due to differentiation possibilities
Differentiation and niche markets enable high profits
Several indicators point to a fairly high degree of competitive rivalry between
producers:
- The market in mature economies is flat at best in volume terms. This forces producers
to innovate in order to create stronger customer value and drive prices up. It also results in
market share-based strategies which have an adverse impact on margins;
- In mature markets again, large producers of about the same size control the bulk of
the volumes, meaning that competitors are more likely to adopt similar strategies, and that
these large producers are able to fuel rivalry in order to drive small competitors out of the
business;
- Independent producers with a strong specialisation take a significant share of the
market in value. It is particularly true in countries with a strong tradition of local
production (wine in Mediterranean countries, beer in the UK and Northern Europe, spirits
in Eastern Europe).
Despite these negative factors, rivalry will remain below average due to the strong
differentiation between products and the fact that if consumption tends to decline,
consumers are becoming increasingly demanding. In a word, in major markets,
consumers drink less, but better. The main options for differentiation strategies in the
industry are the following:
- Location: whereas beers can be produced under licence, appellations are a particularly
decisive differentiation factor in the wine and spirit segment (eg. French, Californian or
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Suppliers and customers are under control
(continued)
Chilean wines) which is also closely monitored by producing countries and regulatory
bodies
This factor is a particularly powerful advantage which can not be relocated.
- Product packaging and marketing: alcohol consumption remains a discretionary expense
which remains linked with pleasure rather than necessity. In this respect, beverages are
generally more viewed as luxury goods rather than commodities, hence the capacity
of producers to compete on non-price based strategies. Marketing strategies play
therefore a particularly important role.
Favourable position against raw material suppliers…
All major producers mention fluctuations in commodity and energy prices as the major
upstream threat. In particular, the industry is sensitive to changes in electricity, aluminium,
corn, wheat and rice prices. While there is nothing producers can do against volatility,
excepted hedging (which has a significant cost), we estimate supplier pressure to be fairly
low owing to both the structure of market (plenty of commodity producers, few large
beverage producers) and the terms of the contracts (generally long-term purchasing
contracts).
… and ability to increase prices if necessary
When considering customer pressure in the industry, it must be reminded that there is no
dominant model concerning the distribution of alcoholic beverages. We estimate pressure
from purchasers to be significant but of a limited reach: producers are not relying on a
major distribution channel. While the situation differs from one market to another, the
bigger picture is that customers are much more fragmented than suppliers.
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Substitutes are a major threat
(continued)
Major distribution channels include mass retailers, wholesalers, speciality retailers,
importers as well as independent and self-owned pubs. This diversity in customer base
favours producers when it comes to pricing.
Substitutes: the main threat
Substitution is possible at two different levels, and is a major threat for all producers:
- Substitution is possible between alcoholic beverages. Changes in consumer tastes may
lead to an increase in consumption of a drink or a category of drink at the expense of
another. Since consumption per capita is flat in major markets, this is naturally a major
issue which forces producers to keep on investing on innovation and brand, hence lower
profits;
- Even more dramatic is the substitution of alcoholic beverages by soft drinks or
abstinence. As we have seen, alcohol remains a discretionary expense which can be easily
substituted by other beverages to quench thirst or by abstinence when consumption is
mostly social. Once more, sparking desire among consumers with innovation and brand
image is the key.
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3.2. Structure of competition Sales trends
Beer companies dominate sales rankings
Net sales ranking unit: billion euros
0 5 10 15 20 25 30
United Breweries* (IN)
Constellation Brands (US)
LVMH (FR)
Kirin (JP)
Pernod Ricard (FR)
Diageo (UK)
Heineken (NL)
SAB Miller (UK)
ABIB (BE)
2008 2009
Source: Xerfi Global calculations. Primary source: annual reports. *Xerfi Global estimates based on the net sales of the group’s two alcoholic beverage subsidiaries.
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3.2. Structure of competition
Acquisitions boost sales figures of market leaders
Combined sales of analysed alcoholic beverage producers unit: billion euros Growth in sales of analysed alcoholic beverage producers
unit: 2009/2005 growth in sales in %
50
60
70
80
90
100
2005 2006 2007 2008 2009
-30% 0% 30% 60% 90% 120% 150% 180%
Constellat ion Brands (US)
LVMH (FR)
Diageo (UK)
Heineken (NL)
SAB Miller (UK)
Kirin (JAP)
Average
Pernod Ricard (FR)
ABIB (BE)
UB (IN)
Source: Xerfi Global calculations. Primary source: annual reports. Source: Xerfi Global calculations. Primary source: annual reports.
The combined sales of the analysed groups, excluding Wuliangye Yibin, leapt by a strong 64.1% between 2005 and 2009 and topped 95.20 billion euros. Due to its decision to focus on premium wines, Constellation Brand was the only group to report lower sales as many businesses were divested. Mergers and acquisitions have been by far the major source of extra revenues for the other groups. The main deals that occurred over the period are the following: - The 52 billion dollar takeover of Anheuser Busch by Inbev (2008); - The 15.5 billion dollar acquisition of Scottish and Newcastle in 2008 by Heineken and Carslberg; - The 6 billion euro acquisition of Vin & Sprit by Pernod Ricard (2008). A great many smaller deals have also taken place, chiefly aiming at expanding the groups’ international presence in emerging countries. All in all, it is debt-financed acquisitions that have enabled leaders to drive sales figures up in a context of slow organic growth.
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3.2. Structure of competition Profitability trends
Premium specialists generally report higher margins
Operating margin ranking unit: %
0% 5% 10% 15% 20% 25% 30% 35%
SAB Miller (UK)
United Breweries* (IN)
Heineken (NL)
Constellation Brands (US)
Pernod Ricard (FR)
LVMH (FR)
ABIB (BE)
Diageo (UK)
2008 2009
Source: Xerfi Global calculations. Primary source: annual reports. Kirin does not report operating profit by division on a consolidated basis and was consequently not taken into account. *Estimates based on the group’s two alcoholic beverage subsidiaries
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3.2. Structure of competition
Profits up, in line with sales figures
Combined operating profit of the analysed alcoholic beverage producers
unit: billion euros Average operating margin of the analysed alcoholic beverage producers
unit: 2005/2009 average operating margin in %
7
9
11
13
15
17
19
2005 2006 2007 2008 2009
0% 5% 10% 15% 20% 25% 30% 35% 40%
Heineken (NL)
UB (IN)
SAB Miller (UK)
Constellat ion Brands (US)
Average
Pernod Ricard (FR)
ABIB (BE)
Diageo (UK)
LVMH (FR)
Source: Xerfi Global calculations. Primary source: annual reports. Source: Xerfi Global calculations. Primary source: annual reports.
The average operating margin of the analysed producers for the 2005-2009 period stands at 20.4%. In absolute terms, profits have jumped by 77% over the period reflecting higher sales (+66.0%) and the general shift to higher margin businesses. Groups with a clearly defined premium positioning such as LVMH and Diageo have outperformed the industry with margins regularly in excess of 30%. Conversely, beer specialists including Heineken and SAB Miller have stood around the average, while world leader Anheuser – Busch InBev has done better than spirit specialist Pernod Ricard and wine specialist Constellation Brands.
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3.2. Structure of competition Presence by product segment
An industry dominated by specialists
Presence of the leading groups in the main product segments unit: squares reflect the importance of each product segment in total alcoholic beverages revenues
Groups Beer Wine Spirits Strategic group Volume market share in branded alcoholic
beverages
ANHEUSER-BUSCH INBEV >15%
SAB MILLER >10%
HEINEKEN
Beer specialists
>8%
PERNOD RICARD <2%
LVMH Premium wine and spirit specialists
<2%
CONSTELLATION BRANDS* Premium wine specialist <3%
WULIANGYE YIBIN Entry-level spirit specialist N/A
DIAGEO Diversified premium producer <3%
UNITED BREWERIES Entry-level diversified producer <3%
KIRIN Diversified producer <2% Source: Xerfi Global estimates. *also present in beer and spirits through imports
While operating in the same industry, the analysed groups have very different positioning in terms of product portfolio. The industry can be loosely divided into two main categories: - Specialised groups: Anheuser-Busch Inbev, SAB Miller and Heineken are global beer market players. Pernod Ricard, LVMH are luxury drinks specialists, while Constellation Brands focuses on premium wine and Wulyangye Yibin on affordable Chinese spirits; - Diversified groups: Diageo focuses on the premium segment in every product and United Breweries on entry-level beverages. Kirin has a more balanced portfolio with wines, beers and spirits.
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3.2. Structure of competition Presence by geographical segment
Market leaders have acquired international presence
Presence of the leading groups in the main geographic segments how to read: Heineken generates 79 % of its sales in its domestic market (right text box, white). The remainder is generated abroad (left text box, light blue)
International sales Groups 0-20% 20-40% 40-60% 60-80% +80%
ANHEUSER BUSCH Europe (18.5%)
SAB MILLER Europe (21.5%)
DIAGEO Europe (29.5%)
LVMH Europe (34%)
PERNOD RICARD Europe (40.9%)
CONSTELLATION US (58.9%)
KIRIN Japan (77.2%)
HEINEKEN Europe (79%)
+80% 60-80% 40-60% 40-20% 0-20%
Domestic sales Source: Xerfi Global calculations. Figures for United Breweries and Wuliangye Yibin were not disclosed.
The fairly high degree of internationalisation of the analysed producers is the reflection of two main long term trends: - Mergers and acquisitions have given birth to international heavyweights. The most prominent example of megadeal in the industry is most certainly the 2008, 52 billion dollar mergers between Anheuser Busch (US) and Inbev (BE); - Organic international development, either through exports to local wholesalers, mass retailers and speciality retailers, or through the creation of local distribution subsidiaries and point of sales.
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3.3. Corporate strategies External growth
Mergers and acquisitions are particularly frequent in the sector
Industry consolidation: the history of Anheuser - Busch InBev
Mergers in the industry: expected positive outcomes
Source: Xerfi Global Source: Xerfi Global
Mergers between competitors and targeted acquisitions have been one of the main strategic weapons used by producers in order to boost sales and profits, both in the beer and in the wine/spirit segment. The most striking case of industry consolidation in the sector is found in the history of what is today Anheuser-Busch Inbev, the result of thirty years of substantial international merger deals. By merging and acquiring competitors, producers expect reduced operating costs through synergies and economies of scale as well as lower cost of goods thanks to increased bargaining power. Judging from the sound profit margins reached by the analysed groups, external growth seems to have paid off.
