Alcoholic Drinks Global Industry Overview

ALCOHOLIC DRINKS GLOBAL INDUSTRY OVERVIEW
July 2018
INTRODUCTION
GLOBAL OUTLOOK
LEADING COMPANIES AND BRANDS
TOP FIVE TRENDS SHAPING THE INDUSTRY
MARKET SNAPSHOTS
APPENDIX
INTRODUCTION
Scope
 This report analyses the Alcoholic Drinks industry, which includes the Disclaimer
following categories. Much of the information in this
briefing is of a statistical nature and,
while every attempt has been made
to ensure accuracy and reliability,
Euromonitor International cannot be
held responsible for omissions or
Beer - 196 billion litres errors.
Figures in tables and analyses are
calculated from unrounded data and
may not sum. Analyses found in the
briefings may not totally reflect the
companies’ opinions, reader
Spirits - 22 billion litres discretion is advised.
2017 is emerging as a vintage

Alcoholic Drinks - 259 year. It is a broad-based and
billion litres Wine - 29 billion litres potent cocktail of renewed
buoyancy. Yet downside risks
remain as new and disruptive
trends surface across all key
segments. Which are the
Cider - 2 billion litres categories fueling growth and
where is momentum peaking?
How are key regions faring and
where are macroeconomic and
legislative hangovers taking a
toll?
RTDs - 4 billion litres
© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 3

INTRODUCTION
Examining five trends shaping Alcoholic Drinks
Trend Expected long-term implications Historic significance/

Forecast significance
Healthy living as
Moderation will only gain further traction as low- and non-
drinking turns
alcoholic products gain momentum across all categories.
mindful
Connected While historically legislative barriers and complacency have
consumers: A limited the relevance of technology to the industry, apps, the
technological internet of things, AR and VR, among others, will all gain
cocktail of disruption
traction in the medium to long term.
The rigid categorisations of the past will increasingly lose
Cross-pollination,
relevance as the millennial demographic drinks around
hybrids and blurring
occasions rather than deciding on the back of traditionalist
category lines
labels and definitions.
Marketing evolves, Machismo-infused advertising and conspicuous consumption

corporate narratives will increasingly give way to gender-neutral
responsibility takes targeting and sustainability cues - millennials and Generation
centre stage Z drinkers will demand so.
Is the grass While the rise of cannabis is currently primarily relevant to

greener? Cannabis North America, its potential for disrupting the alcohol industry
and the substitution both as an antagonistic substitute or even as a symbiotic
conundrum alternative to established brands, cannot be discounted.

INTRODUCTION
Areas of opportunity
Low-/Non-Alcoholic Adult Cannabis Infusions - North

Cross-Pollination Initiatives
Beverages - Global America
Relevant across categories, While de facto more relevant Thinking outside the
demographics and regions, to North America, which is proverbial bottle will be key
low- and non-alcoholic adult currently pioneering for future innovation cycles.
beverages will reach escape legalisation initiatives, Collaborations and radical
velocity on the back of cannabis will inevitably enter experimentation with hybrid
consumer demand, evolving the lexicon and occasions products straddling category
public discourse and leaps while appropriating the lines will be key for retaining
forward in terms of technical alcohol industry’s language relevance for the millennial
innovation. Embracing and semiotics. With key and Generation Z
positive branding narratives players such as Constellation demographics.
rather than subtractive and Heineken already active
stereotypes, the segment will in the segment, the “Green
have a profound effect for Rush” can prove to be both a
the entire industry. huge disruptor as well as a
great opportunity.

INTRODUCTION
GLOBAL OUTLOOK
MARKET SNAPSHOTS
APPENDIX
GLOBAL OUTLOOK
A vintage year?
 As Euromonitor’s latest annual

research is finalised, 2017 is
emerging as a vintage year. The
industry’s global volume growth might
not appear dynamic at first glance,
but at 1%, it is actually its strongest
performance in half a decade.
 It is a broad-based and potent
cocktail of renewed buoyancy. From
lager entering positive territory for the
first time since 2013 on the back of
the seemingly infinite premiumisation
narrative to expanding non-alcoholic
portfolios pushing the often-maligned
segment into the limelight, beer
appears frothy rather than flat.
 Wine and spirits also did well, while
the relative improvement was
witnessed across the on- and off-
trade with both hovering around 1%
growth for the year.

GLOBAL OUTLOOK
Alcoholic drinks: drinks all around?

