Friday, 20 January 2017 16:41

The 2017 Forecast for Beverages

Projections are positive for both packaged and alcoholic beverages.

While convenience stores are evolving in terms of the products and services they offer consumers, they remain a primary destination for those who want to make a quick beverage purchase.

Seven in 10 retailers (70.6 percent) expect their packaged beverage sales to increase in 2017, and only 2.9 percent expect sales to decrease. The projected net change is 3.3 percent, according to the findings of the 15th annual Convenience Store News Forecast Study.

The CSNews Forecast Study provides dollar and unit volume projections in key c-store product categories based on data from various sources, including Nielsen for category sales history; TDLinx for store counts; and government sources for motor fuel volume and pricing data. The data is then run through a sophisticated projection model and presented in summary form. Maureen Maguire, founder and CEO of New York-based ThinkResearch, oversees the Forecast Study process.

C-store operators are right to be optimistic. According to the CSNews Forecast Study numbers, dollar sales of packaged beverages — which includes carbonated soft drinks, bottled water, sports and energy drinks — will increase 5.2 percent across the total industry. On a per-store basis, dollar sales are expected to increase 4.5 percent, and unit volume is expected to increase 4.1 percent. All of these figures are above the estimated results for 2016.

Although they still take up the most space inside convenience store cold vaults, carbonated soft drinks are likely to see another year of status-quo growth in 2017, with an expected rise of 0.9 percent in dollar sales per store and 1.3 percent in unit volume per store.

Perhaps reflecting consumers' growing interest in healthy eating and drinking habits, or even concern over the safety of tap water following national coverage of the water crisis in Flint, Mich., bottled water will see more growth in dollar sales per store (up 4.4 percent) and unit volume per store (up 2.3 percent), although this marks a slowing compared to 2016.

As for alcoholic beverages, price increases are likely to boost beer dollar sales in 2017, which are expected to rise 1.4 percent per store and 2.1 percent for the total industry. Unit volume is forecasted to be flat. C-store operators believe the biggest impact on beer will come from states implementing new laws regarding beer sales, such as Pennsylvania did in 2016.

The continued popularity of craft beer is a likely contributor to higher prices. Dollar sales of microbrews are expected to increase 12.6 percent while unit volume increases 11.1 percent, both on a per-store basis. This marks another year of slowing growth for the segment, but retailers note it remains "hot," with some reducing their stock of domestic brews in favor of craft. One retailer stressed the importance of "stay[ing] relevant with evolving brands in craft."

Angela Hanson
http://www.csnews.com/industry-news-and-trends/special-features/2017-forecast-beverages

Published in Retail News
Thursday, 01 October 2015 08:57

10-1-2015 ABL Update from RBC

Diageo presses ahead with wine sale

The FTSE 100 drinks company is understood to be exploring a sale of its wine brands, which include Blossom Hill

Source: The Telegraph
By Ben Martin
30 Sep 2015

Diageo, the company behind Captain Morgan rum and Smirnoff vodka, is believed to be pressing ahead with a sale of its wine brands, including Blossom Hill, as its under-pressure boss Ivan Menezes continues his sell-off of the group's peripheral businesses.

Australian firm Treasury Wine Estates was named as a leading suitor for the FTSE 100 company's wine business, which also encompasses the Piat d'Or and Rosenblum brands.

Treasury, which was spun out of Foster's in 2011, is the world's largest listed wine maker and produces Wolf Blass and Rosemount Estate.

A disposal would be in keeping with Mr Menezes strategy. Diageo, the owner of Guinness, Baileys and Pimm's, has offloaded a number of non-core divisions under Mr Menezes, including Scotland's famous Gleneagles hotel and golf resort three months ago.

The Diageo boss, who is fighting to restore investor confidence after two years of stalled growth, hinted in July that the company's wine brands could be sold, when he said the group would be "active managers of our portfolio" and that wine "is not going to get bigger for us".

The wine business only accounts for 4pc of Diageo's net sales and has long been considered a prime candidate for disposal. Sky News was first to report that the FTSE 100 giant was stepping up its efforts to sell the brands.

A spokesman for Diageo said: "Wine is a small part of our business but it plays an important role. We have no other comment to make."

Additional Coverage: http://news.sky.com/story/1561554/diageo-uncorks-plan-to-sell-global-wines-unit


Monday, 28 September 2015 08:42

9-28-2015 ABL Update from RBC

The Distillers' Digest (US) - our tracking tool for US spirits in the off-trade

Source: ExaneBNP
September 28, 2015

We have received the latest AC Nielsen data for the distillers in the US, covering the 4 weeks ending 12/09/2015 ('September'). Please see the attached file for related data and dynamic charts. Our key takeaways are as follows:

US spirits market
Another very strong month for the US spirits industry in the off-trade with sales growth of +7.6% (o.w. +3.1% volume), confirming the strong trends observed in the Summer (+7.6% in August and +6.7% in July). Diageo is still ceding the most market share amongst the majors but its sales growth accelerated +5.5% in the month. By category, the Cognac category continues to grow strongly, despite a slight deceleration compared to the last couple of months (sales up 23% in September vs. +26% in Q315TD)

Diageo: Crown Royal-dependent
An ok month for Diageo in September with sales growth of +5.5% vs. +4.7% in August and +4.4% in July. Volume growth remains in negative territory at -0.7% vs. -0.6% in the previous month. Price per unit growth was +6.3% in the month (+5.3% in August and +4.9 in July). Diageo lost 40bps of value share in September (vs. -60 bps in August and -40 bps in July). Scanning the performance by brand, we note that Smirnoff was once again the worst performer (value share down 50bps), that the performance at Crown Royal remains strong (sales up 29.1% vs. 28.1% in August and 30.6% in July), while Johnnie Walker is showed better momentum (+7.4% in September vs. +3.7% YTD). Excluding Crown Royal, a brand that accounted for 70% of the group growth this month, Diageo would have lost 100bps of market share in the month.