Top 5 outcomes of mergers in the industry
Economies of scale (regional level)
Synergies in support functions
Extended distribution channels
Extended product and brand portfolio
Increased bargaining power (procurement) Stella Artois
(BE) Piedboeuf
(BE) Brahma
(BR) Antarctica
(BR)
AmBev, 1999 (BR)
Interbrew, 1987 (BE)
InBev, 2004 (BE/BR)
Anheuser - Busch (US)
Anheuser - Busch InBev (2008) (BE/BR/US)
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3.3. Corporate strategies
Overview: five years of intense M&A activity
Year Purchaser Target Region/Country Price*
2005 Pernod Ricard Allied Domecq (wine and spirits) UK 10.7 billion euros
2005 SAB Miller Bavaria (beers) Latin America About 8 billion dollars
2006 Constellation Brands Vincor International (wine) Canada 1.3 billion dollars
2007 Merger of SAB Miller and Molson Coors’ US operations (beers) USA -
2007 Constellation Brands Spirits Marque One Europe About 350 million dollars
2008 Heineken Scottish and Newcastle (beers) Europe 6.9 billion euros
2008 InBev Anheuser – Busch (beers) USA 52 billion dollars
2008 Diageo Ketel One (50%) (vodka) Europe 900 million dollars
2008 Pernod Ricard V&S Europe 5.69 billion euros
2009 Kirin San Miguel Brewery (48.4%) Philippines About 1 billion dollars
2010 Kirin Lion Nathan (beer) Australia About 3 billion dollars
2010 Heineken FEMSA’s beer operations Mexico 5.3 billion euros
2010 Heineken BBAG (beer) Europe 1.9 billion euros Source: Xerfi Global with groups and business press.*Prices as disclosed by business press at the moment of the deal
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3.3. Corporate strategies Internationalisation
Producers focus on emerging countries to offset decline in major markets
Contribution of Latin America and Africa/Asia to SAB Miller’s total sales
unit: share in % Contribution of the main regional markets to SAB Miller’s growth unit: %
10%
15%
20%
25%
2005 2006 2007 2008 2009
Latin America Africa and Asia
0% 5% 10% 15% 20% 25%
North America
South Africa
Africa and Asia
Europe
Latin America
Source: Xerfi Global calculations. Primary source: SAB Miller Source: Xerfi Global calculations. Primary source: SAB Miller
Faced with falling per capita consumption in the world’s largest markets (Europe, North America, Japan), leading producers are paying more and more attention to low-price, fast-growing consumer markets with a view to increase local production and average prices in order to boost revenues. All major producers already derive a significant share of their revenues from emerging markets. Chart 1 and Chart 2 underline for instance the rising importance of Latin America and Africa/Asia for beer specialist SAB Miller. Since 2005, the group’s revenues in Latin America have leapt by an impressive 172.7%, largely thanks to the 2005 acquisition of brewer Bavaria, and doubled in Asia/Africa mostly on an organic basis. It is therefore no wonder that these segments were amongst the main contributors to the group’s 54.8% hike in revenues over the period.
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3.3. Corporate strategies
Spirits producers buy in baijiu
Understanding consumer tastes: spirits specialists acquire local Chinese producers
Source: Xerfi Global with business press
Baijiu is a type of liquor generally made from grains such as wheat or rice particularly popular in China and which has been part of the country’s tradition for millenniums. Since spirits account for the large majority of Chinese alcoholic consumption and that foreign products are said to be less than 1% of national consumption, leading international spirits producers have logically decided to step up their presence in local production. UK’s Diageo, which owns a 49% stake in local producer Sichuan Swellfun, is for instance striving to acquire a controlling stake in the group provided that Chinese regulatory bodies give their approval. In 2007 already, LVMH took a 55% stake in Wen Jun Distillery, one of China’s top three baijiu producers, while the 2008 acquisition of V&S by Pernod Ricard enabled the latter to inherit a joint venture with JianNanChun Group (Wen Jun’s parent company at the time).
WEN JUN
SICHUAN SWELLFUN
JIAN NAN CHUN
49% stake
55% stake
Joint-venture
PERNOD RICARD
DIAGEO
LVMH
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3.3. Corporate strategies Innovation
Beer specialists are following Nestlé’s Nespresso model
Innovation: objectives of ABIB’s and Heineken’s beer dispensers
Source: Xerfi Global
Following the steps of Nestlé and Sara Lee in the coffee market, Anheuser-Busch InBev and Heineken have recently launched their draught-beer dispensing device targeted at consumers in Europe and in the US. The recipe of the beer industry’s leaders is very similar to that of Sara Lee’s Senseo and Nestlé’s Nespresso: a proprietary system designed and manufactured by a third-party specialist (Krups, SEB, Philips…), a close-integration of hardware with product (beer kegs) and service (member clubs, after sales), a direct online distribution channel and, in the end, an improved experience for customers, and increased sales and profits for beer producers. Less mainstream than their counterparts from the coffee business for the moment, Heineken and ANBI have both reported positive customer feedback and sales figures concerning their new devices.
ANHEUSER – BUSCH INBEV’S PERFECTDRAFT
AND HEINEKEN’S BEERTENDER:
TARGETING INCREASING SALES
AND PROFITS
IMPROVING CUSTOMER EXPERIENCE
Improved beer quality. Stimulates consumption
CHARGING HIGHER PRICES
The prices for beer kegs are higher than for beer bottles. Higher perceived value allows higher prices
REDUCING RETAILER PRESSURE
Direct sales (eg through a website) enable beer producers to get rid of traditional intermediaries, hence higher margins
INCREASING CUSTOMER LOYALTY
Use of proprietary devices: a Heineken beer dispenser must only be used with Heineken beer brands, hence recurring revenues
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3.3. Corporate strategies
Producers forced to develop new products in line with a changing society
Adapting to new market trends: the case of Kirin
Source: Xerfi Global with Kirin
Food and beverages are widely considered an important part of a country’s culture with decade-long traditions and strong differences in consumer habits. In order to keep pace with changing consumer tastes, beverage producers must however innovate in order to stimulate alcohol consumption, a challenge given the general market environment the alcohol industry is faced with. Kirin of Japan has recently launched a significant number of new beers and liquors answering issues such as poor consumer spending, growing health awareness and hostile perception of alcohol and its possible consequences. Kirin reports that its “new genre products” enjoyed sales volume up 21% in 2009, compared to a 7% decline in total beer sales in volume.
Tight consumer spending
DEMAND TRENDS SUPPLY TRENDS
Development of discount beers
Kirin Nodogoshi Nama, a Kirin beer subject to a more favourable taxation (less than 67% of malt)
Health-conscious mindsets Development of diet beers
Launch of Kirin Zero, a beer with zero carbohydrate
Increasing abstinence Development of alcohol free beers
Launch of Kirin Free, an alcohol-free beer
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3.3. Corporate strategies Portfolio management
Producers shift to higher-margin businesses as consumption falls in major markets
Expanding in high profit segments: the case of Diageo
Source: Xerfi Global with Diageo. Non-exhaustive list.
Efforts are being made among leading beer, wine and spirits producers to push into higher margin businesses as average alcohol consumption per capita is shrinking in a great many developed countries. UK-based Diageo stands out in the global competition owing to its product portfolio which is both diversified but restricted to premium drinks. Born from the merger between GrandMet and Guinness PLC in 1997, the group has been increasingly focusing on premium drinks while divesting non-core operations (Häagen-Dazs ice creams, Burger King fast-food restaurant chain etc.). Second only to luxury group LVMH in terms of profitability over the 2005-2009 period, Diageo also has also been reporting strong organic growth rates. The group’s sales grew by 5% in 2009 (+2% organic growth) compared to 0.5% for the industry.
Vodka
Whisky
Beer
Liqueur
Diageo’s premium drink portfolio
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3.3. Corporate strategies Brand management
Extensive marketing expenditure vital to spark desire and consumption
Marketing expenses of selected groups
unit: billion euros Diageo’s operating cost structure unit: %
0 1 2 3 4 5
Diageo (UK)
Heineken (NL)
ABIB (BE)
Raw materials and consumables
20.3%
Marketing13.3%
Staff costs12.5%
Excise duties30.2%
Others23.7%
Source: Xerfi Global with groups Source: Xerfi Global calculations. Primary source: Diageo
Industry leaders Diageo, Heineken and Anheuser-Busch InBev spent some 7.15 billion euros in marketing expenditures in 2009 (13.2% of their combined revenues), reflecting the necessity for beverage producers to support sales with frequent and long-lasting marketing campaigns. Marketing expenditure is therefore as important for the beverage industry as capital expenditure for the oil industry or R&D for pharmaceutical companies. Premium specialist Diageo actually spends more money on sales promotion than on salaries. It is important to bear in mind that alcoholic drinks are no normal goods and that alcoholic advertising is highly regulated in terms of media, airtime, targets and messages. Much like in other consumer markets, advertising is however necessary to support sales, build brand image and increase customer loyalty. Given this tight legal environment, marketing in the industry often includes initiatives including sponsorship programmes (sport events, concerts, naming agreements) and other indirect marketing methods (promotional items, viral campaigns, etc.).
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4. Company profiles
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4.1. Anheuser-Busch InBev Presentation
Fiscal year end : December 31st 2009 Headquarters Leuven
Key figures in 2009
Net Group sales 26.38 billion euros
Operating Profit 8.30 billion euros
Net group profit 4.21 billion euros
Staff 116,000
Anheuser-Busch InBev is a public company based in Leuven and listed on the Euronext stock exchange (ABI). It is the leading global brewer with more than 200 beer brands in the portfolio. It operates almost exclusively in the beer industry.
Anheuser-Busch InBev has an equity interest (50%) in the operating subsidiary of Grupo Modelo, the beer market leader in Mexico.
Anheuser-Busch InBev is organised geographically in 5 main divisions: North America, Latin America, Western Europe, Central and Eastern Europe and Asia Pacific
International presence North America (42.1% of net sales)
Rest of the world (57.9% of net sales)
Anheuser-Busch InBev Net sales: 26.38 billion euros
North America
42.1% of net sales
Latin America
25.9% of net sales
Western Europe
11.7% of net
l
Central and eastern Europe
6.7% of net sales
Asia Pacific
5.7% of net sales
Global export and Holdings
7.9% of net sales
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4.1. Anheuser-Busch InBev Corporate strategy
Focus on best-selling beers
The 2008 acquisition of Anheuser-Busch by InBev created the global market leader in beer. To keep the lead, a focused strategy has been planned in order to allocate the majority of the marketing resources to the highest potential beer brands owned by the company. The brands have been divided in three main categories: “focus brands” comprising Budweiser, Stella Artois and Beck’s, “multi-country brands” and “local champion brands”. These three categories account for almost two thirds of total volume. The company constantly tries to increase the loyalty of the customers towards its brands by innovating (marketing new products) but also renewing (new package sizes and label designs) its existing products.
Improving the financial position of the company
Anheuser-Busch InBev is trying to reduce its level of debt and its leverage. Therefore the company expects, since the 2008 acquisition, to reduce the dividends for the next 2 to 3 years.
External growth
External growth opportunities will continue to be a strategic cornerstone. The company, in the second half of 2010, was in talks to acquire the other half of Mexican competitor Grupo Modelo. Anheuser-Busch InBev gained its actual 50.2% economic stake in Grupo Modelo at the moment of InBev’s acquisition of Anheuser-Busch in 2008.
Increasing presence in emerging markets
The company held a ceremony in April 2010 for its first brewery in Southwest China. The new plant had a cost of 68.29 million euros and a production capacity of 300,000 tons of beer per year. The company also owns plants in Central China, Northern China and Southeast China. The location of the new plant is essential in getting a competitive advantage over other regional players (Sichuan Blue Sword Breweries Group and Chongqing Brewery Co Ltd for instance).
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4.1. Anheuser-Busch InBev Recent events
Date Event
InBev completes the acquisition of Anheuser-Busch for 52 billion US dollars. November 2008
The newly formed entity starts trading on the Euronext Brussels stock exchange under the symbol ABI.
December 2008 Anheuser-Busch InBev cuts 1,400 U.S. jobs, about 6% of its total U.S. workforce.
Anheuser-Busch InBev sells its minority stake in Tsingtao Breweries to Asahi Breweries. The 19.9% stake Is sold for 667 million US dollars. The generated proceeds will be used to repay debt incurred in the acquisition of Anheuser-Busch.
January 2009
The company prices a 3.5 billion euro Bond issue. The cash raised will be used to repay some of the debt InBev incurred to buy Anheuser-Busch.
May 2009 Kohlberg Kravis Roberts & Co. agrees to buy Oriental Brewery from Anheuser-Busch InBev for 1.8 billion
dollars.
The company sells its central European operations to CVC Capital partners group, a UK based private equity firm.
October 2009
Anheuser-Busch InBev agrees to sell its U.S. theme parks to private equity group Blackstone for up to 1.9 billion euros, to help pay for its merger.
