Beer Near Term Prospects Better Than Spirits

China's well documented targeting of big ticket spirits as part of a wider crackdown on over-the-top gift giving has had a crippling effect on the sales and share prices of some of the key players in the luxury spirits space. The Chinese premium baiju producer Kweichow Moutai and France's Remy Cointreau (it is a major player in high-end cognac) have been two of the worst affected alcohol companies as judged by the steep declines in their shares prices over the past eighteen or so months.

Over this period, China's beer industry has attracted more interest from the global majors, with the pace of deal making picking up. We believe there is room for more consolidation and that the beer industry is presently operating below its long-term potential with relatively low profit margins reflective of the more no-frills image of beer in China, compared to other markets globally, where it is has been easier to premiumise the industry.

Over the next three to five years, we expect to see more consolidation take place, led by markets leaders such as SABMiller. Economic power within the wider industry structure will gradually shift to become more favourable towards the leading beer companies as their market power grows.

China Catching Up In Per Capita Stakes
Beer Sales Per Market

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Related sectors of this article: Food & Drink, Drink
Geography: China

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