Asia’s role in the global spirits market has surprised analysts over in recent months, with moves to curb extravagance in China, Suntory’s acquisition of Beam in January and Emperador’s winning bid to acquire White & Mackay each causing a stir.
According to Rabobank analyst Stephen Rannekleiv: “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.”
Continued downturn in China
The performance of domestic baijiu companies in China over the first quarter this year 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, says Rabobank, with analysts predicting the Chinese premium spirits market will be unlikely to return to growth until at least late in the first-quarter next year.
This is on the back of a US spirits market that continues to grow, with volumes increasing 3% in the first four months of this year, although 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.
Meanwhile, European spirit sales saw a 2.5% decline in CAGR between 2008 and 2013, and the trend appears to be accelerating, as volumes lowered 4.3% 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.\
Indian spirits subdued
In India, weakness in the spirits market was largely driven by multiple government-instigated excise tax hikes across several of the country’s 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.