Anheuser-Busch InBev temporarily lays off its Belgian brewery workers. January 2010
Plastic and metal packaging company Ball Corp. acquires four Anheuser-Busch InBev plants for 437.2
million euros. March 2010
The company announces a three-year environmental plan. By the end of 2012, the company plans to reduce its water use by 30%. Additionally the group plans to recycle and re-use 99% of the waste associated with brewing and packaging beers.
April 2010 Carlsberg and Anheuser-Busch InBev are considering joining ranks in India, where they are both minor players.
Source: Xerfi Global. Primary source: business press.
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4.1. Anheuser-Busch InBev Key data
Anheuser-Busch InBev’s net sales units: billion euros; annual % change Anheuser-Busch InBev’s net sales by segment
unit: share in %
5
10
15
20
25
30
2005 2006 2007 2008 2009-20%
0%
20%
40%
60%
80%
100%
120%
North America
42%
Global export and holdings
8%
Latin America26%
Western Europe
12%
Central and eastern Europe
7%
Asia Pacific5%
Source: Anheuser-Busch InBev annual reports Source: Anheuser-Busch InBev annual reports
Chart 1: The 2008 acquisition led to a dramatic hike in consolidated revenues. In 2009 the company’s net sales amounted to 26.38 billion euros, down 6% from 2008.
Chart 2: The merger gave birth to a highly internationalised group, with revenues equally split between North America, Latin America and Europe.
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4.1. Anheuser-Busch InBev
Anheuser-Busch InBev’s operating profit and operating margin units: billion euros; % Anheuser-Busch InBev’s operating profit by segment
unit: share in %
0
1
2
3
4
5
6
7
8
2005 2006 2007 2008 200920%
22%
24%
26%
28%
30%
Asia Pacific1%
Central and eastern Europe
3%
Western Europe
6%
Latin America37%
Global export and holdings
5%
North America
48%
Source: Anheuser-Busch InBev annual reports Source: Anheuser-Busch InBev annual reports
Chart 1: Anheuser-Busch inBev’s consolidated operating profit increased in 2008 following the acquisition of Anheuser-Busch by InBev. Nevertheless in 2008 the operating margin decreased by almost 4 percentage points from the preceding year. In 2009 the acquisition resulted in an operating profit of 7.3 billion euros and an operating margin of 27.8%.
Chart 2: The company’s operating profit by division shows a clear preponderance of the North and Latin America markets which account for 85% of the operating profit of Anheuser-Busch InBev.
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4.2. Heineken Presentation
Fiscal year end: December, 31st 2009
Headquarters Amsterdam
Key figures in 2009
Net group sales 14.70 billion euros
Operating profit 1.63 billion euros
Net group profit 1.1 billion euros
Staff 55,301
Heineken Holding N.V. is a public company based in Amsterdam and listed on the Euronext stock exchange (HEIO). The company holds 50.005% of the issued share capital of Heineken N.V.
Heineken N.V. is the operational subsidiary of the group and is engaged in the production of beer and the management of a portfolio of over 200 brands such as Heineken, Amstel , Birra Moretti, Cruzcampo, etc.
The company is organised geographically in 5 segments: Western Europe, Central and Eastern Europe, the Americas, Africa and Middle East, Asia Pacific.
International presence Western Europe (UK, Netherlands, Spain, Belgium, Finland, France, Ireland, Italy, Portugal and Switzerland.)
Central and Eastern Europe (Greece, Austria, Slovakia, Bulgaria, Macedonia, Poland, Romania, Croatia, Belarus, Russia, Germany, Hungary, Serbia and the Czech Republic)
The Americas (USA, Canada, Latin America and the Caribbean) Africa and Middle east (Nigeria, Egypt, Democratic Republic of Congo, South Africa)
Heineken Holding N.V. Net sales: 14.70 billion euros
Western Europe
57.3% of net
sales
Central and Eastern Europe
21.7% of net sales
The Americas
10.7% of net sales
Africa and Middle East 12.3% of net
sales
Asia Pacific
2.0% of net sales
Heineken N.V. Head
Office -4% of net
sales
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4.2. Heineken Corporate strategy
Internationalisation
Heineken has a global network of distributors and more than 120 breweries to ensure a wide international presence along with a policy of a combination of companies, licences, strategic partnerships and alliances. The acquisition of FEMSA in 2010 clearly goes in this direction, allowing the company to have a major new platform to grow value in the South American region. Agreements and proposed acquisitions in India, Asia and Latin America aim to increase Heineken’s presence in emerging markets. The partnership in India which led to a 37.5% control of United breweries is a recent example of Heineken’s ambition.
Expansion in premium beers
A long-term brand strategy is used in order to establish a broad leadership. The acquisition of strong brands is often preferred. If a market is in the hands of other brewers all the efforts are directed into developing a premium segment with the Heineken beer.
Reinforce its iconic status
The company invests heavily in sponsorship and creates its own events across three cultural platforms: sport, music and film. The Heineken jamming festival and the UEFA Champions league are the most striking examples of this strategy.
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4.2. Heineken Recent events
Date Event April 2008
Heineken and Carlsberg acquire jointly Scottish and Newcastle and split the company’s assets. In addition to the UK operations of Scottish and Newcastle, Heineken will get units in Ireland, Portugal, Finland, Belgium, the U.S. and India.
October 2008 Heineken announces a new factory in Seville, Spain. The 260 million euro investment is aimed at creating
350,000 square meters of constructed area.
April 2009 Heineken announces its intention to take over Staropramen, a Czech subsidiary of Anheuser-Busch InBev.
The potential price of the operation is 226 million euros.
December 2009 Heineken's entry in India will be through a shareholders' partnership with United Breweries Ltd, to
distribute Heineken beer.
January 2010 FEMSA, the largest beverage company in Mexico, agrees to exchange its beer operations for a 20%
economic interest in Heineken. The transaction has been valued around 5.3 billion euros.
Heineken will repurchase its own shares for a maximum value of 100 million euros. These shares are intended to be handed to FEMSA .
March 2010
Heineken opens a new brewery in South Africa. April 2010
Heineken (world's third largest brewer by volume), announces that its first-quarter volume collapsed because of an excise duty increase that hit its corporate sales in Russia and Nigeria, causing instability in the African region.
May 2010 Heineken announces two new community projects in South Africa: a mobile health care clinic near
Johannesburg and support for a new business training initiative for athletes.
June 2010 Heineken subsidiary Alken Maes completes the merger by acquisition of Affligem Brewery in Belgium. The
operation is part of Heineken’s strategy to streamline its Belgian activities.
Source: Xerfi Global. Primary source: business press.
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4.2. Heineken Key data
Heineken’s net sales units: billion euros, annual % change Heineken’s net sales by segment
unit: share in %
8
10
12
14
16
2005 2006 2007 2008 20090%
5%
10%
15%
20%
25%
30%
A i P ifi
Africa and Middle East
12%
The Americas10%
Central and Eastern Europe
21%
Heineken N.V. Head Office
0%
Western Europe
55%
Source: Heineken’s annual report Source: Heineken’s annual report
Chart 1: Heineken’s net sales reached 14.70 billion euros in 2009. They have been growing at a very firm pace (+52%) since 2005 owing to both organic and external growth.
Chart 2: The breakdown by region shown in the chart above shows that the majority of the revenue comes from western Europe. Following the acquisition of FEMSA the Americas’ market share is set to increase in 2010 along with the Asia Pacific market share (partnership with United Breweries).
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4.2. Heineken
Heineken’s operating profit and operating margin units: billion euros; % Heineken’s operating profit by segment
unit: share in %
1,0
1,2
1,4
1,6
1,8
2005 2006 2007 2008 20096%
8%
10%
12%
14%
16%
18%
Asia Pacific4%
Africa and the Middle East
29%
The Americas13%
Central and Eastern Europe
20%
Heineken N.V. Global Holding
3%Western Europe
31%
Source: Heineken’s annual report Source: Heineken’s annual report
Chart 1: The company’s operating profit reached a record high in 2009, up 38% from 2008 to 1.63 billion euros. The operating margin has also significantly improved and stood at 11.1%.
Chart 2: The split of the operating profit by region shows a non proportional breakdown with regard to the net sales chart. Africa and the Middle East region generate a very high percentage of operating profit keeping into consideration that only 12% of net sales come from that region.
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4.3. SAB Miller Presentation
Fiscal year end : March, 31st 2010
Headquarters London, UK
Key figures in 2009
Net group sales 18.62 billion euros
Operating profit 1.85 billion euros
Net group profit 1.47 billion euros
Staff 70,131
SAB Miller is one of the world’s largest brewers with interests in each of the 6 continents. It is a public company listed on the London stock exchange (SAB)
The company has a portfolio of over 200 brands of beer, however it is also involved in the production of soft drinks.
The company formed a joint venture with Molson Coors Brewing company. The resulting entity, MillerCoors, is headquartered in Chicago and manages the US and Puerto Rico operations of SAB Miller and Molson Coors.
International presence Europe (Czech Republic, Hungary, Italy, Poland, Romania, Russia, Slovakia, Spain, The Netherlands, UK, Germany).
North America (US, Canada). Latin America (Colombia, Ecuador, El Salvador, Honduras, Panama and Peru).
SAB Miller Net sales: 18.62 billion euros
North America
20.6% of net sales
Latin America
21.9% of net sales
Europe
24.2% of net sales
Africa and Asia
16.3% of net sales
South Africa
17% of net sales
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4.3. SAB Miller Corporate strategy
Developing a strong brand portfolio for every market
The company is trying to develop an attractive brand portfolio in order to meet consumers’ needs in each of the markets the company operates in. In many markets, consumers are shifting to premium beer brands, while in others consumers favour entry level drinks.. With over 200 brands, SAB Miller hopes to cover all price points and consumer needs from economy to premium beers.
Cost reduction
In North America, the group is striving to improve its profitability. This has been made for instance by the creation of the MillerCoors joint-venture. In Latin America, the group has implemented cost reduction programmes and a shift to premium products. The group’s EBIT (i.e. earnings before interests and taxes) increased by 23% between 2005 and 2009.
Increasing the presence in emerging markets
Beer consumption growth rates in emerging markets are expected to outstrip the global average. SAB Miller’s focus on emerging markets is explained through acquisitions of local producers along with an intense organic growth. Emerging markets represent the biggest share of SAB Miller’s profits.
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4.3. SAB Miller Recent events
Date Event June 2008
SAB Miller and Molson Coors announce the closing of the transactions to combine their US and Puerto Rico operations. The joint venture will create MillerCoors which will begin operating on July 2008 and is necessary to succeed in the highly competitive marketplace.
February 2009 SAB Miller’s joint venture in China announces the acquisition of three breweries in Anhui, Liaoning and
Zhejiang for a total investment of 77.4 million of euros.
September 2009 SABMiller Africa announces an agreement with Trade Kings Limited to acquire its Maheu business for 13.5
million euros.
January 2010 SABMiller considers buying Argentine brewer Isenbeck for 210 million euros.
SAB Miller makes a recovery in the emerging markets of Latin America and Asia which contribute to over 85 % of the company’s overall profits.
SABMiller announces that a boosting of its production of beer in South Africa is underway to keep up with the anticipated increase in demand during the World Cup. SAB Miller expects sales during the tournament to go up by about 5%.
May 2010
SABMiller's big lead in fast-growing emerging markets is to reinstate its valuation premium: the emerging markets of Latin America, Africa and Asia are recovering faster than mature markets, the main source of its rivals’ net profits.
SAB Miller is considering buying the beer division of Foster’s. SABMiller already owns Foster’s brewing rights in the US as well as Foster’s India unit. The company seems to be considering a bid of about 7.2 billion euros for the acquisition.
June 2010
SABMiller launches Grolsch in Romania. The company feels that the new brand will best reflect the needs of the Romanian population.
Source: Xerfi Global. Primary source: business press.
