Why This Is A Great Time To Get Hammered On Beer

Drinking

Photo: AP

Beer. When you stare a bottle the first thing that comes to mind isn’t how can I make money on this (often, it’s actually how much did I just spend on this).But that consumer desire for beer is sweeping the world, and some of Europe’s biggest brewers are now proxies for an emerging market play on more consumer demand, according to Citi.

But there are worries within the industry too. The rising costs of imputs such as malt and crude oil could hit profits.

But for right now, beer looks a good bet.

Beer is all about your local product with consumers loyal to regional brands. Producers also have concerns over the product being perishable.

Source: Citi

Demand in the developed world for beer is either flat or rising slightly. Emerging markets, however, have surging demand, particularly in Asia and Africa.

Source: Citi

Compared to other European companies, brewers are more exposed to emerging markets so should offer greater returns.

Source: Citi

Inflation in commodities could become a problem for brewers again, as it did in 2007-2008. There are also serious concerns about the rising cost of oil, which impacts the costs of delivering beer to market.

Source: Citi

Malt is a particular concern, especially in Russia and the Ukraine, which have had weak crops. Carlsberg will be hit most by this problem.

Source: Citi

Brewers have varying exposure to emerging markets, with some having dominating positions in certain regions (Carlsberg in Eastern Europe).

CARL - Carlsberg

SAB - SAB Miller

ABI - Anheuser Busch Inbev

HEIN - Heineken

Source: Citi

Breakdown: Carlsberg huge in Russia

Source: Citi

Breakdown: AB Inbev profits coming largely from the U.S., also big in Brazil

Source: Citi

Breakdown: Heineken big in Mexico and Nigeria

Source: Citi

Breakdown: SAB Miller huge in Columbia, South Africa

Source: Citi

Price Targets: Heineken leads with SAB Miller not far behind.

Source: Citi

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