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Asia offers better time for major spirits brands says Rabobank

Published:  06 June, 2014

Asia could offer major spirits brands the chance to drive up prices and margins as the market opens up to premium established brands  through acquistions and mergers, according to Rabobank's latest spirits report. 

Asia could offer major spirits brands the chance to drive up prices and margins as the market opens up to premium established brands through acquistions and mergers, according to Rabobank's latest spirits report.

Despite recent challenges in the area for some spirits manufactuers, Rabobank predicts a more optimistic future for established brands.

This year alone has seen two large mergers and acquisitions deals close. Jim Beam was sold to Suntory for US$16 billion and Whyte & Mackay's whisky brands were sold by Diageo to Emperador for £430 million.

Stephen Rannekleiv, a Rabobank analyst said: "Taken together, the recent Suntory and Emperador acquisitions signal a growing appetite for assets among Asian players. For those looking to sell spirits brands, this opens up important opportunities that could drive improved pricing for assets. For those looking to make acquisitions, it is clear that the bidding process is becoming more competitive and aggressive."

China has been a challenging market for many of the giant spirits companies since the beginning fo the year.  The government's crack down on corporate gift giving and anti-corruption policies have had lingered far longer than many of the companies first estimated.

Pernod Ricard posted a €127 million loss in net sales in Q3 of this year.  Remy Cointreau put out a warning that profits for the year could decline as much as 40% this year. Diageo also took hits, but blamed political instability in its poor growth performance.

India also saw declines in mass-end sprit brands, which as related to an increase in excise taxes across several states.  However, despite the tax increase premium spirit brands are continuing to do very well, showing positive growth rates at end of the second half of last year.

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