GLOBAL OUTLOOK
Beer versus spirits: a tale of two worlds

GLOBAL OUTLOOK
Under Asia’s shadow
 While recovery and optimism were visible

across the board, there is little doubt that
the gravitational pull of the Asian market
cannot be understated.
 With the notable exception of Japan,
which was largely flat and still improved
compared to the previous year, all other
major markets were in positive territory
and/or accelerating.
 The big story here is of course China,
which, following the centrally planned
crackdown on conspicuous consumption
that added significant headwinds to the
industry’s once enviable trajectory, shifted
back into positive territory after three
years of painful decline.
 Beyond China’s reinvigoration, key
markets from Vietnam to the Philippines
are retaining their high single-digit or even
double-digit growth rates - a development
underscoring the sustainable and still
booming potential held by the region.

GLOBAL OUTLOOK
European doldrums and North American saturation
 Western Europe, on the other hand, maintained its uninspiring trajectory. Barely entering positive territory,
and with the notable exceptions of Spain and Portugal that are still largely in bounce-back mode following
the lean post-crisis years that hit them both hard, Western Europe does not provide much reason to raise a
glass. From Germany to Sweden to the UK, lingering maturity, demographic headwinds and entrenched
macro weakness have taken a toll for another year as volume growth deteriorated even further.
 Much like Western Europe, North America also remained largely mired in stagnation - an unsurprising
performance that underscores the importance of the premiumisation mantra since value growth
opportunities increasingly appear as the most straightforward way to fight the uphill battle against
saturation.
 There was also not much cheer to be had in Eastern Europe. The key Russian market remained in
negative territory for the 10th year running, while the beleaguered country does not appear to provide much
hope of a robust turnaround any time soon. While smaller regional markets such as Hungary, Romania and
Latvia witnessed healthy total volume growth for the year, the direction of travel remained overwhelmingly
negative, with Lithuania and Latvia leading the race to the bottom with double-digit declines.
 However, it was not all gloomy or sobering. Latin America witnessed significant improvements as the key
Brazilian market edged closer to positive territory following a couple of years of political and
macroeconomic headwinds hitting sales hard - a reminder of the volatility that has historically been a
cyclical occurrence in emerging markets. With Chile and Argentina back in roaring growth and witnessing
high single-digit volume spikes, the region appears to be turning a corner .
 Australasia and the Middle East and Africa largely retained their positive trajectories - unsurprisingly
stronger for the latter rather the former - and while the two regions could not possibly be more different, a
move towards higher-end products in both underscores the global relevance of premiumisation.

GLOBAL OUTLOOK
Lager not going flat anymore and gin lane turns into avenue…
 Lager managed to enter positive

territory for the first time since 2013.
 Shots of optimism were also
prevalent in spirits where volume
performance - at a perhaps
uninspiring yet solid 1.5% - is also
the strongest since 2012, driven as
much by blended Scotch’s belated
return to its historic trajectory as it
was by the much-vaunted
“ginaissance” that is currently in full
swing.
 Registering a consistently
accelerating 5% volume growth for
the year, 2017 was English gin’s
most stellar performance since at
least the early 2000s.
 Nevertheless, it was - yet again -
brown spirits and their over-proof
allure as the wider category’s de
facto drivers that remained the
protagonists.

GLOBAL OUTLOOK
…as brown spirits march on and vodka remains on the defensive
 Beyond the Scottish usual suspects, it was whiskies across the board as well as cognac that continued
capitalising on artisanal credentials, authentic and resonant stories and mixology entering the mainstream.
Tequila also largely retained 2016’s decade-high spike as the transition from shots to sipping and
aspirational consumption takes the edge out of what was once a stiff drink.
 Wine also appeared to have robust legs too with still light grape varietals gaining momentum on the back of
millennial-pink iterations reaching escape velocity. Red and white variants also fared relatively well but it
was the rising rosé tide that provided a refreshing crisp finish to the wider wine segment.
 Other sparkling wine’s widely covered boom was likewise related to its casual and unpretentious
positioning, while vermouth’s mixability credentials catapulted it into positive territory for the first time in
years, with the category ultimately registering its strongest performance in almost a decade.
 Is it time for celebratory toasts then? Not quite. Ale’s gradual deceleration highlights the craft segment’s
underlying saturation issues ultimately bubbling to the surface.
 Flavoured lager languishing into negative territory for the first time ever is another cautionary tale on the
faddish limitations of flavour sophistication initiatives. And vodka, still seemingly trapped in a downward
spiral, remains a prescient reminder of both the danger of complacency and the unrelenting nature of
cyclical generational consumer movements.

