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Spirits Quarterly Q2 2014: Asia continues to grab the spotlight.
Monday, 9th June 2014
Source : Rabobank
In the global spirits market, several surprises have emerged out of Asia in recent months;

China continues to surprise the industry, as initiatives to curb government extravagance that many believed would be short lived continue to weigh on sales of premium spirits. Looking beyond China the other surprises out of Asia have been Suntory’s acquisition of Beam in January and Emperador winning the bid to acquire White & Mackay.

Commenting on the deals Rabobank analyst Stephen Rannekleiv said: “Taken together, the recent Suntory and Emperador acquisitions signal a growing appetite for assets among Asian players. For those looking to sell spirits brands, this opens up important opportunities that could drive improved pricing for assets. For those looking to make acquisitions, it is clear that the bidding process is becoming more competitive and aggressive.”

Regional Outlooks

China: Performance for domestic baijiu companies in Q1 2014 points to a continued downturn in both the top and bottom line with a similar trend being witnessed in the foreign spirits space. Improvement in the market sentiment over the next six months is unlikely. Rabobank predicts the premium spirits market will be unlikely to return to growth until late Q1 2015. • United States: The US spirits market continues to grow, with volumes increasing 3 percent in the first four months of the year, but the rate of growth is showing clear signs of easing. The outlook for the US market remains generally positive. Affluent consumers are likely benefitting disproportionately from the improvement in the stock market in 2013 and Rabobank expects to see continued support for growth of super-premium spirits brands in the coming months.

Europe: European spirit sales saw a 2.5 percent decline in CAGR between 2008 and 2013, and the trend appears to be accelerating, as volumes declined 4.3 percent in 2013, with much of the volume decline centred in Eastern Europe. In 2014, a recovery in spirits sales seems unlikely in the two main eastern European markets of Russia and the Ukraine. In Western Europe, markets seem to be stabilising, but there are still few signs of significant overall growth in the region.

India: Weakness in the spirits market was largely driven by multiple government instigated excise tax hikes across several states, which impacted sales of brands at the mass end of the market. Premium brands, on the other hand, continue to show impressive growth rates and country liquor saw good traction in the third and fourth quarter of 2013.

Brazil: The Brazilian economy has been facing challenges that have been weighing on consumption, with the cachaça segment feeling the impact most acutely. In spite of lackluster economic growth and declining consumption generally, imported spirits appear to be bucking the trend. Scotch, vodka and other imported spirits generated double digit growth in the Brazilian market in 2013 and show no signs of slowing. In 2014, the Brazilian economy will continue to face economic headwinds, but the World Cup games in June and July are expected to provide a boost to consumption.

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