Competitive Strategies in Alcoholic Drinks

November 2018

Company strategies in alcoholic drinks vary significantly across categories, especially the main three – beer, wine and spirits. In many cases, there is limited scope for further large-scale acquisitions. However, in addition to organic growth, takeovers continue to play a key role in expansion strategies. At the same time, alcoholic drinks players are having to navigate a shifting landscape as a result of digital advances, changing consumer priorities and wider legislative developments.

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Key Findings

No “one size fits all” path to growth

The three major alcoholic drinks categories – beer, wine and spirits – each require different development strategies, largely due to variations in methods of production and operation. There are, however, unifying trends – premiumisation, for example.

Beer: consolidation and the continuation of craft

Beer is by far the most consolidated of the three main categories, with significant acquisitions taking place in key markets China and Brazil in 2017. The craft, or “independent” segment continues to play a key role, and niche categories such as non-alcoholic beer offer potential for both major players and microbrewers.

Cider and RTDs: opportunities to broaden appeal

Cider is a logical choice for brewers looking to expand outside of beer, as the two categories share similar distribution models. RTDs appeal to brewers and spirits producers as the category broadens its appeal among different demographic groups.

Spirits: category and geographic expansion

Leading international distillers continue to premiumise, as well as acquiring craft brands in 2017 and 2018, such as Pernod Ricard’s acquisition of Del Maguey Single Village Mezcal. Major players are focused on expanding geographic and category spread, as the focus has historically been narrow, especially for Bacardi.

Wine: embracing democratisation?

Globally, wine remains highly fragmented. The leading players – E&J Gallo Winery and Constellation Brands – are focused on North America, which is supported by higher levels of brand-consciousness than in other regions. Many companies are exploring non-traditional marketing strategies to engage with a wider audience.

A changing landscape

The potential for future mergers and acquisitions activity varies significantly across categories. At the same time, alcoholic drinks players will have to navigate a shifting landscape as a result of digital advances, environmental concerns, cross-category diversification and cannabis legalisation plans. 

Introduction

Scope
Objectives

introduction

Key findings

Overview

Brewers dominate the global top 10 companies
Different categories require different strategies
Beer leads in terms of global consolidation
Private label benefits from the weakness of wine brands
The impact of global megatrends
Five key trends shape alcoholic drinks

Beer

Heineken boosted by acquisition in Brazil
Leading brewers work to improve their geographic balance
“Craft” vs “independent”
Brewpubs tap into the on-trade opportunity
Non-stop growth for non-alcoholic beer?
Michelob Ultra: a case study of healthy growth
Flagship brands lead the way in high-end beer in Brazil
Premiumisation remains the priority in China
Opportunities in Asia…and abroad

Cider/Perry

Growing premium emphasis drives acquisitions in key markets
Cider presents an expansion opportunity for brewers
Aiming for authenticity in the UK

Rtds/High-Strength Premixes

RTDs: a profitable add-on for major alcoholic drinks players
Lovely Rita? Targeting women with RTD expansion

Wine

Brand weakness limits the global shares of wine companies
Treasury Wine gains strength and scale from Diageo’s assets
Growing the Concha y Toro way
The democratisation of wine?

Spirits

Narrow geographic focus for many leading spirits companies
Paying a high price for spirits
Players divest in order to sharpen their focus on spirits
Leading players need to continue to diversify geographically
Premium focus: dark rum
Going super premium: bourbon/other US whiskey
Economy brands play their part
Volume versus value: blended scotch whisky in Russia
Using cheap local spirits as a base
Distillers to remain vigilant to emerging trends

Looking Forward

Limited future M&A potential: at least in-category
Spirited growth for microbrewers
Green issues are increasingly in the limelight
Digital advances through acquisitions
Opportunities in a budding industry
Looking forward...
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