Growth in beer consumption in emerging markets is driven by factors as affordability, per capita consumption and disposable income. It should also be noted that beer is also seen as a more aspirational drink in many of these countries. Beer in Africa has another status than in other markets, due to the fact that most alcohol beverages in Africa are based on illicit home brewer alcohol. This is the reason why mainstream lager beer is critical to this growth.
Volume and consumption in more developed markets show flat or have declined growth over the past decade.
This is a reflection of several things. Firstly, most alcohol types and beer consumption has fallen overall with wine as the only alcoholic beverage with increased growth as covered in the Porters Five Forces chapter.
Secondly, an increased demand for specialized beer and new experiences characterizes the markets in Europe and North America, this often through lower consumption at higher. Different tastes in beers are something that is especially seen in markets in the US. In general, to drive up the top line growth, companies should focus on either emerging markets or high-end products at lower quantities. (Economic Snapshot of Sub-Saharan Africa, 2016) (Economic Snapshot for ASEAN , 2016)
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13.2.1 Regional economic development 13.2.1.1 Africa
In Africa, SABMiller is by far the biggest brewer and distributor of beer with an enormous potential for growth.
However, there is also a much greater risk associated with being present in this country. Now the growth is good, but in Q3 2015 the Sub-Saharan Africa stabilized a bit, and the economy had a small expansion of 3.3%.
The expansion was the slowest in five years. The outlook for 2016 is not very good partly because South Africa has a negative development. Along with falling commodity prices, Nigeria is hitting a rough patch alongside as well as many others. Latin-America’s declining commodity prices hit many of the economies hard. The investor’s sceptics for the government to do what is needed to stabilize the economy. (Economic Snapshot of Sub-Saharan Africa, 2016)
13.2.1.2 South Africa
The finance minister was fired earlier in 2015 in something skyrocketing interest rates on debt. OECD upholds a forecast for South Africa where there is a lot of uncertainty. The increase in the power supply will first hit in 2017, and first then easing the constraints that have hindered production increasing investor confidence. Fiscal policy has been restrictive, and public debt is growing. Major reforms are needed if they want economic progress.
These include improving the business climate, removing the bottleneck and liberalizing the energy market.
(South Africa Economic Outlook, u.d.) 13.2.1.3 Latin America
In Latin America SABMiller and ABInBev are the biggest breweries in countries they operate within. SABMiller had an organic growth of 7% in 2014. There are however significant economic problems in Brazil the largest market in Latin America. The economic activity in Latin America declined by 0.9 percent in 2015. (Latin America and Caribbean Overview, u.d.) Low commodities prices, an economic slowdown with the major trading partners and persistent domestic challenges among Latin America’s largest economies represented the most significant headwinds in 2015.
Mexico,Venezuela, Brazil, Ecuador have all had their oil revenues and export surplus significantly reduced their export earnings. Following heightened volatility in the markets and the currencies the last months, as well as weak currency compared to the USD the central bank will have problems. Following a year of recession, there is expected to be a better performance for 2016. Forecasts state a gradual recovery in the region. According to Goldman Sachs, Brazil is heading for the deepest recession in decades.
Overall the region’s economy is expected to grow by 2.4%, but there is a lot of uncertainty here including the political risk luring in many countries. (Economic Snapshot for Latin America, 2016)
13.2.1.4 South East Asia
While Asia’s growth has recently disappointed, however remaining the global growth leader. Asia’s growth should benefit from relatively stable labor markets and disposable income growth. This goes along with the
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gradual recovery in major advanced economies. Lower commodity prices should help consumption. Overall there is expected growth in the region of a steady 5.4% even with the volatility in the market seen today. (World Economic Outlook Database, u.d.) The weak growth in Japan, the slowdown in China and questions about the actual growth rate in the populous country leads to future instability in the growth rates. SABMiller grew by 1%
on average in the period, with beverages on a 2% decline. This was offset by an NPR growth of 3% reflecting premiumization in China as well as a change in the relative weighing of volumes in Australia compared with China. Consumer sentiment remains subdued with pressure on consumer spending and further challenges in the patterns for the consumer.
During the same timespan, ABInBev managed to increase their market share from 14% to 20%, making the Asian Pacific market even more valuable to ABInBev. This is due to the specifically greater presence in China and South Korea. China as a large market by population and South Korea by consumption makes this growth vital to ABInBev strategies. Growth in these areas comes through the similar initiatives as in Latin America.
ABInBev acquired 5 Chinese beer companies in the period from 2013-2015, showing their aggressive strategy towards growth. These acquisitions resulted in a 9% growth in the Chinese market alone making ABInBev a top 10 actor. (Economic Snapshot for East & South Asia, 2016)
13.2.1.5 North America
ABInBev’s market presence had a 39% in North America back in 2009. This presence, however, was pushed downwards to only account for 30% of this market. Responsible for this lowered market share, was partly due to the fact about health problems related to alcohol, women increasing lust for alternative alcoholic beverages and the millennials focus on speciality craft beers. These new market trends have shown difficulties for ABInBev to persist their market share. (U.S. Economic Outlook, 2016) (Canada Economic Forecast, 2016)
13.2.1.6 Europe
In their latest Q3 report, there were significant gains in Europe. Europe had unstable weather and became the place with the biggest gains. Europe turned out to be positive, with Poland being the standout performer. The growth has slowed to 3.9% in 2013 and to 2.3% in 2014.
13.2.1.7 Eastern Europe
Eastern Europe proved to be a challenging market for growth in the timespan. ABInBev accounted for 8% in 2009 which was reduced to less than 4% in 2014. This decreasing market share was partly due to the fact that the well-established markets gained new preferences towards their choices of beer. Generally, the market was dominated by low-end cheap beer, which is an outfacing trend, increasing the demand for RTD products as well as speciality crafted beer, as seen in other markets. However, this effect has been slower to gain traction
compared to Western Europe. Radler: Alongside with the increasing demand for craft beer, Radler, a beer mixed drink is gaining traction with various European markets. These include markets such as Poland, Austria, and Croatia where growth range from 6%-10%. (Economic Snapshot for Central & Eastern Europe, 2016)
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13.2.1.8 Western Europe
In Western Europe, ABInBev saw a small decrease in their market share, which might stem from the fact that the increased focus on craft beer is on an upward going trend. This trend is a challenge for ABInBev as seen earlier which might, however, be copied easily due to acquisitions of small local craft beer producers.