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4.3. SAB Miller Key data
SAB Miller’s net sales units: billion euros; annual % change SAB Miller’s net sales by segment
unit: share in %
10
12
14
16
18
20
2005 2006 2007 2008 20090%
5%
10%
15%
20%
25%
Latin America24%
Europe21%
North America
20%
Africa and Asia17%
South Africa18%
Source: SAB Miller’s annual reports Source: SAB Miller’s annual reports
Chart 1: SAB Miller’s generated net sales of 18.62 billion euros in 2009, up 7% from 2008. The group’s sales grew by 54.3% between 2005 and 2009, reflecting a great many strategic acquisitions.
Chart 2: SAB Miller’s net sales by division are evenly balanced. In 2009 the European region is where most of the net sales of the group come from. The Americas represented 43% of the total.
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4.3. SAB Miller
SAB Miller’s operating profit and operating margin units: billion euros; % SAB Miller’s operating profit by division
unit: million euros
1,0
1,5
2,0
2,5
3,0
2005 2006 2007 2008 20098%
10%
12%
14%
16%
-200 -100 0 100 200 300 400 500 600 700 800
Corporate
Asia
North America
Africa
Europe
South Africa
Latin America
Source: SAB Miller’s annual reports Source: SAB Miller’s annual reports
Chart 1: SAB Miller reported an operating profit of 1.85 billion euros (9.9% of its net sales) in 2009. This decline is essentially explained by costs related to the group’s business capability programme.
Chart 2: Emerging markets have a very significant contribution to SAB Miller’s total operating profit in 2009. In particular, profits generated in Latin America were particularly high when compared to local sales.
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4.4. Diageo Presentation
Fiscal year end : June, 30th 2010
Headquarters London, UK
Key figures in 2009
Net group sales 8.66 billion euros
Operating profit 2.28 billion euros
Net profit 1.54 billion euros
Staff 24,270
Diageo is an international company engaging in the production of alcoholic beverages. The company produces a collection of branded spirits, beers and wines.
The company is listed on the London Stock exchange (DGE) and has American depositary receipts listed on the New York stock exchange.
Diageo is organised geographically in 4 main divisions : North America, Europe, International and Asia Pacific.
Joint distribution arrangements with Champagne house Moet Hennessy have been started in Europe and Asia Pacific. Diageo owns 34% of Moet Hennessy.
International presence North America (United States and Canada)
Europe (Great Britain, Ireland, Iberia, Northern Europe, Southern Europe, Russia and Eastern Europe)
International (Latin America and the Caribbean, Africa and the Middle East) Asia Pacific (India, China, South Korea, Japan, Australia and New Zealand)
Diageo Net sales: 8.66 billion euros
North America
35.3% of net sales
Europe
29.7% of net sales
International
24.5% of net sales
Asia pacific
9.7% of net sales
Corporate
0.8% of net sales
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4.4. Diageo Corporate strategy
Maintaining the lead in the world premium drinks business
Diageo is one of the few premium drinks companies that operate across spirits, beer and wine. Diageo is nowadays the leading premium spirits business in the world by volume, by net sales and by operating profit. Diageo will therefore continue its strategy of investing in global brands, expanding internationally (emerging markets especially) and launching innovative new products and brands.
Focusing on emerging markets
The company intends to focus on premium drinks to grow the business through sales and operating profit growth and the acquisition of premium drinks brands that add value for shareholders. Diageo in the future will continue to expand the business in certain countries where consumer spending and spending on Diageo’s products has not historically been very high but where there are prospects for growth.
Focusing on global priority brands
Global priority brands (Smirnoff, Captain Morgan, Jose Cuervo and Guinness) are Diageo’s primary growth drivers across markets. The difference with the other brand categories (i.e. local priority brands and category brands) is that local priority brands have leading positions in the markets in which they are distributed and category brands include the smaller scale brands in Diageo’s collection.
Distribution consolidation in the US
In North America, Diageo’s most important market in terms of net sales, Diageo has pursued a distribution strategy centred around consolidating the distribution of Diageo’s US spirits and wine brands into a single distributor in each state where and if it is possible. This distribution strategy intends to provide a consolidated distribution network, which will improve Diageo’s and the distributors’ selling capabilities and will permit a number of alternative approaches to optimise product distribution.
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4.4. Diageo Recent events
Date Event June 2008
Diageo is to build a distillery in the U.S. Virgin Islands. The new distillery will supply the rum used to make its Captain Morgan branded products for the US market. The new plant will be built in partnership with the U.S. Virgin Islands and is expected to begin production in 2011.
November 2008
Diageo reviews a possible collaboration with India's United Spirits. Diageo may take a minority stake in United Spirits, following the European drink makers’ trend to increase their presence in India's fast growing market.
April 2009
Diageo and Kirin Brewery Co. have decided to form a joint venture engaged in the manufacturing and sale of Guinness beer and Smirnoff vodka. Diageo and Kirin Brewery Co. will respectively hold a 51% stake and a 49% stake in the new joint venture, to be established in June 2009.
June 2009 Diageo will increase its investment in Stirrings LLC, a premium cocktail mixer portfolio, to 100%. In 2007, Diageo made a 20% minority investment in Stirrings. Diageo is to shed 900 jobs in Scotland by closing a whisky bottling plant and grain distillery. The company is trying to cut costs to try and cope with the downturn.
July 2009
Diageo‘s African subsidiary, East African Breweries Limited, has entered into a conditional agreement to acquire a substantial interest in Serengeti Breweries Limited, a Tanzanian company. Diageo might spend 730 million euros to take over Sichuan Shui Jing Fang and therefore add Chinese white spirits to its portfolio of brands.
March 2010
Diageo and Heineken will take supplies from a malting plant to be built by local firm Fabcos in South Africa for 50 million euros. Diageo will cut about 90 jobs at its U.S. wine division. The company is also considering selling brands and vineyards in an attempt to scale back the business to reduce costs.
May 2010
East African Breweries Ltd., the Kenyan subsidiary of Diageo Plc, is about to start distributing Diageo’s Blossom Hill wine in Kenya. East African Breweries controls about 95% of the Kenyan beer industry.
Source: Xerfi Global. Primary source: business press.
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4.4. Diageo Key data
Diageo’s net sales units: billion euros; annual % change Diageo’s net sales by segment
unit: share in %
5
6
7
8
9
2005 2006 2007 2008 20090%
2%
4%
6%
8%
10%
12%
14%
16%
North America
34%
Europe28%
International
27%
Asia Pacific10%
Corporate1%
Source: Diageo’s annual report Source: Diageo’s annual report
Chart 1: Diageo’s revenues have been increasing at a particular fast pace over the last five years and topped 8.66 billion euros in 2009. The group owes much of its growth to increasing prices and volumes and has not relied much on acquisitions so far.
Chart 2: Diageo has a highly diversified structure of revenues in terms of geographical markets. In particular, the group has a strong presence in North America and Europe.
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4.4. Diageo
Diageo’s operating profit and operating margin units: billion euros; % Diageo’s operating profit by division
unit: million euros
1,0
1,5
2,0
2,5
2005 2006 2007 2008 200925%
26%
27%
28%
29%
30%
-200 0 200 400 600 800 1000 1200
Corporate
Global Supply
Asia Paci fic
Europe
International
North America
Source: Diageo’s annual report Source: Diageo’s annual report. Excluding corporate functions.
Chart 1: Diageo’s operating profit reached 2.27 billion euros in 2009, a five-year high while the group’s operating margin
Chart 2: Diageo derives the large majority of its profit from its North America, International and Europe reporting segments. Asian profits are less substantial but are in line with the contribution of the region to total sales
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4.5. Pernod Ricard Presentation
Fiscal year end : June, 30 2010
Headquarters Paris, France
Key figures in 2009
Net group sales 7.08 billion euros
Operating profit 1.79 billion euros
Net group profit 951 million euros
Staff 18,177
Pernod-Ricard is a French producer and distributor of spirits and wines. In the sector it is the fifth biggest producer, following Diageo and worldwide brewers such as Anheuser Busch InBev, SAB Miller and Heineken.
The company made several important acquisitions in the recent years such as Allied Domecq in 2005 and V&S in 2008
Pernod-Ricard has been listed on the Paris stock exchange since 1975 (RI) and has a market capitalisation of 17.4 billions of Euro.
The group is structured in 4 geographical zones: France, Europe, the Americas and Asia/rest of the world
International presence France
Europe Americas Asia/Rest of the World
Pernod Ricard SA Net sales: 7.20 billion euros
France
10.2% of net sales
Europe
30.7% of net sales
Americas
27.0% of net sales
Asia/Rest of the World
32.1% of net sales
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4.5. Pernod Ricard Corporate strategy
Increasing the size of the company both organically and externally
Acquisitions have been made for several years in an attempt to cover the global market. The most important operations were made in 2005 with the acquisition of Allied Domecq: the aim of this acquisition was to enable the Group to strengthen its presence in high-growth potential markets (North America in particular) and to add a number of new white spirits and liqueurs to its portfolio. Pernod Ricard financed this 6.6 billion euro investment by issuing shares and securities for 2 billion euros and with a 4.6 billion euro cash payment. In 2008 Pernod Ricard has acquired Vin & Spirit AB for 5.6 billion euros (mostly famous for its Absolut brand); this operation has pushed the Group to the rank of global co-leader in Wines & Spirits.
Investing first and foremost in strategic brands
The company owns one of the industry’s most prestigious brand portfolios which includes ABSOLUT vodka, Ricard Pastis, Ballantine’s, Chivas Regal and The Glenlivet Scotch Whiskies, Jameson Irish whiskey, Martell Cognac, Havana Club Rum, Beefeater Gin, Kahlúa and Malibu Liqueurs, Mumm and Perrier-Jouët champagnes as well as Jacob’s Creek and Montana wines. Pernod-Ricard focuses on 15 strategic brands, which account for more than 55% of Group sales and for 75% of advertising and promotion expenses.
Focus on premium brands
Pernod Ricard has developed its brand portfolio, in particular its key brands, by following a “premiumisation” strategy. Both in developed and emerging countries many consumers want quality and luxury, for which they are willing to pay a higher price. Pernod Ricard ranks number one in the segment for Premium and high-quality spirits: it is the world market leader for top-quality Scotch and acquired Absolut Vodka in 2008, one of the main premium vodka brand worldwide.
Expand in emerging markets which offer the strongest growth outlook
Emerging markets in Asia, Latin America and Central and Eastern Europe offer the strongest growth outlook. The growth model of Pernod Ricard focuses on leadership positions in emerging markets (especially the ones that managed to maintain satisfactory growth during times of economic turmoil) such as Russia, China, Brasil and India. Emerging markets represent 30% of the group’s operations.
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4.5. Pernod Ricard Recent events
Date Event July 2005
Pernod Ricard announces the successful completion of the acquisition of Allied Domecq which enables the Pernod Ricard Group to become the second operator in the world in the Spirits and Wine sector.
July 2008
Pernod Ricard announces the acquisition of Vin & Spirit AB (V&S) for 5.6 billion euros. The company will create two Swedish-based business units within V&S: Absolut Company, in charge of the Absolut brand, and Pernod Ricard Nordic, which will market Pernod Ricard’s international and local brands in Sweden, Denmark, Finland, Norway, the Baltic States and Iceland.
January 2009
Pernod Ricard announces the sale of Serkova Vodka to Amvyx SA. As part of its 2008 acquisition of V&S, Pernod Ricard made a commitment to the European Commission to divest a number of brands including Serkova Vodka.
Pernod Ricard SA signs an agreement to sell its Wild Turkey American straight bourbon to Gruppo Campari for a total purchase price of 433 million euros. The transaction includes the Wild Turkey brands, along with American Honey liqueur.