GLOBAL OUTLOOK
Beyond the usual suspects
 While countries such as China and the

US tend to monopolise headlines and
the industry’s priorities and focus, it is
markets such as Vietnam, Mexico and
India that offer much untapped potential
beyond the usual suspects.
 Positive demographic forces, rising
middle classes and the still embryonic
stages of premiumisation will
increasingly shift the focus towards
them.
 However, and while future volume
growth projections do look intoxicatingly
buoyant, considerable risks remain.
 As was painfully proven in the cases of
markets once hailed as growth engines,
such as Russia and Nigeria,
macroeconomic shocks, political
instability and aggressive legislative
policies can, at least temporarily, derail
the process. Volatility will be part of the
mix.

GLOBAL OUTLOOK
Non-store: still just a shot but rapidly changing the retailing cocktail
 The transition away from store-

based retailing models has been
widely covered across fmcg
industries, and alcoholic drinks is
no exception.
 There are, however, significant
differences. The far more strict
operating environment, legislative
barriers in key markets, such as
the 3-tier distribution networks in
the US - and the industry’s historic
focus on the on-trade side of the
consumption occasion has led to
still comparatively minimal non-
store sales.
 The ubiquitous and ever-widening
penetration rates of special apps,
the clout of major third party online
retailers and most recent initiatives
from key alcohol giants will provide
huge momentum for the segment
going forward.

GLOBAL OUTLOOK
Forecast model scenarios: Brexit – the darkest hour?
 Macroeconomic and legislative developments, political volatility and black swan events can radically alter
the alcoholic drinks landscape, and Brexit is a case in point - both for the key UK market as well as for
Europe and beyond.
 While the UK economy is proving more resilient than dire initial forecasts suggested, signs of a slowdown
have started to become apparent, even though the inflationary pressures arising from the severe
depreciation of the pound in the aftermath of the referendum have subsided.
 As brinkmanship and hard-line views appear to currently dominate the conversation within the ruling
Conservative government, a de facto hard Brexit scenario, or a complete breakdown of negotiations,
cannot yet be discounted.
 From the logistical nightmare of cross-border sales and traffic through Northern Ireland, to the potential
need for renegotiating hundreds of agreements unilaterally, much is at stake while key business
contingency plans will be put in motion as soon as the conversation is shifting towards stockpiling and
disruption.
 The silver lining can be provided by the recent spike in exports of Scotch on the back of that same
depreciation, as well as an opportunity for the resurgent domestic microbrewing, microdistilling and wine
industries.
Note: From Alcoholic Drinks Forecast Model, No-Deal Brexit scenario beginning Q2 2019.

INTRODUCTION
GLOBAL OUTLOOK
MARKET SNAPSHOTS
APPENDIX
Big is not always best
 While consolidation is a historic

development that still retains a
degree of relevance in emerging
markets crossing the threshold to
maturity, it is no longer such a
straightforward affair.
 The share of the top five ranked
companies has largely remained
static or even faced straightforward
decline in key regions such as North
America and Australasia, as a
plethora of new smaller players
witnessed a spike in their penetration
rates on the back of the ongoing craft
revolution.
 On the other hand, private label
remains a niche as the variety of
products available, lifestyle cues
associated with alcoholic drinks and
heavy discounting tactics
implemented by key players do not
allow room for the segment to evolve.

Big beer facing an uphill battle
 While the core Western markets

can indeed prove challenging for
key mass beer brands,
geographic diversification can
provide an escape route for the
building pressure - as proven by
AB InBev successfully pushing
Budweiser beyond the US or
Heineken capitalising on its
momentum in Southeast Asia
and its Brazilian acquisition of
Kirin.
 Carlsberg, on the other hand, is
still to overcome its much-
vaunted Russian hangover,
while major Chinese brewers
are struggling to adapt to the
transition towards a lower
volume/higher value equilibrium
that will inform the next wave of
category expansion in the
country.

