Investors are warming to beer stocks as a relatively cheap way to benefit from growth in alcohol brands, particularly in emerging markets, as easing cost pressures help brewers close the gap on the spirits giants that have outshone them for years.
While spirits companies enjoyed record growth during a post-pandemic boom in expensive liquors, brewers like Anheuser-Busch InBev and Heineken have struggled with huge spikes in costs of everything from energy to barely.
This slashed margins and hurt sales as they hiked prices to cover their bills, and accelerated a shift from wine and beer to spirits in Western markets.
But now brewers are set for a recovery in margins as inflation eases, and are raising growth ambitions. While Heineken, the world's No.2 brewer, recently disappointed markets with its cautious guidance, it still expects to sell more beer in 2024 and could see strong profit growth.
Meanwhile, economic downturns are hurting demand for spirits from companies like Diageo and Pernod Ricard.
Some investors wonder if they face a more serious challenge than a return to normality after the post-pandemic sales explosion, when many drinkers splashed out on pricey bottles of tequila, whisky and more.
"The big unknown thing for spirits versus beer is how much is in your cabinet at home," said Tom O'Hara, a Janus Henderson portfolio manager whose fund invests in beer stocks, adding bottles of liquor can sit in cupboards for years.
It was unclear how close drinkers were to running out, or if they would purchase at the same price tag even when they do, he added.
Unsold bottles of spirits are already piling up in some markets, shaking investor confidence in top firms like Diageo as some drinkers ditch pricey spirits for cheaper options.
Diageo and Pernod Ricard have also seen falling sales in the critical US market.
The risks to spirits businesses were possibly underestimated, O'Hara said, adding the stocks were also relatively expensive.
"Beer is easier: it's resilient, there's very little downtrading," he continued, adding there was a consensus building around this view.
The world's largest brewer AB InBev is scheduled to report full-year results on Feb 29. It is expected to benefit in 2024 from easier comparative numbers following a sharp drop in U.S. sales of key brand Bud Light last year due to a boycott.
Beer set to grow
Moritz Kronenberger, a portfolio manager at Germany's Union Investment, which invests across spirits and beer, said some drinkers appeared to be swapping back from spirits to beer.
However, Marco Scherer, a portfolio manager at Metzler Asset Management, which also holds both stocks, felt spirits companies' troubles were short-term.
Longer-term, they were better able to grow volumes, had strong brands and more pricing power than brewers, he said.
While beer is losing share in some markets, globally it is set to grow volumes and gain share in terms of litres of alcohol sold, Jefferies analysts said in a recent note.
Market research firm Euromonitor International expects beer's share of total alcohol volume to rise slightly by 2027, with spirits' share edging down.
International brewers are increasingly cementing their brands in big, emerging markets in Latin America, Africa and Asia, where demand for beer is growing as incomes rise, Jefferies' analysts said.
In Latin America, for example, both AB InBev and Heineken have invested in growth initiatives, such as offering fast deliveries of cold beers to drinkers' doorsteps.
That has helped drive sales in countries like Mexico - one of Heineken's top performing markets last year, chief executive Dolf van den Brink told Reuters.
Spirits sales are conversely falling in such markets, possibly because liquor makers hiked prices too far while beer has to remain affordable, Etienne Roux, a portfolio manager at beer investor Truffle Asset Management, said.
Spirits shares are also too expensive given the challenges they face, he continued.
Spirits companies' valuations have come down to trade more in line with historical levels after skyrocketing during the pandemic, while beer stocks remain cheaper than in the past.
But spirits stocks were undervalued by some measures too, said Joseph Gabelli, portfolio manager at Gabelli Funds, adding both sectors were primed for future growth.
"I wouldn't sell spirits and buy beer, but I would buy beer," he said, adding beer stocks were becoming more attractive as problems recede.
Britvic, the soft drinks manufacturer set to be acquired by Carlsberg, has posted robust annual results after investment in marketing and product innovation helped it maintain demand for its brands.
Over the year to Sept 30, the company’s pre-tax profits climbed 10.5 per cent to £173.2 million despite a £21.3m hit related to the proposed Carlsberg deal. Britvic stated that its growth was driven by both volume and price-mix, with strong demand for brands such as Pepsi, Tango, Lipton, MiWadi and Ballygowan.
The group noted that scaling up new brands such as Plenish, Jimmy’s, Aqua Libra, and London Essence helped it build its presence in fast-growing categories. Meanwhile, it increased advertising and promotional (A&P) spend by 30.9 per cent to “support long-term brand growth”.
Volumes grew 3.1 per cent, driven by both organic growth and the acquisitions of the Extra Power and Jimmy’s brands.
