Deal activity in the alcoholic beverage category remains strong, with larger players focused on acquiring new markets, younger consumer segments and overseas distribution channels. The industry is seeing a massive shift in consumption patterns, which has several businesses turning to…
Deal activity in the alcoholic beverage category remains strong, with larger players focused on acquiring new markets, younger consumer segments and overseas distribution channels. The industry is seeing a massive shift in consumption patterns, which has several businesses turning to inorganic growth to remain competitive in a fast-evolving market.
Countries such as Canada, USA, Russia and the United Kingdom have seen a decline in alcohol consumption in recent years, according to Forbes. However, global alcohol consumption has been increasing steadily, with Southeast Asian countries in the lead, recording an increase of 34 percent between 2010 and 2017. Large disposable incomes and an increasing urban millennial population are driving consumption in these markets. Overall, the Asia-Pacific food and beverage sector is growing the fastest, surpassing growth in regions such as Western Europe and North America, according to Mordor Intelligence. Within Southeast Asia, the Chinese and Indian markets are developing the most rapidly. In its Consumer and Retail Trends 2019 publication, KPMG reported that 2019 will likely see corporate acquirers seeking deals across Asia, given relatively weaker US domestic growth.
According to research published by the Collage Group, millennials have the highest propensity to experiment and seek variety in the alcohol they consume, preferring liquor and craft spirits over more traditional drinks. Consumers in this demographic are also the driving the growth of the non-alcoholic beverage, soda alternatives and functional drinks segment. The non-alcoholic beverage market is forecasted to reach USD 1.25 trillion by 2024, registering a CAGR of 4.7 percent between 2019 – 2024. To tap into this market, alcoholic beverage companies are pursuing acquisitions as well as going the corporate venture investing route.
For instance, Anheuser-Busch InBev acquired San Francisco-based Hiball Energy, a seller of organic energy drinks and sparkling juices in 2017. In 2018 Diageo acquired Belsazar, expanding into the aperitif sector to cater to the rising demand for lower ABV(alcohol by volume) drinks. Conventional alcohol giants are increasingly acquiring or investing in non-alcoholic alternatives. This is a noteworthy shift, indicating that a significantly large consumer base is looking for healthier alcoholic drinks or alternatives to alcohol altogether, creating multiple opportunities in the segment.
Large beverage alcohol players have also been aggressively pursuing craft beverage deals. The focus has been on filling portfolio gaps by acquiring craft brands or local, smaller brands that cater to millennial consumers who are willing to pay more for premium and super-premium beer. According to Beverage Daily, the mainstream beer category has grown 1.6 percent in the past decade. In comparison, premium beer has grown 3 percent and the super-premium category has grown by 5 percent.
As established beverage giants increasingly acquire upstart brands and overseas companies in order to expand their customer base, acquisitions in both alcoholic and non-alcoholic beverage segments are expected to continue.
Image source: Pixabay
If you are a firm/advisor looking to get introduced to a prospective buyer from the beverage segment, sign up here. To gain access to a wide selection of curated M&A deals in the Food and Beverage Sector, sign up for a free trial on BankerBay.