The craft sector is a core focus for acquisitions…
 The significance of the premiumisation trend globally means AB InBev, Heineken and
leading brewers are all working to enhance the higher brackets of Carlsberg: Beer Volumes by
their portfolios - whether through premium mainstream lager, or Category Share 2017
more niche offerings. 100%
 One key aspect of this is the craft sector, with acquisitions playing
an important role. These takeovers continue to prove controversial,
although the practical significance of this controversy is debatable.
75%
 Some form of divergence appears to be forming in the craft sector
between small-scale brewers which promote their independence
% volume share
and those with a greater reach, often achieved through partnership
with, or ownership by, mainstream companies. 50%
 AB InBev has been perhaps the most prolific in pursuing
acquisitions in this area over the last few years - or at least the
most high profile.
 However, in order to address potential competition issues following 25%
the 2016 SABMiller purchase, any future US acquisitions will need
to be reviewed by the US Department of Justice. AB InBev has
already been looking outside the US for acquisition opportunities.
0%
 In 2017, Heineken boosted its craft-style portfolio by taking 100% AB InBev Heineken Carlsberg
ownership of the US-based Lagunitas Company, building on the
50% stake it gained in 2015. Carlsberg also raised its profile in this
Stout Non/Low Alcohol Beer
sector in 2017 with the acquisition of UK-based London Fields
Economy Lager Mid-Priced Lager
Brewery. The business will operate within the joint venture between Premium Lager Flavoured/Mixed Lager
Carlsberg and Brooklyn Brewery. Dark Beer

…but who has been buying what?
 Top three international brewers: Major microbrewer purchases (partial stake or full acquisition) 2011-2017
AB InBev Heineken
US Mexico US
 Goose Island Beer Co (2011)  Cerveceria Tijuana (2016)  Lagunitas Brewing Co (100%: 2017)
 Blue Point Brewing Co (2014)  Cerveceria Mexicali (2016) South Africa
 10 Barrel Brewing Co (2014)  Stellenbrau Brewery (2017)
 Bocanegra (2016)
 Elysian Brewing (2015)  Soweto Brewing Co (2017)
 Cucapá (2016)
Italy
 Golden Road Brewing (2015) Brazil
 Hibu Società Agricola Srl. (2017)
 Breckenridge Brewing (2015)  Cervejaria Colorado (2015)
UK
 Four Peaks Brewing Co (2015)  Cervejaria Wals (2015)  Brixton Brewery (2017)
 Devils Backbone Brewing Co (2015) Australia Carlsberg
 Pirate Life Brewing (2017)
 Karbach Brewing Co (2016)
 4 Pines Brewing Co (2017) UK
 Wicked Weed Brewing (2017)
China  London Fields Brewery (2017)
 Boxing Cat Brewery (2017)
Colombia Note: This list should not be considered exhaustive. It
Spain also excludes acquisitions by subsidiary companies,
 Bogatá Beer Co (2015) non-ownership partnerships, and distribution
 Cervezas La Vírgen (2017) agreements.

Diversification and emerging markets fuel volume growth
 Having a closer look at organic growth

excluding acquisitions, diversification
initiatives, an international presence and
activity within segments that are on solid
growth trajectories are keys to identifying
the winners.
 Viña Concha y Toro and Brown-Forman
are both enjoying strong performances
due to their geographically expansionary
strategies and relative buoyancy within the
wine and bourbon categories, respectively.
 Boston Beer, on the other hand, proves
that there is still momentum in craft - even
if not necessarily through core beer
ranges.
 Constellation Brands is a star performer
on the back of the momentum of its
Mexican imports, although anecdotal
information for 2017 suggests that the tide
might be turning on that front too.
 In the meantime, smaller emerging
market-focused companies capitalise on
favourable demographics and rapidly
evolving sophistication.

INTRODUCTION
GLOBAL OUTLOOK
MARKET SNAPSHOTS
APPENDIX
Megatrends through the alcoholic drinks looking glass
Experience Experiential campaigns have been consistently gaining traction but brands as a central hub
More of content creation will further underscore the relevance of the trend
Healthy Living From teetotalism to moderation and from low calorie products to natural wines, healthy
living is becoming more intricately associated with alcoholic drinks across the board.
Shifting Market While emerging markets and rising middle classes have historically been an engine for
Frontiers volume growth, the trend retains its relevance - with an important caveat; growth
trajectories will continue being inherently volatile and macroeconomic and political
headwinds should be considered an inescapable part of strategic planning.
Shopping The rise of brewpubs, online sales and specialist apps - even if the latter are still held back
Reinvented due to legislative barriers and tiered distribution models - underscores the relevance of
alternative shopping models, a development that will only accelerate further moving
forward.
Ethical Living The micro-revolution has radically impacted beer and is making its mark in spirits, but it is
related to wider trends than more sophisticated flavour profiles. Sustainability credentials,
corporate responsibility and hyperlocal offerings are all tapping into ethical concerns.
Middle Class Stagnating discretionary incomes, lingering private debt and employment insecurity have
Retreat hit middle-class consumers in Western markets hard and continue presenting significant
headwinds. Drinking less but better has been the answer presenting value growth
opportunities even within an otherwise stagnating volume environment.
Premiumisatio A driver across the industry for decades, premiumisation will remain relevant while
n continuing to evolve while shifting closer to artisanal, heritage and craftsmanship cues.
Connected From the rise of the internet of things to voice-activated devices providing cocktail
Consumers recommendations, connected consumers are reshaping positioning, campaigns and
occasions