Chief Executive Simon Litherland said, “We have delivered another excellent financial performance this year, with strong growth across our markets and portfolio of market-leading brands. We have also continued to ensure the business is fit for the future, adding more capacity, investing in our people, and significantly increasing investment in marketing and innovation.
“I am confident that the prospects for our brands and people are extremely positive, and I look forward to them going from strength to strength,” concluded Litherland.
Subject to approval by the regulatory authorities, the £3.3bn acquisition of Britvic by Carlsberg is expected to be completed in the first quarter of 2025.
The Metropolitan Police has identified two new suspects in its investigation into possible criminal offences as part of the Post Office Horizon scandal. This takes the total number of individuals to four as the force also revealed it believes more suspects will be identified as the inquiry progresses.
Scotland Yard said members of the investigation team met with Sir Alan Bates, the leading Post Office campaigner, and fellow victims to update them on the development.
A Met spokesman said: “On Sunday Nov 17, members of the investigating team met with Sir Alan Bates and a number of affected sub-postmasters to provide an update on our progress and next steps, following an invitation to do so.
“Our investigation team, comprising of officers from forces across the UK, is now in place and we will be sharing further details in due course. The team is preparing to contact other affected sub-postmasters soon. While four suspects have been formally identified at this stage, this number will grow as the investigation progresses.”
However, Sir Mark Rowley, the Met Commissioner, has warned it could be years before anyone faces charges because of the “tens of millions of documents” that must be worked through.
Speaking previously on the matter, he said, “I think at the core of this you’ve potentially got fraud, in terms of false documents, if it’s for financial purposes.
“Clearly, we have to prove beyond all reasonable doubt, so really it’s 99.9 per cent, that individuals knowingly corrupted something. So that’s going way beyond incompetence, you have to prove deliberate malice, and that has to be done very thoroughly with an exhaustive investigation.
“So it won’t be quick. But the police service across the country are alive to this and we will do everything we can do to bring people to justice if criminal offences can be proven.”
More than 900 sub-postmasters were wrongfully prosecuted between 1999 and 2015 as a result of the Horizon scandal, in which the faulty computer software incorrectly recorded shortfalls on their accounts. Of these, hundreds of people are still awaiting compensation despite the previous government announcing that those who had convictions quashed were eligible for payouts of £600,000.
Oral evidence at the Post Office inquiry concluded this month.
New research by American Express Shop Small reveals the nation’s top 10 hotspots for independent shops, showcasing the small businesses and the valuable role they plan in their local communities.
American Express partnered with retail experts GlobalData to identify the top high streets for independent shops through ranking factors such as the number of independent outlets, variety of business types, and vibrancy of the high street.
The list also took into consideration the number of Gen Z and Millennial independent business owners (those aged between 18-43) in each location, factoring in how these younger generations are investing in the future success of UK high streets. Across the top 10 hotspots, on average over a third (36 per cent) of all business owners are in these age cohorts.
The research identified bustling St Mary’s Street in Stamford, Lincolnshire, as Britain’s top hotspot for independent shops – scoring highly across all the factors and delivering a unique experience for shoppers.
Britain’s top high street hotspots for independent shops:
St Mary’s Street, Stamford, Lincolnshire
Devonshire Street / Division Street, Sheffield, Yorkshire
Gloucester Road, Bristol
Market Street / Bridge Gate, Hebden Bridge, Yorkshire
Stoke Newington Church Street, Hackney, London
High Street, Narberth, Pembrokeshire
Oldham Street, Manchester, Greater Manchester
Bailgate, Lincoln, Lincolnshire
Byres Road, Glasgow
The Lanes, Norwich, Norfolk
Beyond their contribution to local communities, the research also revealed how living near a vibrant independent high street can benefit home valuations.
Dan Edelman, general manager, Merchant Services at American Express, said, “Small businesses play a crucial role in supporting local economies up and down the country, and it’s pleasing to now see their impact beyond the high street. Through our Shop Small campaign and support of Small Business Saturday we’re proud to be championing and shining a spotlight on the diverse and vibrant independent businesses who help our local communities thrive.”
The research is released ahead of this year’s Small Business Saturday (Dec 7), of which American Express is founder and principal supporter. Small Business Saturday is the UK’s most successful small business campaign. Over the years it has been running, it has engaged millions of people and seen billions of pounds spent with small businesses across the UK on the day, with an impact that lasts all year round.
Michelle Ovens, director of Small Business Saturday, said, “The nation’s 5.5 million small businesses bring incredible value to the UK’s economy, society and communities, and this research underlines the material impact they have in boosting local areas. On Small Business Saturday, and beyond, we are asking the nation to throw their arms around their favourite local small businesses and show them how much they mean to us all and the wider community. Public support is so vital for small businesses, particularly for the next generation of owners.”
