United States Food and Drink Report Q3 2009

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The economic downturn looks like it could possibly prompt a wave of consolidation in the US soft andalcoholic drink industries. In the soft drink sector the downturn has prompted PepsiCo to launch a bid forits bottlers in an effort to revitalise sales. Meanwhile, in the alcoholic drinks sector the sprits producerBrown-Foreman is rumoured to be considering a tie up with Bermuda-based Bacardi ' a move whichwould create a firm with scale to take on global market leaders, Diageo and Pernod Ricard.In April 2009, soft drinks giant PepsiCo launched a takeover bid for its two largest independent bottlers,Pepsi Bottling Group (PBG) and PepsiAmericas. The cash and share offer represented a premium ofaround 17% on both companies' closing price on April 17 and would mean PepsiCo controls around 80%of its North American distribution. The move is a sharp shift in strategy ' investor pressure actually led toPepsiCo spinning off PBG in 1999 ' but has been deemed necessary to respond to the economicdownturn and changing consumer tastes, which have had a substantial impact on PepsiCo's NorthAmerican sales.So far the two bottlers have been reluctant to accept the terms of the deal. PBG has said the bid issubstantially below PBG's intrinsic value as well as the value implied by similar transactions. PBG alsosuggests that PepsiCo's estimate for synergies ' of around US$200mn ' is inaccurate and that the actualcost savings are likely to be 'multiples' of this figure. To defend its position and prevent PepsiCoappealing directly to shareholders instead of negotiating with the PBG board, the company has installed a'poison pill' defence that gives existing investors the right to buy shares at a 50% discount if PepsiCoacquires more than 50% of the company. PepsiAmericas has taken a similar tough stance. However, withboth firms seeing their sales and profits hit hard by the economic downturn, BMI does believe that bothare likely to be stronger as part of a larger group and that the deal is eventually likely to go ahead.Meanwhile, in the alcoholic drinks sector reports have emerged that Bermuda-based drinks group Bacardiand US-based Brown-Forman, the maker of Jack Daniels and Southern Comfort, may be mulling over amerger. The reports emerged shortly before Brown-Forman announced it would be cutting around 6% ofits workforce and embarking on a cost-cutting programme in response to the economic downturn. Amerger between Bacardi and Brown-Foreman certainly has strategic merit. Both are medium-sized familybusinesses that would benefit from the increased distribution and marketing muscle that being part of alarger group would facilitate.Over the last 20 years the spirits industry has been consolidating around a handful of firms. However,UK-based Diageo and France-based Pernod Ricard have now secured the top two positions and appear tobe gradually moving away from the chasing pack. This unparalleled scale gives them a distinct advantagewhen negotiating supply contracts and results in economies of scale that could gradually mean themargins of smaller producers are eroded. The larger firms are also in a stronger position to invest inemerging markets, from where the majority of future sales growth is expected to stem.A merger would create an entity with revenues of US$9bn, which would see the new group slot neatlyinto third spot, with revenues only slightly below current number two Pernod Ricard, making it trulycapable of challenging on a global scale. The lack of overlap in the two groups portfolios ' with Bacardifocused on rum, and Brown-Forman deriving the majority of its revenues from bourbon ' would alsosuggest a merger would be mutually beneficial. Neither would it result in the need to prioritise one firm'sset of brands at the expense of the other.Despite the merits, any merger deal could be scuppered by unwillingness of the founding families to cedecontrol. However, even if the current rumours turn out to be mere speculation, it is easy to see that themove

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United States Food and Drink Report Q3 2009