Healthy living as drinking turns mindful
 From moderation initiatives to

breaking the taboo of teetotalism, the
trend will enter the realms of a
paradigm shift.
 It will be secular rather than cyclical:
lower-alcohol and adult soft drinks will
find relevance in equal non-
intoxicating measures in mature
markets from South Korean spirits to
Western European beer and beyond.
 Smaller pack sizes and serving
options, production advances allowing
for more sophisticated and balanced
products than first generation de-
alcoholised offerings and synthetic
prototypes focusing on compounds
minimising alcohol toxicity, while
claiming functional benefits will be
key. Key Point: While the trend for moderation has already gained
 The rise of cannabis as a healthier traction within the beer segment, it will be spirits and wine that
substitution alternative will only will spearhead innovation in both lower- and non-alcohol
accelerate the shift. alternatives in the short to medium term.

Connected consumers: a technological cocktail of disruption
 From integrated voice-enabled devices

allowing for seamless recommendations,
shopping and educational initiatives to
augmented reality labels and Near Field
Communication (NFC) technology
transforming products into content hubs and
digital touchpoints, the dawn of a brave new
world is upon us.
 As the historic obsession with nostalgia-
tinged offerings reaches saturation territory,
alcoholic drinks will go back to the future.
 While the relevance of tried and tested
offerings and signature brands and serves
will largely be retained, technology has the
potential to provide the creative twist that
will see them evolve with the times.
 Spectrometry sensors, voice-activated
decanters, smart bottles and the rise of the Key Point: While there is already a plethora of gadgets and
internet of drinks will lead to further experimental technology tested within the industry, apps for
exploration of multisensory experiences, reviewing and ordering, VR and AR activations for educating
customisation functionality and new and promoting and voice- enabled devices with an
occasions. established base will spearhead developments in the
segment.

Cross-pollination, hybrids and blurring category lines
 From combining lager and ale yeast

strains to radical barrel ageing
amalgamations and from cascade hops
in gin to fusion whiskies incorporating
Indian, Scotch and international blends,
innovation will mirror the promiscuous
nature of that all-elusive millennial
demographic.
 The seemingly insatiable demand to
find the next niche flavour, serving,
mixology offering or Instagrammable
concoction will provide the fuel for much
more radical experimentation than has
happened in the past - definitional
taboos will be increasingly tested.
 Both cross-category and intra-category
hybrids will gain further traction Key Point: Collaborations and building bridges across different
providing a halo effect and maintaining categories and brands will provide a much-needed halo effect
consumer engagement. for all involved while allowing for the expansion of penetration
 Some of the most intoxicating rates beyond core category demographics.
opportunities may well lie in between
categories instead of inside them.

Marketing evolves, corporate responsibility takes centre stage
 It is last orders for shots of monolithic aspirational

materialism, as consumers turn to sipping and
savouring brands’ ethical credentials.
 It is also likely the end of gender-based marketing
and the beginning of a transition towards non-
binary and gender-neutral positioning - a far cry
from the machismo-driven campaigns of the past.
 Reaching out to politically-engaged core
audiences that make belief-driven decisions on
issues ranging from LGBT rights to the
environment, hyper-local advertising campaigns
tailored to specific neighbourhoods and
demographics and supporting local communities
will all drastically disrupt established positioning
and promotional rules.
 Aspirational consumption narratives will also
evolve even if they largely retain their underlying
Key Point: Superficiality, materialism, machismo and
relevance; bling and conspicuous consumption will
crash consumerist cues will fade as sustainability,
continue being replaced by stories of authenticity
ethical consumption and genuine craftsmanship
and craftsmanship especially as emerging
replace them as the narrative tipples of choice for
markets are getting increasingly more
younger demographics.
sophisticated - and fast.

