This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.
News
Acquisitions boost spirits despite FMCG decline
A flurry of merger and acquisition activity has allowed the alcoholic drinks industry to increase its profitability as the broader FMCG sector reports its slowest growth since the economic crisis.
An abundance of M&A activity in alcoholic drinks has allowed the sector to “consolidate success” despite the broader decline of the FGMC industry
According to the annual Global 50 Index report, produced by OC&C Strategy Consultants, sales growth of the world’s top 50 FMCG (fast moving consumer goods) firms has almost halved for a second year running, slowing from 2.9% in 2013 to 1.7% in 2014 – reaching the second lowest level in the past decade.
Looking at the financial statements of the 50 companies, analysts claim such firms were hit by falling exchange rates of the Russian rouble and Argentine Peso.
Smaller companies positioned to better address “fragmenting consumer needs” also swiped market share from large international players.
However, the report claims that M&A activity has “consolidated the success” of some of the world’s biggest FMCG groups, particularly those in the spirits and beer sectors.
“Global scale remains a key competitive advantage for many large consumer goods companies, and nowhere has this been more apparent than in the beer and spirits sector,” said Will Hayllar, partner at OC&C Strategy Consultants.
“Our research has shown that many of the biggest players in this market have continued to increase both their scale and profitability through consolidation, which has driven an overall 4.5% increase in bottom line.
“Diageo’s acquisition of United Spirits for instance, has given them unrivalled access to the rapidly growing Indian market.”
Haylarr added that despite this overall growth in scale, large spirits and beer companies have been plagued by “institutional sluggishness” and slower innovation, meaning smaller brands have “the opportunity to thrive”.
In OC&C Strategy’s Global Index, Diageo is the highest ranking spirits producer placed at number 24, followed by Pernod Ricard at 43 and LVMH at 44.
To see a comprehensive list of some of the biggest spirits industry acquisitions which have taken place over the past 18 months, click here.