When we looked at the UK drinks sector earlier this month, we observed the problem of falling demand, especially in relation to spirits. This, however, is not a local problem but rather a global one, with just a few exceptions in some African and South American countries.
As a result, given that many of the world’s leading alcohol brands are found in Europe, it's not surprising that the sector here has been pretty weak, reflecting falling sales and rising costs, which have driven a steady erosion of forecasts. The fall in sales, and perhaps more so the slow response or unwillingness to spot this fall, has also led to an industry-wide problem of excess inventory. This is likely to compound the low sales volumes with additional downwards pressure on pricing.
According to Bold Data, there are some 210,000 beverage businesses in Europe, more than 40 per cent of which are in the Czech Republic. The listed majors are primarily in France, Holland and Denmark. Unlike the UK, in mainland Europe we see a much larger beer sector, with a clutch of dominant global brands alongside a premium-oriented spirits sector and a limited listed soft drinks sector. The soft drinks group comprises either international brands or those found inside larger food and conglomerate businesses such as Unilever, Danone or Nestlé. We will not be considering those here. We also find a sizeable tea and coffee industry block in continental markets, but again this is largely privately owned. Much of the European soft drinks sector is also owned by family businesses, private equity or sits within US businesses such as Coca-Cola.