Is the grass greener? Cannabis and the substitution conundrum
 As legalisation initiatives gather further traction and

alcohol manufacturers hesitantly embrace the rising
green tide through ambitious R&D and still
embryonic M&A activity, cannabis will increasingly
monopolise the spotlight.
 From pot to plate events to cannabis infusions and
from weed pairing wine clubs to Budtenders, buzzy
strains, appellations and artisanal offerings entering
the industry’s lexicon, cannabis will enter the
mainstream in alcohol’s semantic mantle.
 Female, higher-income and Hispanic consumers in
the pioneering US market already appear to
showcase lower rates of cannabis incidence and will
be the alcohol industry’s chosen focus and de facto
last line of defence, but in the medium to long term
symbiotic offerings will be the only viable solution.
 Alcohol-free products, drawing parallels to terpenes Key Point: Cannabis has the potential to be
and non-psychoactive cannabis flavour become a far greater disruptor than the craft
sophistication will spearhead innovation on that front, segment ever was and adopting a symbiotic rather
led by enthusiastic micro producers willing to take than an antagonistic stance towards its offerings
the inevitable risks and pave the way for bolder will be an existential issue for an alcohol industry
hybrid products. already on the defensive.

INTRODUCTION
GLOBAL OUTLOOK
MARKET SNAPSHOTS
APPENDIX
MARKET SNAPSHOTS
Global snapshot of beer

MARKET SNAPSHOTS
Global snapshot of spirits

MARKET SNAPSHOTS
Global snapshot of wine

MARKET SNAPSHOTS
Global snapshot of cider

MARKET SNAPSHOTS
Global snapshot of RTDs/high-strength premixes

MARKET SNAPSHOTS
Regional snapshot: Asia Pacific

MARKET SNAPSHOTS
Regional snapshot: North America

MARKET SNAPSHOTS
Regional snapshot: Latin America

MARKET SNAPSHOTS
Regional snapshot: Western Europe

MARKET SNAPSHOTS
Regional snapshot: Middle East and Africa

MARKET SNAPSHOTS
Regional snapshot: Eastern Europe

MARKET SNAPSHOTS
Regional snapshot: Australasia

INTRODUCTION
GLOBAL OUTLOOK
MARKET SNAPSHOTS
APPENDIX
APPENDIX: COMPETITOR ANALYTICS
Competitor Analytics tool
 Competitor Analytics is a new tool from Euromonitor International that focuses on fmcg companies and
competitors. It visualises the retail sales footprint and performance of more than 25,000 companies by
geography and product category.
 Competitor Analytics also maps the competitive landscape for each of these companies, allowing users to
see with whom each company competes and in which specific markets. To do this, the tool calculates a
numeric “distance” between competitors, allowing the user to track how the competitive landscape is
evolving and which companies are becoming strategically more or less similar.
 For a detailed explanation of the graphics in each of Competitor Analytics’ four tabs – Overview,
Competitors, Treemap and Overlap Matrices – please refer to the following slides.

Overview
 The Overview tab (shown in the graphic below) provides a global snapshot of a company’s sales footprint
and performance, highlighting where it is winning and losing by country and product category.
 It shows company (GBO) retail value sales and absolute growth by countries and categories in current
terms and US dollars at a fixed exchange rate for the years spanning 2008 to 2014.
 The grey bars represent value sales in the selected “Start Year”, while the green bars show the subsequent
absolute value sales increase between the user-selected start year and 2014. Red bars denote a retail
value decline over the same time period.

Competitors
 The Competitors tab (see graphic to the

right) plots the “competitive distance”
between the selected “focal” company (in
this case Unilever) and its competitors.
 The vertical axis measures the size of
“market overlap” between two companies,
and is the metric for quantitatively
measuring competitive distance. The higher
a company is on the vertical axis, the bigger
a competitor it is for the focal company.
 Meanwhile, the horizontal axis captures
each company’s total retail value sales over
the selected time period, irrespective of
market overlap.
 Flat lines (eg Nestlé in the chart to the right)
indicate that a competitor’s total sales are
growing, but mainly in markets where the
focal company is not present.
 Lines moving steeply upwards (eg Procter
& Gamble) show that competitive similarity
is increasing strongly over time relative to
overall retail sales growth.

