Moody's: Outlook for the global beverage industry remains stable

The outlook for the global beverage industry remains stable, Moody's Investors Service says in a new report.

Higher prices, supported by premium brands and innovation, as well as portfolio mix, will offset volume challenges in some beverage categories. Meanwhile, cost synergies following large M&A transactions, and ongoing efficiency programs will help to support operating profit growth.

"We expect overall operating profit to grow 4% to 5% over the next one to two years, based on low single-digit sales growth," said Linda Montag, a Moody's Senior Vice President. Moody's also expects modest commodity cost inflation for beverage companies in the year ahead.

Sales of spirits, particularly brown spirits and premium beers, will help drive growth. Sales of carbonated soft drinks and mainstream beers will remain challenged by changing consumer behaviors, as well as economic pressures in some developed markets, though both categories have room to grow in emerging markets.

Companies including Anheuser Busch InBev and Molson Coors are making acquisitions in the premium craft beer space, while Constellation Brands continues to acquire premium craft beer, luxury wine and craft whiskey, and Diageo and Remy Cointreau have made acquisitions in the craft spirits space and are expected to continue to do so.

Moody's anticipates continued, if slow, volume growth for beverages across most emerging markets over the next 12 to 18 months, alongside a gradual recovery in some economies, including Brazil, China, India and Russia. In the long run, the rising middle class in many emerging markets will offer better growth prospects than currently exist in developed markets.

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