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The glass is half full in spite of warnings

Drinks companies continue to report positive results despite cautioning about the global financial turmoil and the possibilities of further sharp disruption to trading patterns.


Diageo, LVMH, Rémy Cointreau and Constellation Brands have been followed by Pernod Ricard, Kweichow Moutai, the world’s biggest beverage alcohol group, and Treasury Wine Estates in publishing buoyant numbers to the end of September. Even out-of-favour Boston Beer achieved a small uptick in trading.

For its latest three months, Pernod Ricard’s sales were €3.308 billion ($3.23 billion), a like-for-like rise of 11%, which easily beat market expectations of a 9.3% sales increase.

It successfully raised prices in the United States, while demand was strong in China in India and the rebound in global travel retail continued.

Despite signs of general market slowdown in the US, chairman and CEO Alexandre Ricard said: “I am hugely encouraged by our start to the year.”

Meanwhile baijiu producer Kweichow Moutai’s net profit surged by 19.1% in the first nine months of this year compared with 2021, rising to $6.2 billion as sales soared 16.7% to $12.1 billion.

This was Moutai’s fastest growth in three years and propelled it into the position as China’s most valuable quoted company, eclipsing tech giant Tencent, which has been hit by a consumer spending slowdown.

Much of Moutai’s improvement was due to the better margins achieved from direct to consumer sales through its iMoutai arm. These more than doubled in the first three quarters from a year ago to $4.4 billion, accounting for over a third of the group’s total revenues. It also benefited from strong early popularity for its newly-introduced baijiu-flavoured ice-cream.

On the flip side wholesale sales fell by 8%, reflecting the continued lockdowns in China earlier this year.

Despite the continuing headache over lost China sales due to Beijing’s punitive tariffs on Australian wine, Treasury Wine Estates has also cheered its shareholders.

Chief executive Tim Ford told the annual meeting that demand for both premium and luxury wines had been consistent across all the company’s key markets, with trading conditions, earnings and inflation in line with expectations for the first quarter of its fiscal year.

Treasury “expects to deliver strong growth” for the full year, which runs to the end of next June.

“After two years of significant change, we enter financial year 2023 confident that we are absolutely on the right path towards the delivery of the 2025 strategy and our ambition to be the world’s most admired premium wine company,” Ford said.

Analysts believe Treasury has put the worst behind it and, providing it suffers no further external shocks to its business, they suggest that it could be on the road back to share price growth. The shares have put on 12% so far this year but still remain far below pre- tariff shock levels.

Boston Beer beat expectations and returned to profitability in the third quarter compared with last year. It achieved a 6.2% gain in net revenue to US$596.5m with the gross margin rising to 43.2% from 30.7% in the same quarter last year.

Earnings per share of US$3.82 were better than analysts’ consensus estimate of US$3.28.

Boston rode the hard seltzer boom and became a Wall Street darling, its share price soaring to almost US$1,300 in 2020 only to nosedive to about US $400 today after vastly overestimating market demand, especially for its Truly seltzer brand.

The problem was that by 2019 the surging popularity of the category attracted an array of new entrants. Today, virtually every alcohol and soft drink maker has launched a hard seltzer, making the segment overcrowded, especially as demand is shrinking in favour of spirit-based STDs.

Retail sales in the latest quarter fell by 6% compared with 2021, reflecting lower demand for the Truly Hard Seltzer, Angry Orchard, Samuel Adams, and Dogfish Head brands, which were partially offset by increased demand for the Twisted Tea and Hard Mountain Dew ranges.

Overall, the company’s deliveries into the market were 1.4% up. “I continue to be optimistic about the long-term growth outlook for Boston Beer’s diversified beverage portfolio, said chairman and founder Jim Koch.

The company expects earnings per share for its full year to be in the range of US$7.00 to US$10 compared with its previous guidance of between US$6.00 and US$11.00.

Analysts noted that the company had trimmed the upper figure and that it had already lowered its forecasts earlier this year from earnings per share of US$11 to US$16.

While chief executive Dave Burbeck says he believes the company’s future will be in the “Beyond Beer” market, he forecast that hard seltzers as a category would see a further 15% to 20% fall in demand during the year.

Boston is putting big hopes on its collaboration with Pepsi. The soft drink giant’s Mountain Dew soda is the fifth-most popular in the U.S. That, many believe, bodes well for the Hard Mountain Dew derivative.

Launched in a handful of states, early sales are encouraging and because the line will be more difficult to imitate because of its distinctive taste, there are hopes it will create a strong niche in the low alcohol RTD market.

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