Pernod: strong month, volumes improving
Another strong month for Pernod with sales accelerating to +8.0% in the month vs. +7.5% in August and +6.3% in July. Volume growth in the month was +4.1%, vs. +2.4% in August and +0.8% in July. Price per unit growth was +3.7% in the month, vs. +5.0% in August. Pernod's value share was flat y/y in September (= August). Scanning performance by brand and category, we note that pricing on Absolut increased 2.4% in September (while volume are still slightly negative at -1.1%) and that sales growth at Jameson remains very strong (+32.5% in the month vs. +30.8% in August vs. +32.7% in July). While still small for Pernod in the US, its Cognac business grew 51% (vs. +32% YTD).

Friday, 04 September 2015 14:25

9-4-2015 ABL Update from RBC

Possible M&A in beer/spirits - Diageo / SABMiller

Adding value as "SABGEO"?

Source: Nomura
September 04, 2015

European Beverages
Sector View: Bearish
Ian Shackleton - NIplc

Pressure to deliver at Diageo and SABMiller.
We see strong pressure on both Diageo and SABMiller management to create value for shareholders. In our SABMiller review we discussed potential benefits from a more entrepreneurial culture as well as margin upside from a tighter focus on costs. In our Diageo review we investigated ways to create value through spinning off businesses such as beer or Reserve Brands.

.but macro/forex headwinds are increasing
Would it be enough in a world in which forex and slower macroeconomic conditions are creating more headwinds for profit growth? A report in the UK press (Sunday Times, 29 August) that SABMiller has been consulting new advisors about a possible bid defence appears to show that the company feels under threat still from a bid from AB InBev; for Diageo, updating for forex moves last week, we now estimate slightly negative EPS growth this year in what was supposed to be a recovery year.

Better balance in a merged entity.
That made us think about SABGEO, a merger of equals of Diageo and SABMiller. Some 17 years on, we would see this as a similar move to the creation of Diageo from the merger of Guinness and Grand Metropolitan in 1998. We estimate that with c50/50 emerging and mature market split of profits, a merged group could offer a firmer profit base in uncertain times (for SABMiller holders) and potentially increase its growth profile in the longer term (for Diageo holders).

.and potential to increase combined net profits by 18%
Although Diageo is now making less of its total beverage alcohol strategy, we believe that a more balanced portfolio of beer and spirits could produce material upside. With broadly similar market capitalisations, we see such a deal adding 18% to combined net profits, assuming GBP 1bn of cost synergies and some benefit on tax, with minimal regulatory issues to subtract value. There is potentially further upside from revenue synergies, and scope for a higher rating for a better balanced business. In addition, for the two large shareholders in SABMiller (Altria and Santo Domingo families), we believe a merger would preserve their tax status while giving smaller shareholdings in a more liquid investment.

Valuation
We retain our Buy rating on Diageo (TP 2,000p); CY15E P/E is 19.6x. We retain our Buy rating on SABMiller (TP 3,800p); CY15E P/E is 20.5x.

Tuesday, 08 September 2015 14:20

9-8-2015 ABL Update from RBC

SABMiller and Diageo could benefit from a merger, say analysts

Nomura says a deal could boost profits and see off any ABInbev bid for SAB

Source: The Guardian
Nick Fletcher
4 September 2015

Markets may be plunging again ahead of the US jobs data - the FTSE 100 is currently down 1.6% - but that does not mean that takeover speculation has gone away.

Analysts at Nomura have looked at the drinks sector and examined the prospect of a merger between SABMiller and Guinness owner Diageo as way to overcome slowing growth. The bank said:

We see strong pressure on both Diageo and SABMiller management to create value for shareholders. In our [recent] SABMiller review we discussed potential benefits from a more entrepreneurial culture as well as margin upside from a tighter focus on costs. In our Diageo review we investigated ways to create value through spinning off businesses such as beer or Reserve Brands.

[But] would it be enough in a world in which forex and slower macroeconomic conditions are creating more headwinds for profit growth? A report in the UK press (Sunday Times, 29 August) that SABMiller has been consulting new advisors about a possible bid defence appears to show that the company feels under threat still from a bid from AB InBev; for Diageo, updating for forex moves last week, we now estimate slightly negative earnings per share growth this year in what was supposed to be a recovery year.

That made us think about SABGEO, a merger of equals of Diageo and SABMiller. Some 17 years on, we would see this as a similar move to the creation of Diageo from the merger of Guinness and Grand Metropolitan in 1998. We estimate that with around 50/50 emerging and mature market split of profits, a merged group could offer a firmer profit base in uncertain times (for SABMiller holders) and potentially increase its growth profile in the longer term (for Diageo holders).

Although Diageo is now making less of its total beverage alcohol strategy, we believe that a more balanced portfolio of beer and spirits could produce material upside. With broadly similar market capitalisations, we see such a deal adding 18% to combined net profits, assuming £1bn of cost synergies and some benefit on tax, with minimal regulatory issues to subtract value. There is potentially further upside from revenue synergies, and scope for a higher rating for a better balanced business. In addition, for the two large shareholders in SABMiller (Altria and Santo Domingo families), we believe a merger would preserve their tax status while giving smaller shareholdings in a more liquid investment.

But despite this suggestion, in a falling market SABMiller is down 39p at £30 and Diageo has dropped 14.5p to £16.99.


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