April 2009
Kirin Holdings Netherlands BV and Le Delos Invest 3, a company owned by Société Paul Ricard, have entered into a sale agreement. Le Delos Invest 3 undertakes to buy and Kirin undertakes to sell the full stake held by Kirin in Pernod Ricard. This stake represents 3.74% of the share capital and 3.37% of the voting rights of Pernod Ricard.
July 2009
Pernod Ricard sells the Tia Maria coffee liqueur brand for 125 million euros to Illva Saronno, in an attempt to further reduce its debt. The company took on debt to finance its acquisition of Sweden's V&S, the owners of Absolut vodka.
Source: Xerfi Global. Primary source: business press
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4.5. Pernod Ricard Key data
Pernod Ricard’s net sales units: billion euros; annual % change Pernod Ricard’s net sales by segment
unit: share in %
5
6
7
8
2005 2006 2007 2008 2009-5%
0%
5%
10%
The Americas27%
Europe31%
Asia/Rest of the World
32%
France10%
Source: Pernod Ricard’s annual report Source: Pernod Ricard’s annual report
Chart 1: Pernod-Ricard’s net sales grew by 16.7% between 2005 and 2009. They were down 1.7% in 2009, down to 7.08 billion euros due to divestments (Wild Turkey, Tia Maria and Bisquit were sold).
Chart 2: Pernod Ricard generated about 40% of its revenues in Europe, the remainder in international markets. In particular, sales and presence in emerging markets have increased dramatically.
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4.5. Pernod-Ricard
Pernod Ricard’s operating profit and operating margin units: billion euros; % Pernod Ricard’s operating profit by segment
unit: share in %
600
1 000
1 400
1 800
2 200
2005 2006 2007 2008 200920%
22%
24%
26%
28%
The Americas27%
Europe33%
Asia/Rest of the World
30%
France10%
Source: Pernod-Ricard’s annual report Source: Pernod-Ricard’s annual report
Chart 1: Pernod Ricard reported an operating profit of 1.79 billion euros in 2009 (1.85 billion euros in 2008). The group’s margin lost 1.3 point down to 25.3%.
Chart 2: Pernod Ricard’s operating profit by segment is consistent with the group’s revenues by segment, with Europe, the America and Asia top contributors.
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4.6. Kirin Presentation
Fiscal year end : December, 31st 2009
Headquarters Tokyo, Japan
Key figures in 2009
Net group sales 14.7 billion euros
Operating profit 1.0 billion euros
Net group profit 0,4 billion euros
Staff 35,150
Kirin Holdings is a Japanese holding company engaged mostly in the production and sale of alcohol beverages. The Company sells its products both in Japan and overseas.
The company is listed on the Tokyo stock exchange (2503) and on NASDAQ (KNBWY).
The Company is structured into four divisions. The Alcohol Beverages division is engaged in the manufacture and sale of beer, wine and spirits. The other divisions are soft drinks and foods, pharmaceuticals and other businesses (bio-chemicals, chemicals and real estate).
International presence Japan (77.2% of net sales)
Asia and Oceania (19.5% of net sales) Other regions (3.3% of net sales)
Kirin Holdings Group net sales : 14.7 billion euros
Alcohol beverages
38.7% of net sales
Soft drinks and foods
38.3% of net sales
Pharmaceuticals
10.7% of net sales
Other businesses
12.3% of net sales
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4.6. Kirin Corporate strategy
Reduce cost and debt
In order to increase the value of the firm, the management intends to pursue an integrated beverages strategy across the group, devote a lot of effort to finding and generating intra-group synergies and realise lean management across all operations to reduce costs and boost efficiency. Along with these actions, Kirin will continue reinforcing technical capabilities and developing customer relationships. A financial strategy consistent with this approach will also be pursued, utilising revenues from asset liquidation and projected growth in operating cash flow to repay debt.
External growth
The company has boosted growth through a series of mergers and acquisitions like Mercian and the Kyowa Hakko group in Japan, National foods, Dairy farmers and Lion Nathan in Australia and San Miguel Brewery in the Philippines. These operations have created a solid platform for future growth.
Reinforcements of core brands to build up leading category positions
Kirin is striving to focus on its core brands (such as Kirin Ichiban Shibori, Kirin Tanrei, Kirin Nodogoshi Namawhich) in its domestic market. In Japan this effort is necessary because of key market drivers like ageing population, the diversification of consumer tastes and a defensive consumer mindset due to economic fragility.
Focusing on International expansion
International expansion remains a group priority as demand abroad, especially in emerging markets, is expected to grow. In the international markets the Kirin brand will be used as a premium beer when it will be introduced.
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4.6. Kirin Recent events
Date Event January 2009 Kirin Holdings considers buying a 43% stake in San Miguel Brewery Inc.
Kirin Holdings announces that its subsidiary, Kirin Brewery, has decided to establish a new joint venture with Diageo, engaging in the manufacture and sale of premium alcohol. The new joint venture will be under the name of Diageo Kirin Company and will be established in June 2009. Kirin Brewery Company and Diageo will hold a 49% stake and a 51% stake in the new joint venture.
Brewer Lion Nathan and Kirin have reached an agreement on a deal for Kirin to acquire Lion Nathan. The companies have agreed on a deal under which Kirin would acquire all of the issued shares in Lion Nathan that it does not already own for the equivalent of 11.8 Euro per share.
April 2009
Kirin Holdings, has increased its stake in San Miguel Brewery, the Manila-based beer maker. Kirin raised its stake from 43% to 48.3 percent after buying 778 million shares for 107.5 millions of euro.
July 2009 Kirin Holdings is in talks to merge with Suntory Holdings. The new entity would form a beverage giant in Japan.
October 2009 Kirin announces that it will shut down two breweries in Japan in the next years to improve
efficiency over the long term.
December 2009
Kirin Holdings will buy six plants in China, Thailand, and other parts of Asia through group firm San Miguel Brewery. Two breweries are in China's Hebei and Guangdong provinces. The others are in Bangkok, Hong Kong, Jakarta, Indonesia and Vietnam.
February 2010
Kirin Holdings announces that it has terminated the talk on merger with Suntory Holdings due to opinion difference. The divergences over whether the new entity would be listed caused the deal to fail.
Source: Xerfi Global. Primary source: business press.
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4.6. Kirin Key data
Kirin’s net sales units: billion euros; annual % change Kirin’s net sales by segment
unit: share in %
8
10
12
14
16
2005 2006 2007 2008 20090%
10%
20%
30%
40%
Other businesses
12%
Pharmaceuticals11%
Soft drinks and foods
38%
Alcohol beverages
39%
Source: Kirin’s annual report Source: Kirin’s annual report
Chart 1: Kirin’s net sales increased between 2007 and 2009 as a result of the alliance with Mercian, the integration of Kirin Pharma and of the Kyowa Hakko group and the acquisitions of Australia’s National foods and Dairy farmers limited. The acquisition of Lion Nathan and the investment in San Miguel brewery also contributed to the increase in Kirin’s net sales.
Chart 2: Kirin’s net sales come mostly from the alcohol beverages and the soft drinks and foods business segments. However it is important to notice that there is a state liquor tax on alcohol beverages that brings down the proportion of revenue attributable to this business segment.
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4.6. Kirin
Kirin alcoholic beverage segment’s net sales units: billion euros; annual % change Kirin’s operating profit and operating margin (consolidated)
units: billion euros; %
3
4
5
6
7
2005 2006 2007 2008 2009-10%
0%
10%
20%
800
900
1000
1100
1200
2005 2006 2007 2008 20094%
5%
6%
7%
8%
9%
10%
Source: Kirin’s annual report
Chart 1: Kirin’s sales in the alcoholic beverage business fell 7.8% down to 5.68 billion euros in 2009 after three years of firm growth. Shrinking domestic demand for key products and adverse exchanges rates account for much of the decline according to the group.
Chart 2: Kirin’s operating profit increased in the 2008-2009 period following the company’s external growth operations. Interestingly, the operating profit rise couldn’t keep the pace of Kirin’s net sales increase: the operating margin decreased over the same period.
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4.7. LVMH Presentation
Fiscal year end : June, 30 2009
Headquarters Paris, France
Key figures in 2009
Net group sales 17.0 billions euro
Operating profit 3.3 billions euro
Net group profit 1.9 billions euro
Staff 77,302
LVMH is a France-based luxury goods company engaged in the production of wines, spirits, fashion, leather goods, perfumes, cosmetics, watches and jewellery. LVMH operates mainly in Europe, the Americas, and Asia.
The group was formed after two mergers: one brought together champagne producer Moët et Chandon and Hennessy, a cognac producer. In 1987, the newly formed entity merged with fashion house Louis Vuitton to form the current group.
The company is listed on the Euronext Paris exchange (MC). The Arnault group is the major shareholder with 47.3% of capital and 63.6% of voting rights.
International presence France (14% of net sales)
Europe (21% of net sales) United States (23% of net sales) Asia (23% of net sales)
LVMH SA Group net sales : 17.0 billion euros
Wines and spirits
16% of net sales
Fashion and leather goods
37% of net sales
Perfumes and cosmetics
16.1% of net sales
Watches and jewelry
4.5 of net sales
Selective retailing
26.5% of net sales
Other businesses
-0.1% of net sales
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4.7. LVMH Corporate strategy
Focusing on star brands
The group maintains a focus on key luxury brands with high potential. The company’s portfolio of wine and spirit brands is positioned in the high-end segment and is backed up by a strong distribution network. LVMH started to pursue a group strategy of organic growth of key brands at the beginning of the decade: key brands include Louis Vuitton, Hennessy, Moet & Chandon and Parfums Christian Dior. In the fashion clothing business, the company own prestigious brands such as Donna Karen and Fendi. Especially Louis Vuitton, Hennessy and Moet & Chandon represent the key profit drivers of the group.
Worldwide expansion
Group operating investments for the year 2009, after taking out the disposals, resulted in a cash outflow of 729 million euros. This amount reflects the Group’s growth strategy and that of its key brands such as Louis Vuitton, Sephora and Perfume Christian Dior. The group lately managed to make acquisitions in the Netherlands, Russia and France and plans to expand in Singapore and in Middle East, as well as in countries such as Egypt and Oman.
Diversification of activities
Diversification of activities will focus around luxury products as the group is willing to propose to its clients unique high-value added products. Recently LMVH has announced the creation of a subsidiary (LVMH hotel management) with the goal to diversify its activities and enter the luxury accommodation business with the brand “Cheval blanc”. In order to achieve this goal, the company in partnership with Egypt’s Orascom will build two luxury hotels in the middle east. The hotels will be built in Oman and Egypt and will be ready by 2012.
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4.7. LVMH Recent events
Date Event September 2008
LVMH announces that it has signed an exclusive agreement with Dutch-based investment company Egeria to acquire Royal van Lent, the Dutch designer and builder of luxury custom mega-yachts.
October 2008 LVMH acquires, through Sephora, a subsidiary of the Company, a 45% stake in Ile de Beaute, a perfume chain located in Russia.
December 2008
LVMH announces the acquisition of the Montaudon champagne house. Montaudon will join LVMH"s portfolio of champagne brands. The portfolio includes Dom Pérignon, Moët & Chandon, Veuve Clicquot Ponsardin, Krug, Ruinart and Mercier.
August 2009
LVMH announces the acquisition of 50% of Cheval Blanc (the producer of Chateau Cheval Blanc). LVMH also acquired 50% of the company La Tour du Pin, owner of the Chateau Quinault l'Enclos estate.
November 2009 LVMH 's Sephora announces the opening of a 1,200 square meters store in Singapore. Sephora opened its first store in Singapore in 2008.
March 2010 LVMH issues new shares. The number of outstanding shares will be increased from 4,400 to 47,200 shares through issuance of 42,800 new shares, immediately assimilated to the existing ones.
