Stable Outlook for Global Beverage Industry
Most beverage companies will be able to sustain current cash-flow levels by continuing to cut costs and by increasing retail prices over the next year, despite the economic downturn, says Moody’s Investors Service. Constraining the industry’s outlook is commodity-price inflation which Moody’s expects will remain above historical levels and hurt profitability.
“However, packaged beverages are affordable to most people around the world, making the business relatively resistant to economic slowdowns. Companies that sell brand-name beverages and that have operations in fast-growing emerging markets will have the strongest pricing power.”
In a separate report, Moody’s says the outlook for the European beverage industry is stable, despite the difficult economic climate. “The companies have sparked revenue growth and mitigated costs by retaining a large portfolio of brands at various price points, including premium products. They have also enacted strategic price increases, cut costs and hedged where possible against the rising costs of commodities.”
The report, “European Beverage Industry Outlook“, expresses the rating agency’s expectations for fundamental credit conditions in the industry for the next 12-18 months.
Moody’s notes that input costs, especially the prices of aluminium, sugar and barley, have increased in the past year, continuing to put pressure on margins. Furthermore, softening economic conditions in the US, where many of the rated companies have a substantial presence, as well as in European markets, have reduced consumer spending, holding back volume growth.
However, the industry has proven that it is somewhat resilient to general consumer downturns, because of the overall low prices and variety of its products.
Moody’s notes that increased M&A and joint venture activity in the sector in the past 12 months, especially amongst brewers, has expanded their scale, geography and portfolio of brands; as a result, Moody’s is expecting savings through cost and distribution efficiencies. Moody’s also believes that emerging markets will continue to increase their contribution to volume and revenue growth for the European beverage industry. Further acquisition activity is expected to continue for rated companies, albeit at a more moderate pace and scale, as many will be integrating purchased assets and rebuilding their financial profile in the coming months.
Related Articles
|
Hedge Fund Jobs
Job Seekers: Search jobs by category, get job alerts by email or live feed, apply online See full list of jobs »
Employers: See all recruitment options, get applications online or by email Post a job »
Trading Center
- Free E-Newsletters
- About Seeking Alpha
- About Us
- Contact Us
- What's New
- Readers Feedback
- Advertise With Us
- Contributors
- Contribute an Article
- Feature Your Book
- Our Contributors
- Anonymous Contributions
- Dispute an Article?
- Legal
- Terms of Use
- Privacy
- Copyright
More by Research Recap