  1. 1. Find Industry reports, Company profilesReportLinker and Market Statistics >> Get this Report Now by email!United States Food and Drink Report Q3 2009Published on August 2009 Report SummaryThe economic downturn looks like it could possibly prompt a wave of consolidation in the US soft andalcoholic drink industries. In the soft drink sector the downturn has prompted PepsiCo to launch a bid forits bottlers in an effort to revitalise sales. Meanwhile, in the alcoholic drinks sector the sprits producerBrown-Foreman is rumoured to be considering a tie up with Bermuda-based Bacardi a move whichwould create a firm with scale to take on global market leaders, Diageo and Pernod Ricard.In April 2009, soft drinks giant PepsiCo launched a takeover bid for its two largest independent bottlers,Pepsi Bottling Group (PBG) and PepsiAmericas. The cash and share offer represented a premium ofaround 17% on both companies closing price on April 17 and would mean PepsiCo controls around 80%of its North American distribution. The move is a sharp shift in strategy investor pressure actually led toPepsiCo spinning off PBG in 1999 but has been deemed necessary to respond to the economicdownturn and changing consumer tastes, which have had a substantial impact on PepsiCos NorthAmerican sales.So far the two bottlers have been reluctant to accept the terms of the deal. PBG has said the bid issubstantially below PBGs intrinsic value as well as the value implied by similar transactions. PBG alsosuggests that PepsiCos estimate for synergies of around US$200mn is inaccurate and that the actualcost savings are likely to be multiples of this figure. To defend its position and prevent PepsiCoappealing directly to shareholders instead of negotiating with the PBG board, the company has installed apoison pill defence that gives existing investors the right to buy shares at a 50% discount if PepsiCoacquires more than 50% of the company. PepsiAmericas has taken a similar tough stance. However, withboth firms seeing their sales and profits hit hard by the economic downturn, BMI does believe that bothare likely to be stronger as part of a larger group and that the deal is eventually likely to go ahead.Meanwhile, in the alcoholic drinks sector reports have emerged that Bermuda-based drinks group Bacardiand US-based Brown-Forman, the maker of Jack Daniels and Southern Comfort, may be mulling over amerger. The reports emerged shortly before Brown-Forman announced it would be cutting around 6% ofits workforce and embarking on a cost-cutting programme in response to the economic downturn. Amerger between Bacardi and Brown-Foreman certainly has strategic merit. Both are medium-sized familybusinesses that would benefit from the increased distribution and marketing muscle that being part of alarger group would facilitate.Over the last 20 years the spirits industry has been consolidating around a handful of firms. However,UK-based Diageo and France-based Pernod Ricard have now secured the top two positions and appear tobe gradually moving away from the chasing pack. This unparalleled scale gives them a distinct advantagewhen negotiating supply contracts and results in economies of scale that could gradually mean themargins of smaller producers are eroded. The larger firms are also in a stronger position to invest inemerging markets, from where the majority of future sales growth is expected to stem.A merger would create an entity with revenues of US$9bn, which would see the new group slot neatlyinto third spot, with revenues only slightly below current number two Pernod Ricard, making it trulycapable of challenging on a global scale. The lack of overlap in the two groups portfolios with Bacardifocused on rum, and Brown-Forman deriving the majority of its revenues from bourbon would alsosuggest a merger would be mutually beneficial. Neither would it result in the need to prioritise one firmsset of brands at the expense of the other.United States Food and Drink Report Q3 2009 Page 1/6
  2. 2. Find Industry reports, Company profilesReportLinker and Market StatisticsDespite the merits, any merger deal could be scuppered by unwillingness of the founding families to cedecontrol. However, even if the current rumours turn out to be mere speculation, it is easy to see that themove makes long-term strategic sense and the factors forcing the companies together are only likely toincrease as time passes. Table of ContentExecutive Summary 7Industry SWOT Analysis.9United States Food Industry SWOT...... 9United States Drink Industry SWOT .. 10United States Mass Grocery Retail Industry SWOT ... 11Business Environment .12Business Environment Ratings 12Global Food & Drink Business Environment Ratings Q3 2009... 13Macroeconomic Outlook.. 14Table: United States Economic Activity, 2005-2013 ....... 17Food18Industry Forecast Scenario....... 18Food Consumption...... 18United States Food Consumption Indicators Historical Data & Forecasts, 2004-2013 ..... 