April 2010
LVMH plans to open two luxury property developments in Oman and Egypt under the Cheval Blanc brand. The projects, developed in collaboration with Orascom Hotels and Development, will cost 74.5 million euros.
May 2010 Kenzo, a unit of luxury goods maker LVMH, has acquired the Indigo trademark from Russian cosmetics producer Faberlic.
June 2010 LVMH has signed a contract with Kuehne+Nagel to become its exclusive logistics provider for warehousing and distribution services in Spain.
Source: Xerfi Global. Primary source: business press .
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4.7. LVMH Key data
LVMH wine and spirits’ net sales units: billion euros, annual % change LVMH wine and spirits’ net sales by region
unit: share in %
2,0
2,3
2,6
2,9
3,2
3,5
2005 2006 2007 2008 2009-15%
-10%
-5%
0%
5%
10%
15%
20%
Rest of Asia22%
Japan6%
United States26%
Rest of Europe25%
Other Markets
12%
France9%
Source: LVMH’s annual report Source: LVMH’s annual report
Chart 1: The net sales of LVMH’s wines and spirits division have been decreasing since the beginning of the financial and economic turmoil. In particular, sales were impacted by lower consumption in major markets and lower demand from retailers trying to reduce inventories, the group says.
Chart 2: LVMH’s operations in premium drinks are highly internationalised with over 90% of revenues generated out of France. In particular, LVMH is gaining ground in emerging markets, even if mature economies still represent the large majority of its revenues.
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4.7. LVMH
LVMH wine and spirits’ operating profit units: billion euros, annual % change LVMH wine and spirits’ operating margin
unit: %
0,0
0,2
0,4
0,6
0,8
1,0
1,2
2005 2006 2007 2008 2009-40%
-30%
-20%
-10%
0%
10%
20%
0.15
0.20
0.25
0.30
0.35
0.40
2005 2006 2007 2008 2009
Source: LVMH’s annual report Source: LVMH’s annual report
Chart 1: The operating profit of the LVMH’s alcoholic beverage segment decreased to 0.7 billion euros in 2009, primarily due to lower sales.
Chart 2: The company’s continues to have a relevant operating margin, even in 2009. It is important to state that overall LVMH didn’t experience the same drop in sales and operating profit in its other businesses (with the exception of the watches and jewellery division).
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4.8. Constellation Brands Presentation
Fiscal year end : February, 28th 2010
Headquarters New York, U.S.
Key figures in 2009
Net group sales 2.39 billion euros
Operating profit 221 million euros
Staff 6,600
Constellation Brands is a US based company engaged mainly in the production of wine, spirits, imported beer and other selected alcohol beverage products. It operates and distributes more than 250 beverage alcohol brands in nearly 150 countries.
The company has a joint venture with Grupo Modelo, the Mexican brewer, to import its products to the US and Canada. Both companies have equal interest in the joint venture (Crown imports).
Constellation Brands is a public company listed on the New York Stock exchange (STZ and STZ.B)
The company has a portfolio of over 200 brands across the wine, beer and spirits categories: Robert Mondavi, Corona, Svedka Vodka, etc.
International presence U.S. (59% of net sales)
Non-U.S. (41% of net sales)
Constellation Brands Net sales : 2.5 billion euros
Constellation wines
88.5% of net sales
Constellation spirits
11.5% of net sales
Constellation beers
0% of net sales
Corporate operations
0% of net sales
Crown imports
0% of net sales
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4.8. Constellation Brands Corporate strategy
Focusing on premium operations
The group intends to pursue a strategy of focus on premium wine brands complemented by premium spirits and imported beers. Constellation brands will continue investing in the fast growing premium wine categories and geographic markets to profitably grow the business. It has developed a wine strategy to promote wine brands with significant profit margins and growth potential in core markets. In addition the company seeks to maintain its leadership positions in key markets in volume, value and profit and furthermore take steps to enhance the long-term profitability of the international business. The purpose of this “premium” strategy is to cultivate higher-margin wines priced from 3.5 euros to 10.5 euros at retail and the mid-premium spirits business. Through the Crown Imports joint venture, the company continues to invest in the beer brands that maintain the leading market share in the U.S. import beer category.
Divestment of non-strategic assets
The group took a number of strategic actions to right-size its international operations, with the divestment of a number of low-growth, low-margin wines and spirits brands to refocus its portfolio and allocate resources to the brands that return the greatest profits. The Company remains committed to its long term financial strategy of growing sales (both organically and through acquisitions), expanding margins and increasing cash flow to achieve higher growth and profitability.
Achieving distribution efficiency
The group will consolidate its U.S. distributor network in key markets and implement a new go-to-market strategy designed to exploit to the fullest its scale. The distribution of the Company’s products is managed on a geographic basis in order to fully leverage leading market positions within each key market. During 2009, the Company completed the acquisition of the remaining 50% ownership of its Canadian joint venture distribution business for 8.8 million euros.
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4.8. Constellation Brands Recent events
Date Event October 2007
Constellation Brands signs a letter of intent to acquire Flagstone Winery. The proposed Flagstone acquisition derives from a need to extend Constellation’s South African portfolio into premium and luxury brands.
August 2008 Constellation Brands considers selling some assets and cutting 350 jobs following a strategic review. The company will also reduce the size of its Australian work force by 20%.
September 2008 Constellation Brands announces a partnership with Kenny Chesney to develop a new premium rum. The joint venture, to be called Crouton Spirits, will develop the rum.
January 2009
Constellation Brands’s commitment to sustainable business practices will result in the installation of the winery solar energy system at its Californian facility. Once in place the solar energy will provide approximately 50% of the winery's total energy requirements.
March 2009
Constellation Brands announces the sale of its value spirits business to Sazerac for 232 million of euros. The entire cash proceeds will be used to further reduce Constellation's borrowings. The group also announced that it will implement additional cost reductions across the Company's global businesses. These initiatives will probably result in the cutting of 5% of the Company's workforce.
November 2009 Constellation Brands enters into an agreement to sell its Gaymer Cider Company business to C&C Group PLC for 48.6 millions of Euro.
December 2009
Grupo Modelo sues a unit of Constellation Brands in a dispute over marketing at their U.S. joint venture Crown Imports. The conflict originated from a dispute over Constellation's refusal to fund the marketing efforts of the joint venture. The Crown Imports joint venture was launched in 2007 and will last for 10 years.
April 2010 Constellation Brands will pay 208 million euros to repurchase about 11 million shares in an accelerated repurchase deal through Goldman Sachs.
Source: Xerfi Global. Primary source: business press.
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4.8. Constellation Brands Key data
Constellation Brands’ net sales unit: billion euros; annual % change Constellation Brands’ net sales by region
unit: share in %
2,0
2,5
3,0
3,5
4,0
2005 2006 2007 2008 2009-30%
-20%
-10%
0%
10%
20%
Non US41%
US59%
Source: Constellation brands’ annual report Source: Constellation brands’ annual report
Chart 1: The company’s net sales have been declining since 2007 and fell to 2.39 billion euros in 2009 (-7.9%). Sales were dragged down by lower volume sold and divested operations.
Chart 2: Constellation Brands is the US’ most important wine company. The group generated about 59% of its total revenues in its domestic market.
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4.8. Constellation Brands
Constellation Bbrands’ operating profit and operating margin units: million euros; % Constellation brands’ operating profit by business unit
unit: share in %
-300
-200
-100
0
100
200
300
400
500
600
2005 2006 2007 2008 200914%
15%
16%
17%
18%
Constellation spiri ts10%
Constellation wines90%
Source: Constellation brands’ annual report Source: Constellation brands’ annual report. Excluding corporate functions.
Chart 1: Constellation brands’ operating profit reached 311 million euros in 2009, reflecting lower costs and restructuring charges related to divestments. The group’s operating margin has therefore improved since sales were down over the same period.
Chart 2: The group’s net sales come from two business units: constellation wines and constellation spirits. Wines accounted for more than 90% of the group’s profit in 2009. It is important to remember that Crown Imports (beer division of the group) had net sales of 1.6 billion euros but these were written off at the moment of consolidation.
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4.9. United Breweries Presentation
Fiscal year end : March, 30 2009
Headquarters Bangalore, India
Key figures in 2009
Sales in the alcoholic beverage market 973 million euros
Operating profit 104 million euros
United Breweries Holdings is an India-based company engaged in the production of alcoholic beverages, leather shoes, sandals and uppers, pharmaceuticals and fertilizers. Additionally the company runs Kingfisher airlines (started in 2005) and R&D centres.
The company is listed on the Bombay stock exchange (507458). United Breweries Holdings is active in the alcohol industry through United
Breweries Ltd (Beer) and United Spirits (spirits), two subsdiaries. Heineken owns a 37.5% stake in United Breweries following its acquisition of
Scottish & Newcastle in 2008.
International presence (group) India (43.2% of net sales)
Rest of the World (56.8% of net sales)
United Breweries Holdings
United Breweries Limited
United Spirits
Limited
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4.9. United Breweries Corporate strategy
Make the most out of domestic demand
Per capita consumption in India remains particularly low but is trending up. The country is one of the most populated in the world, and a significant share of total population has not reached the legal drinking age for the moment. These good prospects are good news for the group. The acquisition of Whyte & Mackay, the fourth largest Scotch distiller in the world, needs to be put in this context as spirits are particularly popular in the country.
Expanding operations in all segments
United Breweries will continue promoting market leading brands across all flavours and price segments. The Indian consumers seem to show a greater affinity to the consumption of wine and new categories of consumers are coming to the market. Given this scenario, the group has set up India’s largest winery in the Baramati district of Maharashtra and introduced the “Four Seasons” and “Zinzi” range of wines. The company also made an important acquisition: the French winery Bouvet-Ladubay. The latter has proved useful to the company as it offered a series of high quality French wines but also permitted to assimilate viticulture technology at the new Baramati Winery.
Increasing quality standards
United Breweries considers quality vital to the long-term success of the Group, given the increasingly competitive marketplace. Building quality into the workplace, products and services is essential to be successful and to this end, the Central Scientific Laboratory (CSL), headquartered at Bangalore sets standards for all its breweries. In emerging markets, including India, unrecorded alcohol consumption is particularly high and poor alcohol quality is a major issue.
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4.9. United Breweries Recent events
Date Event December 2004
Scottish & Newcastle announces that it has finally reached an agreement to invest in United Breweries, the number one Indian brewer, to form a combination of both companies’ Indian brewing operations. S&N is to take an equity stake of up to 37.5% in United Breweries and exercise joint management control with a group of shareholders led by Dr. Mallya, the UBL Chairman.
May 2007 United Breweries buys spirits producer Whyte & Mackay for 595 million euros.
May 2008
United Breweries considers expanding its beer product portfolio by launching new brands in India. The company plans to launch fruit flavoured beer brands and low alcohol brands in India within a year and is discussing with a couple of foreign liquor manufacturers the possibility to outsource the technology in India.
December 2009
After more than a year of conflict, United Breweries and Heineken have formed a partnership that will also give United Breweries access to the Dutch group’s distribution network to market his Kingfisher beer globally. The dispute started in the April of 2008 when Heineken inherited a 37% stake in United Breweries, which is also 37 per cent-owned by Mr. Mallya, the actual chairman. The United breweries stake came to Heineken when, with Carlsberg, it acquired Scottish & Newcastle, the former owner.
April 2010
United Breweries plans to set up a litchi processing plant in Bihar's Muzaffarpur district to make wine. The company already took 100 acres of litchi gardens on lease and has plans to take another 1,000 acres from the farmers.
May 2010 United Breweries considers exporting Indian wine to Britain, starting with three brands later this year.
June 2010 United Breweries signs a memorandum of understanding with the state government of Karnataka to set up a greenfield brewery at Nanjangud in Mysore.
