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Beverage industry growth opportunities - Sharpening execution - EY - Global

Beverage industry growth opportunities

Sharpening execution

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“Really getting it right — particularly in emerging markets — comes down to understanding your consumers.” Emmanuelle Roman,
Global Consumer Products Markets Leader

Sharpening execution in developed and rapid-growth markets is a theme beverage companies return to frequently. The ability to execute in the on- and off-trade markets is a critical success factor for their businesses, so those companies getting it right will achieve significant competitive advantage.

Understanding consumers in every market

Beverage brands need to develop deep insights into their consumers in order to really deliver a compelling value proposition — in every market that they operate in. Those that don’t are unlikely to survive.

A major shift from on-trade to off-trade also has to be factored into companies’ planning — consumers in developed markets are increasingly buying alcohol to consume at home, rather than buying drinks in bars and restaurants. Much smaller profit margins on off-trade products spell problems for beverage companies, unless they can change the way they work and turn the challenge into an opportunity.

In response, some companies are replacing category management with ‘demand chain management.’

Evolving from competition to collaboration

In developed markets, retailers continue to exert heavy pressure on beverage producers, especially when it comes to negotiating on prices and supply terms, which can be a real issue for those companies that are not well integrated.

To counterbalance this risk to their businesses, beverage companies are moving away from traditional, purely adversarial relationships and seeking increased collaboration with customers. Typical initiatives include working together on promotions to create overall category growth, and exploring mutually-inclusive benefits associated with the customer experience.

Transforming the finance function and increasing rigor of accounting practices

The need for improved management information to support business decision-making is a recurring theme in our discussions with beverage companies.

There is a need for more, better integrated information, faster — for example, in areas like pricing and forecasting. Many of our clients are also focusing on opportunities to reengineer the balance sheet and cash flow to boost profitability. Boards want assurance that the finance team is sweating maximum value out of assets such as shared service centers or SAP systems, and they are increasingly open to considering options including partnership models.

Revitalizing risk control and compliance

Beverage companies have significant new challenges to sharpen risk management practices and ensure internal controls are effective. These challenges include managing pricing pressures and getting corporate governance right.

Another key focus is compliance with local laws. Alcohol sales and pricing are locally regulated — and act as an important source of income for governments via tax and duties. The US has different rules in different states, which makes compliance very complex.

How we can help

We support beverage companies on a wide range of initiatives to sharpen execution across the business, from driving down costs to making processes more effective, structures more efficient and use of information more insightful. Our work includes:

  • Finance transformation
  • Customer collaboration and customer relationship management
  • Effective brand management
  • Risk management and compliance
  • Controls optimization: control function outsourcing and co-sourcing; internal audit
  • Enterprise performance management — improved planning and reporting capabilities

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