Matt Piner, research director at GlobalData, commented on the findings, “Independent shops bring something different to high streets, offering uniqueness and propositions that are finely tuned to the needs of their local communities. As younger generations of shoppers are attracted to their local high streets, so too are shop owners, with a new breed of Gen Z and Millennial entrepreneurs helping to keep them thriving.”
As part of this year’s Shop Small campaign, American Express has pledged £100,000 worth of grants to small businesses. The Champion Small initiative encourages Cardmembers to nominate their favourite independent small business, with 10 set to receive a £10,000 grant. Those who nominate a business will be entered into a prize draw too, with a chance to win one of 50 x £1,000 statement credits.
Shoppers who walk and wheel spend more than those arriving by car, states a recent report, demonstrating the significant economic and social benefits of investing in walkable town centres, challenging traditional views on urban accessibility.
The findings published in third edition of "The Pedestrian Pound Report", recently published by Living Streets, the UK charity for everyday walking, come at a critical juncture for British high streets, with a record number of retail failures in 2022 and a vacancy rate of nearly one in seven by the end of 2023.
The launch of the report is backed by Scotland’s national walking charity, Paths for All, underscoring the need to make walking a central feature of Scotland’s high streets.
“Making high streets and town centres more walkable increases time – and money – spent in those businesses,” says Catherine Woodhead, Chief Executive of Living Streets. “It’s slowly being recognised – the majority (95 per cent) of London’s Business Improvement Districts identify a good walking environment as important to business performance.”
The report highlights encouraging data from Scottish towns, such as Nairn, where public space improvements and community events have significantly bolstered foot traffic. In 2022, a Christmas event in the town drew 7,800 attendees, including 600 new visitors, while a classic car show in 2023 attracted over 10,000, with 80 per cent saying they would return even outside of events.
Kevin Lafferty, Chief Executive of Paths for All, emphasised the broader benefits, “These findings show that when we put people first and make walking and wheeling the easiest, most natural choices, we don’t just get an economic boost – we build communities that are happier, healthier, and more sustainable for everyone.”
The report highlights that 85 per cent of Scottish adults walk or wheel regularly, contributing to both economic and health benefits.
In Scotland alone, the health benefits from walking to work are valued at over £600 million annually in prevented deaths. Community-focused initiatives, such as the Alloa Hub, are proving successful in encouraging residents to travel into town centres, with research showing that 56p of every £1 spent in community businesses stays in the local economy.
The report is timely, with investment in active and sustainable transport cut by £23.7 million by the Scottish Government this September. The Pedestrian Pound provides an excellent case for these vital funds to be restored.
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Home secretary Yvette Cooper speaking at the annual conference hosted by the NPCC and APCC on 19 November 2024
Home secretary Yvette Cooper has announced plans to rebuild neighbourhood policing and combat surging shop theft as part of an ambitious programme of reform to policing.
In her first major speech at the annual conference hosted by the National Police Chiefs’ Council and Association of Police and Crime Commissioners on Tuesday, Cooper highlighted four of the key areas for reform: neighbourhood policing, police performance, structures and capabilities, crime prevention.
The initiatives she announced include:
a Neighbourhood Policing Guarantee to get policing back to basics and rebuild trust between local forces and the communities they serve
a new Police Performance Unit to track national data on local performance and drive up standards
a new National Centre of Policing to harness new technology and forensics, making sure policing is better equipped to meet the changing nature of crime
The home secretary also announced more than half a billion pounds of additional central government funding for policing next year to support the government’s Safer Streets Mission, including an increase in the core grant for police forces, and extra resources for neighbourhood policing, the NCA and counter-terrorism.
In her speech, Cooper said that without a major overhaul to increase public confidence, the British tradition of policing by consent will be in peril.
“I am determined that neighbourhood policing must be rebuilt,” she said, pointing to its decline over the past decade. Cuts to community-based roles have left town centres vulnerable to rising crime and antisocial behaviour, she added.
“Shop theft is up at a record high, street theft is up 40 per cent in a year… Criminals – often organised gangs – are just getting away with it. We cannot stand for this,” she said.
Cooper reiterated the government’s commitment to deliver an additional 13,000 police officers, PCSOs and special constables in neighbourhood policing roles, adding that further steps will be announced in the coming weeks.
The reforms will restore community patrols with a Neighbourhood Policing Guarantee and an enhanced role for Police and Crime Commissioners to prevent crime. The changes will also ensure that policing has the national capabilities it needs to fight fast-changing, complex crimes which cut across police force boundaries.
“The challenge of rebuilding public confidence is a shared one for government and policing. This is an opportunity for a fundamental reset in that relationship, and together we will embark on this roadmap for reform to regain the trust and support of the people we all serve and to reinvigorate the best of policing,” Cooper said.