Market Overlap
 Market Overlap is a measure of

competitive distance between two
companies in retail value terms.
 It is calculated as the sum of the
smaller of the two company’s
retail value sales in each of their
common country/category (aka
market) combinations. The sum of
these observations indicates a
total Market Overlap.
 In 2014, Procter & Gamble and
Unilever were present in 711
common markets (see right)
across the global fmcg universe.
 In US deodorants, Procter &
Gamble was the smaller of the
two, and thus defined the Overlap.
 In US hair care, Unilever was
smaller and thus defined Overlap.
 Replicating this exercise across
all 711 markets in which both
companies were present yields a
total 2014 Overlap of US$23,420.

Treemap
 Treemap (as shown in the graphics below ) shows either overlap with a competitor (the left graphic) or
individual company sales (the graphic on the right) by product category and/or country.
 The size of each box indicates the proportional size in US dollars of a country, category or market relative
to the total overlap or sales for the geographies and industries selected.
 The colour gradient reflects sales or overlap growth/decline over the selected time period. The darker the
green, the higher the growth, and the darker the shade of pink/red, the stronger the rate of decline.

Overlap Matrices
 Overlap Matrices (as shown in the graphic below) compare two selected competitors (Unilever Group vs
Procter & Gamble Co) in terms of their respective presence across countries and product categories.
 The darker the colour shading, the higher the company’s retail value share in that market. The graphic
below shows that Procter & Gamble has a strong share in hair care in China, whereas Unilever is weaker.
 Overlap Matrices also highlight respective market gaps and potential white space opportunities. Dark grey
boxes indicate that one of the two companies shown is present in that market, but the other company is not.
A light grey box means that neither of the two selected companies is present.

APPENDIX: INDUSTRY FORECAST MODEL
About Euromonitor International’s Industry Forecast Model
 The Industry Forecast Model is a new tool from Euromonitor International that integrates intuitive,
judgment-based forecasting with the quantitative techniques of an econometric Industry Demand Model.
 The Industry Demand Model assesses the relationship between several historic quantifiable independent
variables (demand drivers) and historic retail volume sales for different markets that Euromonitor tracks.
 In identifying these relationships, the model estimates elasticities for each statistically significant demand
driver, including income growth, changing retail prices, demographic trends and retail channel trends.
 Multiplying these elasticities by corresponding year-on-year growth forecasts for each demand driver allows
the Forecast Model to build annualised retail volume and value forecasts for a market in a given year.
 While estimated demand driver elasticities are constant, forecast demand driver growth can change over
time. For example, forecast GDP growth for a given year is regularly upgraded or downgraded in
Euromonitor International’s Macro Model to reflect changing economic and sociopolitical conditions.
 In turn, changing only forecast growth for GDP in this example allows the Packaged Food Forecast Model
to create multiple retail forecasts that capture the impact of these changing macroeconomic conditions.
Impact of Russia GDP Shock on Chocolate Confectionery Retail Volume Forecast in Russia
2015 real GDP % Chocolate income Income effect on 2015 chocolate %
growth forecast elasticity chocolate growth volume growth
Baseline Forecast
+1.43 0.37 +0.53pp +1.41
(June 2014)
Updated Forecast
-3.82 0.37 -1.41pp -0.55
(December 2014)

Soft drivers and the Industry Forecast Model
 The power of Euromonitor International’s forecasting methodology is that it blends statistical modelling with
local market observations reflecting local industry consensus. As such, retail market forecasts also rely on
the insights and expertise of Euromonitor’s global analyst network. Euromonitor analysts work closely with
the Industry Demand Model to ensure that it remains consistent with their empirical observations,
guaranteeing that quantitative and intuitive expectations fully complement each other.
 Euromonitor analysts also capture all the demand drivers beyond the scope of the Industry Demand Model.
These “soft drivers” remain critical to future retail sales, but are either fundamentally unquantifiable or have
no globally comparable data with which to measure them.
 Soft drivers are captured and measured exclusively by empirical research from Euromonitor analysts, and
their overall positive or negative impact is estimated on top of the results of the Industry Demand Model.
Demand Driver Soft Demand

Forecast Demand
Elasticities: Drivers:
Driver Growth:
From Industry From Country and
From Passport
Demand Model Industry Research
Industry Forecast Model

