Europe and US are providing a hard time to the drinks companies.

So much so, that they are struggling to maintain beer sales in these two regions. The reason – consumers look to pour themselves a healthier option and abstain from beer.

There is a widening gap between the capacities of production of the drinks companies and the demand from the region and as such drinks firms are increasingly focusing on health and wellness to fill the gap, believes Mintel drinks analyst Jonny Forsyth.

“Particularly in developed markets. So we are seeing regions like North America and Europe which used to be a real cash cow for the beer industry, suddenly we are seeing drinking rates decline. We are seeing more focus on emerging markets but health and wellness is also spreading to emerging markets, particularly in Asia,” he said on Wednesday.

While overall sales of lager in the U.K slumped 8 percent from 2010 levels, less than half of Brits drank beer in 2015, claimed a report that was published by Mintel in January.

And as a direct consequence of that, there is expected to be an estimated 1.8 percent rise in the sales of carbonated soft drinks in the U.K. this year and is estimated to reach total sale revenue of £8,035 million in 2016 from £7,890 million in 2015.

It might be worthwhile to mention that the shareholders of SABMiller shareholders voted on Wednesday to accept the £45 per share offer for a takeover by rival Belgian brewer AB InBev where the total cost of the deal is estimated at $100 billion, marking one of the biggest takeovers in brewery history.  And it is amidst this environment that the Forsyth’s comments came describing the fall in the drinks market in Europe and the U.S.

AB Inbev has a need to take a dominating position in the emerging markets and the the deal is part of AB Inbev’s such pans, said Forsyth.

“The beer market is a difficult place right now and a huge strategy with this deal is that AB InBev really wants to be in pole position in Africa. Forsyth said African growth potential is enormous, noting that Nigeria is forecast to reach the same population as the United States by 2050,” Forsyth said.

The thirst for soft drinks is growing and firms need to change their product mix with beer intake declining, Forsyth said.

“It is actually a great time for soft drinks as people look for the healthier option. Within soft drinks there are the ones that are seen as bad for you, the sugar-laden ones, but healthier soft drinks such as water, carbonated drinks and cold press are really growing,” he said.

Heineken will find it hard to compete if they stay at their current size despite claims they are happy as they are, said the Mintel analyst in relation to further deals in the sector.

“I think Heineken are probably going to be increasingly on the outlook for an acquisition. Maybe another brewer but perhaps a soft drink company,” he said.

(Adapted from CNBC)

Categories: Economy & Finance