Asia's beverage sector fizzes despite downturn(1)
SINGAPORE (Reuters) - The crowds drinking beer in the bustling bars of Mumbai and Shanghai underscore the motive behind a flurry of recent merger and acquisition activity in Asia, with forecasts of strong growth for beer and spirits in years to come.
In China and India, as well as smaller markets in Southeast Asia such as Singapore, Thailand and Vietnam, beer drinking is becoming a popular past time due to rising disposable income and relatively young populations who are embracing the party scene.
"I'm a firm believer in the Asia growth story and when there's growth there's going to be increased consumption," said Edward Chia, managing director of Singapore's Timbre bars.
"My analysis of trends is that people tend to start drinking beer as the first form of alcohol, then move to wines and spirits. That (applies) to both age and maturity of industry."
Market research firm Euromonitor International says Asia is the most dynamic region globally in volume for beer, with average annual growth of 8 percent between 2003 and 2008. China is the world's biggest beer market and India's $12 billion (7.3 billion pounds) alcohol market has been enjoying 12-15 percent annual growth.
So it's no surprise that beverage firms, facing slowing sales in mature markets in Europe, Japan and the United States, have heightened M&A activity in the past few month. Analysts suggest there will be more to come given the outlook for rising alcohol consumption across Asia.
In China, per capita consumption of alcoholic drinks is expected to rise to 53.4 liters by 2013 from 37.8 liters in 2008, according to Euromonitor. It sees consumption in Singapore and Thailand rising to 23.1 and 61.4 liters respectively by 2013 from 21.1 and 48.4 liters last year.
"Expect more activity in the years to come as the major brewers establish or reinforce existing operations in the region, in particular outside the mature markets of South Korea and Japan," said Euromonitor's Marlous Kuiper.
Beverage firms are focusing closely on China and India as growth is expected to be rapid due to rising disposable incomes in the world's third and twelfth largest economies, dented by the downturn but still holding up with forecasts for annual GDP growth of 8 and 6.3 percent respectively.
"The beer market (in China) is set for double digit (revenue) growth in coming years. Its growth will be much stronger than other liquor or wine," said Jiang Guo-Qiang, general manager and director of Chinese brewer Kingway Brewery.
In line with this sentiment, shares in China's Tsingtao Brewery have soared 65 percent this year, outpacing a 29 percent gain in Hong Kong's main index.
China's beer market was valued at almost $30 billion in 2007 compared with about $17 billion in 2001. Japan's mature beer market is valued at about $42.5 billion, but its size has been steadily declining from about $51 billion in 2004.
ECONOMIC RECOVERY
Big names such as Diageo, the world's biggest spirits group, and Japan's Kirin Holdings are adopting multi-pronged strategies that include mergers and acquisitions and also partnerships with local firms for footholds in markets in India and China which are dominated by domestic firms.
Diageo said in June it had teamed up with Chinese white spirit producer Shui Jing Fang to make a premium vodka in China. It is also in talks to pick up a stake in India's United Spirits.
