General States with the policy in rising taxes on

General overview by business units/regionsAn industry carried by opportunitiesThe wineries and distilleries industry stands attractive for its growing alcoholic beverage consumption and profitability ($975bn) in 2016. China is the biggest consumer of alcohol in the world with 60.48bn liters followed by US with 31.25bn liters. The industry is divided into three sub-sectors, (1) beers accounting for 32% of the global alcoholic beverages, (2) spirits and liquors, accounting for 51% and (3) wine accounting for 14%. Among the three sectors, beer is the most consumed, comes second the spirit and then wine. Forecast shows a rise of 1.5% per year by 2019 in global demand. While the worldwide alcoholic beverages market revenue is expected to grow at a CAGR of 6.4% between 2017 and 2025. Value of the alcoholic beverage market worldwide by 2022, is expected to rise from 1344bn to 1594bn (in billion U.S. dollars). Although consumption in mature countries is reduced, news customers in emerging countries will show up to offset the curve. It is expected to reach 270bn liters by 2020. The industry is composed of unnumbered brands throughout the world. The pattern to pick a product is based on cultures, incomes earnings and behaviors, and is highly influenced by regions. We see the emergence of other regions such as Africa or India. Africa is an attractive region due to its fast GDP growth and its important opening for the alcoholic beverage market. We forecast a significant volume demand rising in Asia (especially India) and Africa. Furthermore, the industry can be impacted by politic decisions. Corporations tempt to reduce tax rates and to block the penetration of smaller corporations and restricted advertising. Due to the high influence of lobbying, we saw a decrease in sales when China stated the corruption issue. It was the consequence of a major drop on the global market. And it still remains political uncertainties in Brazil and Russia (recession). Also, we see issues with Brexit on the trading cost, also in United States with the policy in rising taxes on products coming from abroad.  Today, the industry is driven by innovation where companies seek to develop new products on existing ones. It is significant to satisfy consumers, remaining at the top of competition by bringing further share revenue, as well as entering in new available rooms. They are also looking to reinforce by improving the distribution and purchase channels such as online stores and presence at airports. Consumption is driven by revenue incomes, social media factor as well as its facility access.Spirits driven by ultra-premium growthSpirits volume sales is expected to grow at an average of 1% per year by 2021, estimated at 28.9bn liters (Vs 26.6bn in 2016). While the CAGR for revenue to be at 3.5%, estimated at $605bn (Vs $494bn in 2016). However, the sector knows a low penetration in emerging markets. Producers can count on the growth consumption of US, Asia and EMEA. For instance, India consumed a lot of international spirits translated by its large take up of Indian-style whiskey. The whiskey market is expected to grow at a CAGR of 5% by 2022, estimated at $7.4bn. We see the operating margin remaining steady (average of 25%) for the major competitors (Diageo, Pernod Ricard, Brown-Forman, etc.). Among the international spirits, it is divided in four segments, (1) mainstream with a volume growth rate of 1.5% over the last ten years, (2) premium wit h 2.6%, (3) super premium with 3.8% and (4) prestige with a volume growth rate of 7%. Mainstream spirits though, encompassed roughly 85% of the total spirits consumed in emerging markets. Their consumption of spirits increases but at a low price. Forecast shows a growing demand for mainstream products as well as a shift towards high-quality spirits. White spirits, rums and whiskies show the biggest consumption per type of alcohol while scotch, vodka, and whiskey will have the highest demand. BesideWine, a fragmented marketThe wine market is very split. We forecast it remains steady until 2021 with a CAGR of volume sales at 0.6%, estimated at 23.5bn liters (Vs 21.9bn liters in 2016). The five biggest producers (E&J Gallo, Constellation Brands, Wine Group, etc.) encompass barely 10% of the global volume. Besides, Pernod Ricard is the only leading global producer to be in a high position in the wine market. Most of the worldwide wine is produced in European countries (France 43.5m hL and Italy 50.9m hL). However, Spain is the country that exports the most in volume (22.9m hL) followed by Italy (20.6m) and then France (14.1m). While Germany, US and UK are the biggest importer. However, global wine demand forecasts to decrease due to lower per-capital consumption by 2018, and frequency as well. Consumption sees a shift from daily to special occasions as celebrations. We forecast the wine segment revenue at 3% by 2021, estimated at $175bn (Vs $140bn in 2016). Sur statista, wine consumption worldwide expected to drop in 2018, other sites say rise… Why? Beer, the most consumed alcoholic beveragesBeer is the most produced in five regions (China, US, Brazil, Mexico and Russia), accounting for than 50% in 2016. China is the biggest producer of beers in the world, while Germans remain the biggest consumer. However, Asia is the fastest growing market for beer consumption. The demand for beers is forecasted to rise at a CAGR of 2% by 2021, ($346bn Vs $312bn in 2016) even though a low penetration is occurring in emerging markets. We see a high demand in Africa and Middle East with a CAGR at 5% by 2020. Beer production reached 1.96bn in hectoliters this year and remains steady. Among those producers, AB InBev produced 433.9m hectoliters followed by Heineken (200.1m), China Snow Breweries (118.8m) and Carlsberg (116.9m). Those are also leading in worldwide volume sales. The