19Confectionery ..... 19Confectionery Value/Volume Sales Historical Data & Forecasts, 2004-2013 .. 19Canned Food....... 20Canned Food Value/Volume Sales Historical Data & Forecasts, 2004-2013.... 20Trade... 21Table: Food & Drink Trade Indicators (US$mn) Historical Data & Forecasts, 2004-2013....... 21Industry Developments .... 22Market Overview..... 27Food Consumption...... 27Confectionery ..... 28Canned Food....... 28Trade... 29Table: Top Food Products Exported From China To The US 2007 .. 30Trade Agreements....... 30Agriculture.. 31Organic Farming. 32Drink .......33Industry Forecast Scenario....... 33Alcoholic Drinks. 33Alcoholic Drink Value/Volume Sales Historical Data & Forecasts, 2004-2013 ....... 35Hot Drinks .. 35Hot Drink Value Sales Historical Data & Forecasts. 36Soft Drinks.. 36Soft Drink Value Sales Historical Data & Forecasts, 2004-2013...... 38Industry Developments .... 39Market Overview..... 43Alcoholic Drinks. 43United States Food and Drink Report Q3 2009 Page 2/6
  3. 3. Find Industry reports, Company profilesReportLinker and Market StatisticsHot Drinks .. 44Soft Drinks.. 45Retail.......46Industry Forecast Scenario....... 46United States MGR Sector Sales Value by Format Historical Data & Forecasts ... 47Table: Sales Breakdown by Retail Format Type (%) .. 47Industry Developments .... 48Market Overview..... 51Main Players ....... 51Table: Structure of the Mass Grocery Retail Market by Number of Outlets (000s), 2002-2008.. 53Table: Structure of the Mass Grocery Retail Market Sales by Format (US$bn), 2002-2008..... 53Average Annual Sales Value by Format 2008 (US$mn).. 53Competitive Landscape54Key Players...... 54Food.... 54Table: Key Players Food Sector....... 54Drink... 55Table: Key Players Drink Sector...... 55Mass Grocery Retail ... 56Table Key Players: US Mass Grocery Retail Sector 56Company Analysis... 57Food.... 57Kellogg Company....... 57General Mills Inc. ....... 58Tyson Foods ....... 59Drink... 60Pepsi Bottling Group .. 60Anheuser-Busch InBev (ABI)..... 61MillerCoors. 62Mass Grocery Retail ... 63Wal-Mart Stores.. 63Appendix: .......64Commodity Price Forecasts.64Corn. 64Table: Corn, 2005-2010...... 64Soybean ... 64Table: Soybean, 2005-2010 65Rice.. 65Table: Rice, 2005-2010....... 65Wheat....... 65Table: Wheat, 2005-2010.... 66Cocoa....... 66Table: Cocoa, 2005-2010.... 67Coffee ...... 67Table: Coffee, 2005-2010 ... 67Milk . 67Table: Milk, 2005-2010 ...... 68Sugar 68Table: Sugar, 2005-2010..... 68Country Snapshot: US Demographic Data..69United States Food and Drink Report Q3 2009 Page 3/6
  4. 4. Find Industry reports, Company profilesReportLinker and Market StatisticsSection 1: Population.. 69Table: Demographic Indicators, 2005-2030 69Table: Rural/Urban Breakdown, 2005-2030 ....... 70Section 2: Education and Healthcare .. 70Table: Education, 2002-2005...... 70Table: Vital Statistics, 2005-2030....... 70Section 3: Labour Market and Spending Power.. 71Table: Employment Indicators, 2001-2006. 71Table: Consumer Expenditure, 2000-2012 (US$)....... 71Table: Average Annual Wages, 2000-2012 (US$)...... 72Food & Drink Business Environment Ratings ....73Ratings Methodology....... 73Ratings Overview .... 73Ratings System... 73Indicators .... 73Limits of Potential Returns . 73Risks To Realisation Of Potential Returns.. 74Weighting ... 76Weighting ... 76BMI Food & Drink Industry Glossary ...77Food & Drink... 77Mass Grocery Retail 77BMI Food & Drink Forecasting & Sourcing .79How We Generate Our Industry Forecasts....... 79Sourcing... 80United States Food and Drink Report Q3 2009 Page 4/6
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  6. 6. Find Industry reports, Company profilesReportLinker and Market Statistics Payment Information Please indicate the payment method, you would like to use by selecting the appropriate box. Payment by credit card Card Number: ______________________________________________ Expiry Date __________ / _________ CVV Number _____________________ Card Type (ex: Visa, Amex…) _________________________________ Payment by wire transfer Crédit Mutuel RIB : 10278 07314 00020257701 89 BIC : CMCIFR2A IBAN : FR76 1027 8073 1400 0202 5770 189 Payment by check UBIQUICK SAS 16 rue Grenette – 69002 LYON, FRANCE Customer signature:   Please note that by ordering from Reportlinker you are agreeing to our Terms and Conditions at http://www.reportlinker.com/index/terms Please fax this form to: Europe, Middle East and Africa : + 33 4 37 37 15 56 Asia, Oceania and America : + 1 (805) 617 17 93United States Food and Drink Report Q3 2009 Page 6/6

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