Source: Xerfi Global. Primary source: business press
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4.9. United Breweries Key data
United Breweries’ net sales units: million euros; annual % change United Spirits’ net sales
unit: share in %
0
50
100
150
200
250
300
350
2005 2006 2007 2008 20090%
10%
20%
30%
40%
50%
60%
0
100
200
300
400
500
600
700
800
2005 2006 2007 2008 20090%
5%
10%
15%
20%
25%
30%
35%
40%
Source: United Breweries’ annual report Source: United Breweries’ annual report
Chart 1: The subsidiary in charge of beer production and distribution has experienced firm growth since 2005 as sales have almost tripled. They reached 298 million euros in 2009.
Chart 2: The subsidiary in charge of wine and spirits has also enjoyed rising sales since 2005. Revenues in 2009 topped 675 million euros (+152% from 2005).
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4.9. United Breweries
United Breweries’ operating profit and margin units: million euros; % United Spirits’ operating profit and margin
units: million euros; %
0
5
10
15
20
25
2005 2006 2007 2008 20090%
2%
4%
6%
8%
10%
12%
14%
16%
0102030405060708090
100
2005 2006 2007 2008 20090%
5%
10%
15%
20%
25%
30%
Source: United Breweries’ annual report Source: United Breweries’ annual report
Chart 1: United Breweries’ operating profit for 2009 was 22 million euros or 7.6% of net sales.
Chart 2: United Spirits reported a 81 million euro operating profit for 2009 or 12% of sales. Much like in other markets, wine and spirits producers tend to report higher operating profitability compared to beer producers.
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4.10. Wuliangye Yibin Presentation
Fiscal year end : December, 31 2009
Headquarters Yibin, China
Key figures in 2009
Net group sales 1.2 billion euros
EBIT 963.1 million euros
Net group profit 364.5 million euros
Staff 22,967
Wuliangye Yibin Ltd. is a China-based company specialised in the production of Baijiu liquor. Concurrently it is involved in bio-engineering, in the pharmaceutical industry, in printing, in electronics, in logistics and transport, and in other related service sectors.
The Company distributes its products all over the domestic market, and exports to overseas markets.
The company is listed on the Shenzhen Stock Exchange (000858)
Baijiu market share by brands* Wuliangye 45%
Kweichew Moutai 30% National Cellar 1573 10% *on the Chinese Market Shuijingfang 10%
Wuliangye Yibin Co., Ltd. Group net sales : 1.2 billion euros
Wuliangye Group Push
Ltd
Licai Group Co. Ltd
Universe Group Co. Ltd
Anji Logistics Group Co. Ltd
Wuliangye Import &
Export Co. Ltd
Sichuan Chuanxiang Group Co.
Ltd
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4.10. Wuliangye Yibin General information
Pricing strategy The company seeks to increase the market share of medium and high-priced brands,
and to reduce the market share of low-priced brands. International ambitions
The group intends to become a world-known company that manufactures and sells world-class liquor. The Wuliangye Group seeks to make itself stronger and larger, and to unceasingly develop international market. At the same time, Wuliangye Group is re-enforcing the industries associated to the technologies used in the development of the main business (alcohol).
Key products
The corporatation has developed dozens of serial products of different flavors, aimed at the needs of customers from different regions and social classes, with distinctive cultural background. The serial products comprise Wuliangchun liquor, Wuliangshen liquor, Wuliangchun liquor, Changsanjiao liquor, Lianghuchun liquor, Xiandairen liquor, Jinliufu liquor, Liuyanghe liquor, Laozuofang liquor, Jingjiu liquor. Wuliangye has gained an annual capacity to brew over 400,000 tons of Wuliangye Liquor and its series.
A company with room for growth
Nowadays the group has grown into an extra large corporate group with huge potential for development, consisting of 17 wholly-owned or partially-owned subsidiary companies.
A variety of activities to accompany the key alcohol business
While keeping liquor as the core business, the company will realize a great expansion on multi-quality-and-scale benefits. Wuliangye Yibin is multi-industry group engaged in plastic processing, mold manufacturing, printing, pharmaceuticals, fruit liquor, electronic equipment, transportation, foreign trade.
Rising government expectations
Placing great expectations on Wuliangye Group, the Sichuan Province required the Wuliangye Group to double its sales in comparison with 2000, an economic growth rate of 20% per year.
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4.10. Wuliangye Yibin Key data
Wuliangye Yibin’s net sales units: billion euros; annual % change Wuliangye Yibin’s operating profit
units: million euros; %
0,0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
2005 2006 2007 20080%
5%
10%
15%
20%
25%
0
50
100
150
200
250
300
2005 2006 2007 20080%
10%
20%
30%
40%
50%
60%
Source: Wuliangye Yibin’s annual report Source: Wuliangye Yibin’s annual report
Chart 1: Wuliangye Yibin’s net sales have not been affected by the economic turmoil: the group posted a 17% increase in net sales in the period between 2007 and 2008. In 2008, the group’s reported a revenue increase of 0.1 billions of euro with respect to 2007.
Chart 2: The company’s operating profit reflected the pace of its net sales, raising by 11% in the period between 2007 and 2008. Interestingly, also the operating profit wasn’t affected negatively by the economic crisis.
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4.10. Wuliangye Yibin
Wuliangye Yibin’s operating margin and net profit margin unit: % Wuliangye Yibin’s net income
unit: million euros
0%
5%
10%
15%
20%
25%
30%
35%
2005 2006 2007 2008
Operating margin Net profit margin
0
50
100
150
200
250
2005 2006 2007 2008
Source: Wuliangye Yibin’s annual report Source: Wuliangye Yibin’s annual report
Chart 1: The operating margin of the group, besides a slight decrease in 2008, continuously increased throughout the years. On the other hand, the net profit margin rose by about 3-4 percentage points each year since 2005.
Chart 2: Wuliangye Yibin’s net income graph shows the rise of the profit in the 2005-2008 period. The 109 million euros increase in the four-year span led to the 2008’s 24% net profit margin showed in the previous graph.
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5. Statistical appendix
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Year Consumption 1970 4.46 1971 4.64 1972 4.74 1973 4.95 1974 4.99
Global unweighted average recorded alcohol consumption, 15+years of age unit: litres per capita Source: Xerfi Global. Primary source: World Health Organisation.
1975 5.07 1976 5.21 1977 5.27 1978 5.17 1979 5.15 1980 5.08 1981 5.16 1982 5.11 1983 5.01 1984 4.97 1985 4.85 1986 4.78 1987 4.70 1988 4.68 1989 4.66 1990 4.71 1991 4.70 1992 4.74 1993 4.74 1994 4.57 1995 4.63 1996 4.52 1997 4.56 1998 4.49 1999 4.47 2000 4.53 2001 4.56 2002 4.62 2003 4.64 2004 4.71
2005 4.67 2006 4.62 2007 4.71 2008 4.74 2009 4.74 2010 4.75
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Year Beer Spirits Wine 1980 100.00 100.00 100.00 1985 95.91 95.27 94.23 1990 85.65 89.08 79.21 1995 88.58 83.19 77.36 2000 86.43 77.09 75.70 2005 88.33 80.68 80.64
Index of global unweighted average recorded alcohol consumption, 15+years of age unit: consumption index. 1980=100. Source: Xerfi Global. Primary source: World Health Organisation.
2010E 97.08 91.74 90.67
Country Consumption Mexico 4.57 China 5.20 Brazil 5.76 Sweden 7.00 Japan 7.59 South Korea 7.87 Italy 8.02 Argentina 8.40 USA 8.61 Australia 9.02 Russia 10.32 France 11.43 Spain 11.68 UK 11.75
Unweighted average recorded alcohol consumption, 15+years of age in selected countries unit: litres per capita. Source: Xerfi Global. Primary source: World Health Organisation.
Germany 11.99
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Country Beer Spirits Wine Russia 18.7% 70.5% 10.7% China 24.3% 75.1% 0.6% Japan 26.0% 68.0% 6.0% France 18.8% 24.9% 56.4% Italy 21.1% 5.7% 73.3% Argentina 30.0% 5.0% 65.0%
Structure of consumption in selected countries unit: % of per capita consumption Source: Xerfi Global. Primary source: World Health Organisation.
South Korea 28.6% 31.8% 39.6% Spain 40.4% 24.8% 34.8% Sweden 49.7% 16.9% 33.4% Australia 57.1% 14.9% 28.0% Germany 54.1% 22.0% 23.9% UK 55.8% 19.8% 24.4% USA 57.2% 28.2% 14.6% Brazil 59.2% 35.8% 5.0% Mexico 76.5% 22.8% 0.7%
Year Beer Spirits Wine 2006 1.1% 1.0% 0.4% 2007 1.8% 1.3% 1.4% 2008 3.0% 2.7% 4.2% 2009 3.0% 2.8% 2.7%
Growth rate of consumer prices of alcohol in the European monetary unionunit: annual % change Source: Xerfi Global. Primary source: Eurostat.
2010 3.5% 3.2% 3.7%
Year Beer Spirits Wine 2007 0.0% 0.1% 0.0% 2008 2.7% 2.3% 5.1% 2009 3.0% -1.9% 12.6%
Growth rate of excise taxes on alcoholic beverages in the EMU unit: annual % change Source: Xerfi Global. Primary source: CEPS. 2010 1.7% 0.2% -5.6%
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Year Production 2000 1378.26 2001 1398.31 2002 1434.66 2003 1468.35 2004 1527.72 2005 1583.85 2006 1680.05 2007 1781.10 2008 1807.38 2009 1820.49
Global beer production unit: million hectolitres Source: Xerfi Global. Primary source: Canadean.
2010E 1845.36
Year Production 2004 292 2005 301 2006 285 2007 285 2008 284 2009 280
Global wine production unit: million hectolitres Source: Xerfi Global. Primary source: Wine institute.
2010E 275
Year Change 2000 -2.1% 2001 4.3% 2002 8.2% 2003 5.3% 2004 8.6% 2005 6.0%
US spirits gross revenues growth rate unit: annual % change Source: Xerfi Global. Primary source: DISCUS.
2006 7.5% 2007 5.8% 2008 2.7% 2009 0.0% 2010E 2.6%
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Year Change 2000 3.0% 2001 1.0% 2002 2.0% 2003 3.8% 2004 4.1% 2005 2.7%
US spirits volumes growth rate unit: annual % change Source: Xerfi Global. Primary source: DISCUS.
