Anheuser-Busch and Heineken

It looks like the world economy is on the verge of slipping back into recession. Deadlock in the United States Congress is pushing the world’s largest economy towards the so-called fiscal cliff. The Eurozone remains unstable. Asia is showing mixed results with some economies surging while others are falling behind. Latin America is stagnating and Africa is a mess. Perfect time to sit back and drink a beer, right? A number of people seem to think so as reflected in surging global alcohol in 2012.

For those who haven’t been following, the alcohol industry has been one of the more exciting sectors in the last few years. Several big mergers have arose, while at the same time a series of highly popular and also profitable micro-brews have come to challenge and steal market share from the mega-brewers. Inbev has become the largest beer brewer in the world, following its 2008 purchase of Anheuser-Busch InBev NV (NYSE:BUD) (EBR:ABI), SABMiller plc (PINK:SBMRY) (LON:SAB) comes in at number two, while Heineken N.V. (PINK:HINKY) (AMS:HEIA) and Carlsberg A/S (CPH:CARL-A) (CPH:CARL-B) round out the top four. Together the top four brewers produce nearly half of all beer brewed in the world. Heineken N.V. (PINK:HINKY) (AMS:HEIA) has recently launched a series of acquisitions in Asia, while the other major brewers continue to evaluate their options.

Globally, a group of mass produced beers from the major brewers dominate the market. Asahi Super Dry, a premium Japanese beer, accounted for 11.3 billion barrels of beer sold in 2011, largely in Asia. Heineken N.V. (PINK:HINKY) (AMS:HEIA) is also among the most popular beers in the region and accounts for 26 million barrels of beer sold.  Bud Light and Budweiser are both the number two and number three most sold beers in the world respectively, accounting for some 84 million barrels sold. The most popular beer in the world, however, is “Snow” beer, a Chinese brand mostly sold in China. It accounted some 52 million barrels in beer sold in 2011.

There are nearly 1,700 beer brewers in the United States alone and the numbers are growing as micro-brewers are becoming increasingly popular. Total revenues for beer sold tops 500 billion dollars and this does not even include liquor and wine sales. The retail value of wine sales in the United States alone topped 30 billion dollars in 2010. While the U.S. market is massive, it has been growing at a slow rate in recent years and some analysts believe that the market is fully tapped. Still, many analysts believe that the global alcohol sales market will post strong growth in years to come even as sales in the United States, Europe, and Japan seem to be leveling off.

Asia and other emerging markets are now seen as the markets of tomorrow. As nations rise up out of poverty they tend to drink more. The World Health Organization supports this view. The WHO has found that alcohol sales have been declining in developed countries, however it has been rising in developing countries at a rapid pace. Alcohol has long been a luxury enjoyed largely by middle class and above, especially in emerging markets. As people are lifted out of poverty, they tend to spend more and more money on alcohol.

Accordingly, most of the growth in the global alcohol industry has come from emerging countries, especially in Asia. The WHO finds that alcohol consumption per capita in Asia still lags behind Europe and North America. Yet sales are increasing rapidly in the region, in line with strong economic growth and a regional increase in discretionary income. Euromonitor found that alcohol sales grew by an average of 8% from 2003 to 2008. Singapore, Thailand, and China are all expected to see a strong growth in sales as alcohol consumption per head is expected to rise in the years to come.

China is now the largest consumer of beer, consuming over 28 billion liters of beer per year. The United States comes in at second, consuming nearly 24 billion liters of per year. Russia, Mexico, Brazil, Poland, and South Africa all come in the top ten, meaning that developing countries now make up more than half of the top ten beer consuming countries. Also, Japan comes in at number 5, which along with China, makes Asia one of the largest consumer regions in the world. Meanwhile India’s 15 billion dollar beer industry has been growing at an astonishing 15%.

Add in a huge population consisting of billions of people and Asia offers the best source of growth for major alcohol companies, especially as sales are leveling off in North America and Europe with their markets fully tapped and intense competition for dollars. Many emerging Asian markets feature a mix of local-owned companies that largely focus on selling cheap booze, and international brands which tend to focus on and dominate premium markets.

So long as the global economy remains on track through 2013, the alcohol industry should continue to boom, especially with strong growth coming from emerging markets in Asia and elsewhere. Interestingly alcohol sales tend to be recession proof in developed markets, as people usually do not modify their drinking habits even in the face of declining income. Whether or not this trend will prove true for developing markets where consumers have less disposable income remains to be seen.