trends also show the rise of premium (8% to 15%) and mainstream (26% to 35%) in beers demand by 2025. This shift is translated by the high consumption and incomes rise from the middle class. Growing population with higher incomesWith a growing population and a rising income, 800m new middle-class consumers is expected to flourish by 2025, meaning a stronger trade up as well as a premiumization. The consumption gives a larger consumer base which drives to increase demands. Besides, the industry knows a shift demand going from low-cost to high-end. By consequent, producers have a higher margin.Competitive environment and growth opportunitiesA moderate competitive environmentThe competition is healthy in the alcoholic beverage industry. It has slightly every year a growing demand and supply. But will get harder with the appearance of new producers, especially the one who craft products. Keys for competition are to be innovative, to have an efficient supply chain with the capacity of providing with a panel of price. Nonetheless, international spirits know an intense competition (mostly whiskey and vodka products) to make a better distinction. Advertising expenditure is significant in the process to raise the awareness of the brand, especially in premium and ultra-premium brands. By sustaining stronger brands, the goal is to reach as soon as possible the next generation that will be wealthier and willing to spend money. We particularly see the upcoming trends of innovation and digital marketing that will boost communication. A high change regarding segmentation with premiumization and innovationAlcoholic beverages consumption varies across countries and cultures and we believe premiumization is the main driver. New products are launched to fill in the high demand in diversification. High potential to expand the geographical presence in emerging markets such as Africa and Asia (India) as well as mature. Use of diverse communication and technologies as big data enable to boost segmentation. A shift is seen in marketing towards social media platforms. It is the key to boost the sales of premiumization brands, especially to attract consumers and to give them a high value perceived. Digital technologies will improve cost structure, reduced time and give a better access to consumer data. In fact, by 2020, 80% of adults are expected to have a smartphone. Besides, consumers are free to choose a large range of drinks at diverse price. Craft alcohol, especially beers is a growing. Same happening for flavored spirits, notably with the Absolute Vodka lemon of Pernod Ricard. Premium and ultra-premium are growing fast, and consumers want the best experience for the right price. Since the consumption of premium alcohol remains low, producers forecast substantial opportunities in mature markets first, and then emerging markets. They further want consumer to trade up. The low amount of existing ultra-premium alcohol encourages groups to focus on premiumization strategies to attract customers and loyalty.Consumer mindsetConsumer are being immerse in digital innovation. They want to be treated as individuals and no longer as a group. Social network is a driver for sales alcohol. Here Or in a high change regarding segmentation cause already mentionned… Growing population with rising incomesHere or at the beginning? Selective acquisitions /External growth through mergers and acquisitionsWe can see major acquisitions to get in the region. It eases the expansion and allows a smooth integration. Companies acquires already have a significant footprint in the local market. Major groups such as Heineken, Diageo, Pernod Ricard, etc., thus use this path to avoid implementation laws and others major fees such as employees, logistics, knowledge of the market, etc. For example, Bacardi acquired Angel’s Envy, a premium bourbon brand in 2015 and Brown-Forman acquired BenRiach, a scotch whiskey in 2016. But it is also restricted due to the agreement of government for preventing concentration. Partnership / Emerging economies and mature economies p32 Emerging markets see a high increase in demand and consumption, consuming at an inexpensive price.Mature markets see the budding of wealthier people where premium alcoholic beverages increase as well as the demand.Threaten by policies limiting alcoholOver the past years, we saw an increase of concerns regarding the alcohol consumption. Mostly due to negative health effect on population. High warnings and concerns are shared by associations and governments to unleash the aftermath of drunkenness such as weight gain and mental addiction. States seek to set harder boundaries for its use. Depending on the region, governments set rules to limit the access or even banning over time. Especially, by limiting legal age for alcoholic beverage purchases, restrictions on advertisement and placement product, or the appearance of warnings labels. It leads to high constraints for companies to be implemented. Because of policies, Carlsberg left its brewing operations in India in 2016. Russia sets strict policies to prevent alcohol addiction in the country. We can see companies conducting campaigns and advertisement to alert the side effects on the abuse of alcohol. In Russia, tax rates have been raised to face with excess of drinks. Competitive positioning of Pernod RicardA large variety of productsPernod Ricard is a wine and spirit producer that sells all kind of alcohol (liqueur, cognac, whisky, gin, rum, etc.) throughout the world. From low-quality to premium products, the group implements its goods with ingenuity and a finest strategy. By adapting its products through each region, the group segments its products to a known local consumer culture. Its strategy of being on most of the regions with a large panel allows to be strong and influent. The premiumization of its products answers to the worldwide growing demand.