Top dogs under threat as market recovers

2010 has proved to be a year of recovery for the drinks industry across the globe and Diageo stands to lose its position as the world’s leading drinks producer by volume to Indian firm UB Group, according to latest data from Euromonitor International.

Euromonitor’s newly published alcoholic drinks data reveals that all categories displayed improved performance in 2010 compared to 2009.

Global alcoholic drinks volumes grew by more than 1% – a visible improvement on the 0.3% growth reported in 2009.

Emerging markets reaffirmed their role as the main engine for growth. China in particular continued to impact the global market, with 50% of all forecasted volume growth coming from the country.

The importance of Asia Pacific is also reaffirmed, with India’s UB Group set to become the leading spirits producer by volume in 2011.

Euromonitor even predicts that Diageo could slump down to third, behind Pernod Ricard, although it will remain number one by value for the foreseeable future.

The report justifies its predication by stating that unlike its two closest rivals, Diageo lacks a strong presence in the booming Asia Pacific region, especially in India, but also in China, where Pernod Ricard enjoys strong sales.

The Indian spirits market, which is dominated by low-value local spirits, remained unaffected by the economic crisis and has seen double-digit volume growth year-on-year since 2006.

UB Group, the leader with over 42% of Indian spirits volume sales in 2010, and second-placed Pernod Ricard, which has 8% volume share, have been able to exploit this growth.

Euromonitor said: “Both companies have managed to either exceed or closely match the continued strong growth seen in the Indian market. Diageo, in contrast pulled out of the market in 2002, and, while it has attempted to re-enter the market through a joint venture with Radico Khaitan, signed in 2006, this has failed to take off.

“With the Indian market expected to grow by over 10% in volume again in 2011 and with UB Group only 0.1 percentage points behind Diageo in terms of volume share in 2010 and Pernod Ricard even less, Diageo could end up as the world’s number three company by volume by the end of the year.”

The report also states, perhaps surprisingly, that global on-trade growth is outperforming off-trade.

Although consumers still prefer to drink at home in developed markets, benefiting the off-trade channel, the picture is more mixed in emerging markets.

Emerging markets have also generated an upsurge in demand for luxury goods as growing middle classes are increasingly drawn to the consumption of high-end products, according to the report.

“While Western consumers can be expected to take small steps back into the luxury industry, emerging markets are embracing luxury, even in this uncertain economic environment,” the report said.

Alan Lodge, 24.11.2010