Growth in global beer volumes rolled along at 5 per cent per annum from 2005 to 2008 until the financial crisis put the brakes on.
Now that prospects for the global economy are improving medium term volumes are expected to rise, but in a note to investors, Nomura analyst Ian Shackleton warned that a return to 2005-2008 growth levels is unlikely. He said the emerging market driver is set to weaken as growth rates begin to normalise.
In addition Shackleton said Nomura sees some risk of disappointment regarding market expectations for profit growth. This is because the bank believes marketing spending needs to rise if the big European brewers are to establish a premium market positioning and compete with spirits and private label alternatives.
Nomura estimates that current marketing spend is about 10 per cent of net sales compared to 15 per cent in other consumer industries.
As for where to direct marketing investment, Shackleton told BeverageDaily.com: “I think mature markets like the US are the most urgent issue as beer has been losing share to spirits for 10 years.”
Growth prospects across the globe are expected to vary significantly in the medium term. Nomura expects the best opportunities for profit growth in 2010-2015 to come from China and Russia.
The bank picked out Russia despite recent troubles caused by the global economic recession and the hike in excise duty on beer at the beginning of the year.
Shackleton said: “Overall profitability in Russia is low as half the beer market is low value discount product. We believe that the Russian consumer will trade up to drink beer like in the west and this will lead to better mix. The regulatory and economic issues of the last 18 months have held this back temporarily but not derailed this process.”
Meanwhile Nomura is less positive about prospects in the US despite a strong rise in industry profits in 2009 and 2010.
“US profit pool has moved up materially in the last 2 years (nearly 50pc) following Anheuser change of ownership and MillerCoors merger - from here on growth will be more normal, we estimate c5pc pa, better than W Europe but more restrained,” said Shackleton.