Canadean’s latest update of its global beverage forecasts to 2019 strongly underlines the role of the emerging market country groupings.
MINT nations to be the next economic powerhouses
The BRIC (Brazil, Russia, India, China) acronym coined by Jim O’Neill 13 years ago has been as relevant to the development of the commercial beverage industry as to the shifting global economic balance. During the period, the impact of the volatility on the world financial stage on Western developed markets has seen the BRIC nations’ commercial beverage share leap by 10 percentage points to 37 percent. In 2013, the BRIC nations are estimated to have contributed more than 60 percent of incremental beverage volume, a figure which is expected to be similar in 2019.
The MINT group (Mexico, Indonesia, Nigeria, Turkey) has been identified by economists as the next emerging global economic powerhouse to follow on the heels of the BRIC nations. While Mexico, Indonesia and Turkey already rank within the G20 economies, population and income growth is expected to see all four of the MINT contingent make significant strides up the ranking during the next few decades.
Beverage companies will, of course, continue to keep their eyes closely on growth prospects in the BRIC nations, but the potential and new opportunities offered by the MINT nations also is high on their radar. The MINT nations have their economic and political challenges — and in the case of Nigeria, significant infrastructure development needs — but they all boast large and expanding populations and a burgeoning middle class. This is highly attractive to producers as aging populations in mature Western markets continue to make for a difficult operating environment and lackluster growth rates and revenue return. By 2019, in volume terms, the MINT nations are expected to account for approximately 9 percent of global commercial beverage consumption and to have provided 8 percent of the incremental volume gain. Soft drinks are forecast to provide the major growth impetus.
Soft drinks driving MINT market growth
Global soft drinks consumption growth, excluding bulk/home-and-office-delivery (HOD) water, currently is projected to be around 4 percent in 2014, compared with 9 percent for the BRIC nations and 3 percent for the MINT nations. Looking out to 2019, the MINT grouping is expected to see acceleration in momentum to a 4 percent compounded annual growth rate (CAGR). In volume terms, Mexico currently accounts for half of MINT soft drinks volume and 5 percent of overall global consumption. Unlike in its other group companions, carbonates is the No. 2 beverage in Mexico, after bulk/HOD water, and tops the global carbonates liters per capita league. This might help to explain PepsiCo’s recent announcement of its intention to invest $5 billion in the country during the next five years, despite the government’s recent targeting of “sugary drinks” with a punitive tax.
Turkey, 14th in the global carbonates ranking, also has seen its market knocked by regulation, with the banning of carbonates in school canteens and a subsequent increase in the popularity of still drinks and ready-to-drink iced teas. By contrast, demand in both Nigeria and Indonesia is robust, but availability and investmentin packaging and production capacity are key in harnessing volume and value growth from youthful populations with increasingly on-the-go lifestyles.
All four countries have a deeply ingrained requirement for bottled water. In Mexico and Indonesia, bulk/HOD water — and in Nigeria, packaged water — are the most consumed commercial beverages. This is primarily out of necessity due to a lack of safe water supplies. As a result, the markets are heavily fragmented, and in the case of Nigeria, largely composed of unbranded/generic sachet products. Demand can be expected to continue to expand in relation to population growth, health concerns and affordability aided by local sourcing.
Although Turkey also has one of the largest bulk/HOD water markets in the world, it is overshadowed locally by the traditional propensity for hot black tea. In per capita terms, Turkey ranks sixth globally, consuming an average of 183 liters of hot tea per person — a rate that is expected to dip only slightly during the next five years.
Brewer capacity investment and innovation opportunities
With continuing declines in the traditional key Western beer markets and targeting of the sector by many governments as a revenue raiser in times of austerity, the major brewers continue to look to emerging markets to increase their global market share and profits. Overall global beer sales are forecast to see only a low level increase in 2014. Of the MINT countries, while Mexico takes sixth place in the global beer ranking, Nigeria is expected to show the higher incremental volume increase and growth rate in 2014. Growing competition on the ground between Heineken, SABMiller and Diageo, capacity investments, innovation with local brands, and rebranding of flagship brands (such as Diageo’s recent re-brand of Guinness), are forecast to see Nigeria record consistent, healthy increases during the next five years.
Beer progression in Turkey has, however, hit a bumpy road following government restrictions on the commercialization of alcohol drinks last year. The implementation of a new 10 percent tax in 2014 is likely to act as a further drain on growth prospects in the short-term, but sales are expected to be close to the 2012 peak by 2019. In Indonesia, consumption, marketing and distribution of alcohol drinks also is subject to stricter levels of regulation for religious reasons. Brewers have to work within the confines of legislation to maintain their position in the market. The rapid growth in modern retail, where beer is generally accepted on shelf, is, however, offering brewers and retailers alike opportunities for profit margin growth.
Rising middle class benefiting wine, spirits and dairy drinks
MINT contribution to the global wines and spirits market is of less significance than beer volume-wise. However, a growing brand-conscious middle class and rising wealth is offering opportunities for brand equity development. For instance in Africa, Diageo is looking to take advantage of its established beer business to grow sales of its spirits brands.
While raw milk prices have impacted global dairy drinks sales, increasing urbanization and an expanding middle class is helping to drive up consumption in the MINT countries. Ongoing producer investment in innovation in dairy drinks beyond white milk in response to consumer health trends is forecast to see both volume and value growth rates shift upward during the forecast period.
Forecast for growth
Canadean’s long-term forecast prediction for global commercial beverage is for growth to continue to trend around 3-4 percent — a rate which the BRIC group will continue to exceed, but the MINT nations will be broadly in line with. Although the volume contribution of the MINT group will remain dwarfed by that of the BRIC nations, it is notable that its incremental volume increase by 2019 is anticipated to be just short of that of Latin America’s. The MINT countries undoubtedly offer new opportunities and a favorable youthful demographic for the major beverage producers but also challenges in adapting their strategies to different local market cultures and preferences.
Canadean is a global beverage information specialist. This analysis is based on the company’s latest “Global Beverage Forecasts” report published in March 2014. For more information on this report or Canadean, visit www.canadean.com, email info@canadean.com, or call 011/44-1256-394224.
