The beer is to the drink sector what GAP is to the clothing industry: A boring low-end proposition with no growth prospects.

Contrasting results for beer and spirits manufacturers

°We recently had Carlsberg, AB InBev, Budweiser China, Campari, and Remy Cointreau * results with contrasting comments on price increase elasticity. On one hand, Remy and Campari have been able to pass high single-digit price rises over the past 3 years with no negative impact on volume growth. Campari disclosed organic growth of 45-50% in volume for its bourbon and its Jamaican Rum over the past 3 years (2019-2022).

°On the other hand, Carlsberg warned last week that beer price increase will negatively impact demand in 2023 and InBev indicated flat volume for beer this week and Budweiser shrinking volumes in China for the past year.

Consolidation has been hiding the lack of growth in the beer segment.

°25 years ago, Beer companies were buying assets in emerging markets perceived as the new Eldorado: Carlsberg in Russia, InBev in Latin America, Heineken everywhere arguing that volume growth in emerging markets would offset declining volumes in developed economies.

°The past 20 years in emerging markets suggests that there is a negative correlation between beer consumption and economic development. Consumers, as they are becoming richer, tend to switch from beer to Spirits or wine. China, still the world largest beer market, is experiencing a slowdown of the growth rate according to Statista, a platform specialized in consumer data.

°In developed countries with a high penetration for beer such as the UK, volume of beer consumed per capita decreased then stagnated for multiple years also according to Statista. This week Budweiser APAC (the Chinese JV of Budweiser listed) indicated negative volume growth for beer in China (-3%) in 2022.

°Now that the consolidation in the beer sector seems completed, beer manufacturers are left with stagnant volumes at best and cannot expect more cost synergies related to mergers.

Conclusion

According to Statista, worldwide beer volumes have been flat from 2012 to 2022 and there is no sign of return to brighter prospects.

*Remy Cointreau is owned by Deshima Certificate “Croissance Contrariante Europe”