Growth decomposition explained
 To help understand and illustrate the impact of each demand driver to a market’s retail growth performance
and prospects, Euromonitor International employs a graphical tool called “growth decomposition”.
 The fundamental idea behind growth decomposition is that a product category’s retail sales performance
and future prospects can be explained through changes in underlying demand factors.
 As explained above, the impact of demand driver change to retail market sales can be calculated by
multiplying a demand driver’s observed elasticity by that demand driver rate of change over a period of
time. Multiplying demand driver elasticity by forecast demand driver growth yields the percentage points of
overall retail growth that that specific demand driver is contributing to the market forecast under review.
 In addition, Euromonitor analysts estimate the impact of “soft drivers” to overall retail growth via their
empirical research. The relative impact and importance of “soft drivers” can be shown alongside that of the
measurable demand drivers identified by the Industry Demand Model.
 In the growth decomposition visual below, the percentage points of growth that each demand driver is
contributing to overall market growth are illustrated in the coloured segments of the stacked bar charts.

Significance and applications for growth decomposition
 By attributing a fraction of overall retail growth to each contributing demand driver, overall category growth
can be “decomposed”. In doing so, an extensive picture of underlying market fundamentals and processes
on a category-by-category and country-by-country basis can be provided.
 Ultimately, growth decomposition allows Industry Forecast Model users to:
 Identify different demand drivers that affect historic sales, and will likely impact future market prospects;
 Evaluate the relative importance of different demand factors over time and then identify which factors
generate the highest deviations in historic - and ultimately future - consumption;
 Illuminate the underlying market dynamics for each product category;
 Measure and predict the effects of demand driver shocks, either expected or hypothetical;
 Facilitate scenario analysis by generating understanding of which demand factors can be influenced by a
manufacturer or retailer and which are beyond their control.

Key applications for Industry Forecast Models
• Quarterly Forecast Restatements

• Regularly updated retail market forecasts to reflect latest macro expectations (ie,
quarter-on-quarter real GDP growth revisions) for all markets.
1
• “What If?” Scenario Analysis
• See and compare how a hypothetical event (ie Eurozone recession, China Hard
Landing, Grexit) stands to impact different market forecasts.
2
• Growth Decomposition and Demand Driver Elasticities
• Understand, compare and respond to the forces driving expected market growth
across different product categories and countries.
3
• Assess Market Potential
• See the ceiling on retail volume or value sales and growth, regardless of a specific
forecast scenario. How much more can that market really grow?
4

FOR FURTHER INSIGHT PLEASE CONTACT
Spiros Malandrakis
Industry Manager - Alcoholic Drinks
Experience more...
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ALCOHOLIC DRINKS GLOBAL INDUSTRY OVERVIEW

2017 is emerging as a vintage

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 3

Examining five trends shaping Alcoholic Drinks

Trend Expected long-term implications Historic significance/

Marketing evolves, Machismo-infused advertising and conspicuous consumption

Is the grass While the rise of cannabis is currently primarily relevant to

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 4

Low-/Non-Alcoholic Adult Cannabis Infusions - North

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 5

 As Euromonitor’s latest annual

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 7

Alcoholic drinks: drinks all around?

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 8

Beer versus spirits: a tale of two worlds

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 9

Under Asia’s shadow

 While recovery and optimism were visible

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 10

European doldrums and North American saturation

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 11

 Lager managed to enter positive

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 12

…as brown spirits march on and vodka remains on the defensive

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 13

Beyond the usual suspects

 While countries such as China and the

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 14

 The transition away from store-

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 15

Forecast model scenarios: Brexit – the darkest hour?

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 16

Big is not always best

 While consolidation is a historic

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 18

Big beer facing an uphill battle

 While the core Western markets

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 19

The craft sector is a core focus for acquisitions…

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 20

…but who has been buying what?

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Diversification and emerging markets fuel volume growth

 Having a closer look at organic growth

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Megatrends through the alcoholic drinks looking glass

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Healthy living as drinking turns mindful

 From moderation initiatives to

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 25

Connected consumers: a technological cocktail of disruption

 From integrated voice-enabled devices

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Cross-pollination, hybrids and blurring category lines

 From combining lager and ale yeast

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 27

Marketing evolves, corporate responsibility takes centre stage

 It is last orders for shots of monolithic aspirational

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 28

Is the grass greener? Cannabis and the substitution conundrum

 As legalisation initiatives gather further traction and

© Euromonitor International ALCOHOLIC DRINKS: GLOBAL INDUSTRY OVERVIEW PASSPORT 29

Global snapshot of beer

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