2006 4.1% 2007 2.4% 2008 1.7% 2009 1.4% 2010E 1.7%
Year Change 2000 -2.1% 2001 1.9% 2002 8.8% 2003 6.0% 2004 0.3% 2005 4.5%
EU27 spirits production revenue growthunit: annual % change Source: Xerfi Global. Primary source: Eurostat
2006 3.1% 2007 4.1% 2008 -0.6% 2009 -6.6% 2010E 3.3%
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Year Revenues Annual % change 2005 10.4 2006 11.9 14.4% 2007 14.1 18.4% 2008 28.1 99.2%
Anheuser Busch InBev’s revenues unit: billion euros; % Source: Xerfi Global with Anheuser Busch InBev
2009 26.3 -6.4%
Segment Share North America 42.1% Latin America 25.9% Western Europe 11.7%
Anheuser Busch InBev’s revenues by segment unit: share in % Source: Xerfi Global with Anheuser Busch InBev Central and Eastern
Europe 6.7% Asia Pacific 5.7% Global Export and
Holding 7.9%
Year Operating profit Operating margin 2005 2.2 21.1% 2006 2.9 24.3% 2007 3.8 26.9%
Anheuser Busch InBev’s operating profit and margin unit: billion euros; % Source: Xerfi Global with Anheuser Busch InBev 2008 6.5 23.1% 2009 7.3 27.7%
Year Net income Net profit margin 2005 0.9 8.6% 2006 1.4 11.7% 2007 1.8 12.7%
Anheuser Busch InBev’s net income unit: billion euros; % Source: Xerfi Global with Anheuser Busch InBev 2008 - - 2009 2.8 10.6%
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Year Revenues Annual % change 2005 10.2 2006 12 18% 2007 14.5 21% 2008 16.7 15%
SAB Miller’s revenues unit: billion euros; % Source: Xerfi Global with SAB Miller
2009 17.8 7%
Segment Share North America 20.6% Latin America 21.9%
SAB Miller’s revenues by segment unit: share in % Source: Xerfi Global with SAB Miller Europe 24.2% Africa and Asia 16.3% South Africa 17%
Year Operating profit Operating margin 2005 1.9 18.6% 2006 1.9 15.8% 2007 2.3 15.8%
SAB Miller’s operating profit and margin unit: billion euros; % Source: Xerfi Global with SAB Miller 2008 2.6 15.5% 2009 2.6 14.6%
Year Net income Net profit margin 2005 1.1 10.7% 2006 1.0 8.3% 2007 1.2 8.2%
SAB Miller’s net income unit: billion euros; % Source: Xerfi Global with SAB Miller 2008 1.4 8.4% 2009 1.3 7.3%
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Year Revenues Annual % change 2005 9.7 2006 10.5 8.2% 2007 11.2 6.6% 2008 14.3 27.6%
Heineken’s revenues unit: billion euros; % Source: Xerfi Global with Heineken
2009 14.7 2.7%
Segment Share Western Europe 57.3%
Central and Eastern Europe 21.7%
The Americas 10.7%
Heineken’s revenues by segment unit: share in % Source: Xerfi Global with Heineken
Africa and Middle East 12.3%
Asia Pacific 2.0% Heineken N.V.
Head Office -4%
Year Operating profit Operating margin 2005 1.1 11.6% 2006 1.6 15.5% 2007 1.4 12.1%
Heineken’s operating profit and margin unit: billion euros; % Source: Xerfi Global with Heineken 2008 1.2 8.2% 2009 1.6 11.1%
Year Net income Net profit margin 2005 0.8 8.2% 2006 1.2 11.4% 2007 0.8 7.1%
Heineken’s net income unit: billion euros; % Source: Xerfi Global with Heineken 2008 0.2 1.4% 2009 1.0 6.8%
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Year Revenues Annual % change 2005 7.8 2006 8.4 7.7% 2007 8.7 3.5% 2008 9.4 8.0%
Diageo’s revenues unit: billion euros; % Source: Xerfi Global with Diageo
2009 10.8 14.9%
Segment Share North America 35.3% Europe 29.7% International 24.5%
Diageo’s revenues by segment unit: share in % Source: Xerfi Global with Diageo Asia Pacific 9.7% Corporate 0.8%
Year Operating profit Operating margin 2005 2.3 29.4% 2006 2.4 28.5% 2007 2.5 28.7%
Diageo’s operating profit and margin unit: billion euros; % Source: Xerfi Global with Diageo 2008 2.7 28.7% 2009 3.0 27.7%
Year Net income Net profit margin 2005 1.5 19.2% 2006 2.3 27.3% 2007 1.6 18.3%
Diageo’s net income unit: billion euros; % Source: Xerfi Global with Diageo 2008 1.8 19.1% 2009 2.0 18.5%
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Year Revenues Annual % change 2005 3.6 2006 6.0 66.6% 2007 6.4 6.6% 2008 6.6 3.1%
Pernod Ricard’s revenues unit: billion euros; % Source: Xerfi Global with Pernod Ricard
2009 7.2 9.1%
Segment Share France 10.2% Europe 33.7% The Americas 28.1%
Pernod Ricard’s revenues by segment unit: share in % Source: Xerfi Global with Pernod Ricard
Asia/Rest of the World 28%
Year Operating profit Operating margin 2005 0.7 19.4% 2006 1.2 20% 2007 1.4 21.8%
Pernod Ricard’s operating profit and margin unit: billion euros; % Source: Xerfi Global with Pernod Ricard 2008 1.5 22.7% 2009 1.8 25%
Year Net income Net profit margin 2005 0.5 13.8% 2006 0.7 11.6% 2007 0.8 12.5%
Pernod Ricard’s net income unit: billion euros; % Source: Xerfi Global with Pernod Ricard 2008 0.9 13.6% 2009 1.0 13.8%
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Year Revenues Annual % change 2005 9.5 2006 9.7 2.1% 2007 10.7 10.3% 2008 14.7 37.4%
Kirin’s revenues unit: billion euros; % Source: Xerfi Global with Kirin
2009 14.7 0%
Segment Share Alcohol beverages 38.7%
Soft drinks and foods 38.3%
Pharmeceuticals 10.7%
Kirin’s revenues by segment unit: share in % Source: Xerfi Global with Kirin
Other businesses 12.3%
Year Operating profit Operating margin 2005 0.8 8.4% 2006 0.9 9.2% 2007 0.9 8.4%
Kirin’s operating profit and margin unit: billion euros; % Source: Xerfi Global with Kirin 2008 1.1 7.4% 2009 1.0 6.8%
Year Net income Net profit margin 2005 0.4 4.2% 2006 0.4 4.1% 2007 0.5 4.7%
Kirin’s net income unit: billion euros; % Source: Xerfi Global with Kirin 2008 0.6 4.1% 2009 0.4 2.7%
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Year Revenues Annual % change 2005 2.6 2006 3 15.4% 2007 3.2 6.6% 2008 3.1 -3.1%
LVMH’s wines and spirits revenues unit: billion euros; % Source: Xerfi Global with LVMH
2009 2.7 -12.9%
Segment Share Wines and spirits 16%
Fashion and leather goods 37%
Perfumes and cosmetics 16.1%
LVMH’s revenues by segment unit: share in % Source: Xerfi Global with LVMH
Watches and jewellery 4.5%
Selective retailing 26.5% Other activities -0.1%
Year Operating profit Operating margin 2005 0.8 30.8% 2006 0.9 30% 2007 1.0 31.2%
LVMH’s wines and spirits operating profit and margin unit: billion euros; % Source: Xerfi Global with LVMH 2008 1.0 32.2% 2009 0.7 25.9%
Year Revenues Annual % change 2005 13.9 2006 15.3 10.1% 2007 16.4 7.2%
LVMH’s revenues unit: billion euros; % Source: Xerfi Global with LVMH 2008 17.2 4.9% 2009 17 -1.2%
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Year Revenues Annual % change 2005 2.8 2006 3.2 14.3% 2007 3.6 12.5% 2008 2.6 -27.8%
Constellation Brand’s revenues unit: billion euros; % Source: Xerfi Global with Constellation Brands
2009 2.5 -3.8%
Segment Share Constellation wines 88.5% Constellation spirits 11.5% Constellation beers 0%
Constellation Brand’s revenues by segment unit: share in % Source: Xerfi Global with Constellation Brands Corporate
operations 0% Crown imports 0%
Year Operating profit Operating margin 2005 435.2 15.5% 2006 527.7 16.4% 2007 585.1 16.2%
Constellation Brand’s operating profit and margin unit: million euros; % Source: Xerfi Global with Constellation Brands 2008 378.4 14.5% 2009 415.2 16.6%
Year Net income Net profit margin 2005 276.5 9.8% 2006 325.3 10.1% 2007 331.9 9.2%
Constellation Brand’s net income unit: million euros; % Source: Xerfi Global with Constellation Brands 2008 -613.3 -23.5% 2009 -301.4 -12.0%
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Year Revenues Annual % change 2005 45.1 2006 190.5 322.6% 2007 290.5 52.5% 2008 494.7 70.3%
United Breweries’ revenues unit: million euros; % Source: Xerfi Global with United Breweries
2009 905.1 82.9%
Segment Share
Alcoholic beverages 4.9%
Shoes. sandals. uppers 0.8%
Investments 0.9%
United Breweries’ revenues by segment unit: share in % Source: Xerfi Global with United Breweries
Airlines 91.7% Property
development 0.4% Others 1.3%
Year Operating profit Operating margin 2005 -2.15 -4.8% 2006 10.07 5.3% 2007 -87.89 -30.3%
United Breweries’ operating profit and margin unit: millions; %
Source: Xerfi Global with United Breweries 2008 -148.9 -30.1% 2009 -291.6 -32.2%
Year Net income Net profit margin 2005 -0.6 -1.4% 2006 36.4 19.1% 2007 -57.9 -19.9%
United Breweries’ net income unit: millions; % Source: Xerfi Global with United Breweries 2008 -45.1 -9.1% 2009 -268.8 -29.7%
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Year Revenues Annual % change 2005 0.6 2006 0.7 19.1% 2007 0.7 0.68%
Wuliangye Yibin’s revenues unit: billion euros; % Source: Xerfi Global with Wuliangye Yibin 2008 0.8 17.6%
Segment Share
Wuliangye Group Push Ltd -
Licai Group Co. Ltd -
Universe Group Ltd -
Wuliangye Yibin’s revenues by segment unit: share in % Source: Xerfi Global with Wuliangye Yibin
Anji Logistics Group Co. Ltd -
Wuliangye Import & Export Co. Ltd -
Sichuan Chuanxiang Group Co. Ltd -
Year Operating profit Operating margin 2005 125.6 20.8% 2006 187.9 26.7% 2007 229.5 32.7%
Wuliangye Yibin’s operating profit and margin unit: million euros; % Source: Xerfi Global with Wuliangye Yibin 2008 255.6 31.8%
Year Net income Net profit margin 2005 83.17 13.8% 2006 123.0 17.5% 2007 154.4 22.0%
Wuliangye Yibin’s net income unit: million euros; % Source: Xerfi Global with Wuliangye Yibin 2008 192.4 24.0%
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6. Information sources
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International organisations
WHO World Health Organisation
http://www.who.int/en/
World Bank World Bank
www.worldbank.org
UNSD United Nations Statistics Division
unstats.un.org
Eurostat
Eurostat
ec.europa.eu/eurostat
ITC Internation Trade Centre
www.intracen.org
ICAP International Center for Alcohol Policies
www.icap.org
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Corporate websites
Anheuser-Busch InBev www.ab-inbev.com/ Constellation Brands www.cbrands.com Diageo www.diageo.com Heineken www.heineken.com Kirin www.kirin.com LVMH www.lvmh.com Pernod Ricard www.pernod-ricard.com SAB Miller www.sabmiller.com United Breweries www.theubgroup.com Wuliangye Yibin www.wuliangye.com.cn/en
Market research and consulting firms
European Spirits Organisation (CEPS) www.europeanspirits.org CANADEAN www.canadean.com The Wine Institute www.wineinstitute.org Distilled Spirits Council of the United States
www.discus.org
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7. Annexes
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Statistical framework
3533 and 3535 codes of the ICB classification
Brewers are classified under the 3533 code of the industry classification benchmark (ICB) Wine makers and distillers are classified under the 3535 code of the industry classification benchmark (ICB)
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Data
Analysed financial data
The main indicators and ratios used for analysis purposes are the following: Net sales; Operating profit. which is the difference between operating revenues and
operating expenses; Operating margin. which the result of operating profit by net sales;
Net income (profit or loss after operating expenses. taxes and exceptional
charges); Net margin. which is the result of net income by net sales.
Exchange rates
Financial figures mentioned in the report are stated in euros. The conversion rates used for comparison purposes are the following: 1 USD = 0.7196 EUR (January 2009 – December 2009); 1 USD = 0.7067 EUR (April 2009 – March 2010); 1 USD = 0.7095 EUR (March 2009 – February 2010) 1 GBP = 1.1295 EUR (July 2008 – June 2009) 1 JPY = 0.0076 EUR (January 2009 – December 2009) 1 CNY = 0.1053 EUR (January 2009 – December 2009) 1 INR = 0.0149UR (April 2009– March 2010
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