“Beverage leaders are talking about regulatory and environmental concerns. But their biggest issue is demand and the impact that's having on volume growth.” Steve Wills,
Global Beverage Leader, EY
Beverage companies are looking at a number of areas in order to maximize growth: leveraging consumer insights, focusing on rapidly expanding emerging markets and looking for acquisition opportunities.
Leveraging consumer insights to reignite growth
To grow, companies need to understand the changes in the consumer landscape and bring greater focus to their marketing efforts. New demographic groups are being identified as companies try to capture changing consumer behavior.
In the developed world, companies are targeting the 'bifurcated consumer' — split between cash-poor value-seekers and richer purchasers interested in innovative premium products.
But age is also becoming a more significant factor.
The challenge for beverage companies is to leverage these insights to identify the core brands which have the greatest relevance and maximize growth opportunities at every level across economy, mass and premium markets.
Focusing on rapidly-growing emerging markets
Emerging markets are seen as holding the key to future growth for beverage companies: of the one billion people projected to enter the middle class by 20201, two-thirds will come from emerging economies such as the BRIC grouping (Brazil, Russia, India, China) and other fast-expanding territories including Bangladesh, Indonesia, Mexico, Pakistan, Turkey, Vietnam and Africa.
What attracts beverage companies to emerging markets?
- 82% of the world's population live there
- 92% of the world's births occur there
- GDP growth is 4%–5% higher than developed markets
- One billion people will enter the middle class by 2020: two-thirds will come from emerging markets
- 70% of global GDP will come from emerging markets in the next 10 years
Targeting growth through acquisition
Developed world companies are looking to enter or strengthen their position in emerging markets with acquisitions and joint ventures. At the same time, emerging market companies are establishing themselves as global players in their own right, looking for opportunities to acquire local competitors, and developed world businesses.
In spirits, there is significant scope for further consolidation. The new trend is a major focus on brand. Companies are targeting valuable or iconic national and global brands.
In contrast, the wine subsector offers less scope for consolidation and many beer companies are looking at divestments to help reduce debt.
In non-alcoholic beverages there is increasing bottler consolidation and global soft drinks companies have been making acquisitions to extend their portfolios into perceived ‘healthy’ segments which offer value added growth opportunities.
How we can help
Our closely integrated teams are highly experienced in serving clients across different cultures, languages and regulatory systems. We are ready to advise on the full transaction lifecycle including:
- Pre-transaction feasibility and structure
- During-the-deal due diligence and valuation, including brand valuation
- Negotiations and closing
- Post-acquisition support, including post-purchase price allocation
- Tax structuring and capital markets transactions
- Internal audit effectiveness
- Legal entity rationalization
1Indonesian Middle Class Recycle Wealth Back into Domestic Economy, NowPublic, 1 April 2010 via www.nowpublic.com, accessed 8 August 2011.
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