Drinks companies defy doom-laden forecasts

It’s not all gloom and doom in the drinks sector. The pervading national atmosphere may be one of caution and trepidation, but the hard evidence suggests that producers are faring well.

Diageo, Pernod Ricard, Rémy-Cointreau and Moët-Hennessy have all reported record profits this year and all are predicting sales growth and additional profitability in 2012.

Constellation is back on a solid growth path and Beam is flourishing as a focused drinks group following its separate Wall Street listing back in October.

While brewers are having to battle against a declining market, niche producers such as Green King and Fullers are thriving. In soft drinks, only this week AG Barr reported that revenues were up by 4.6% since the end of July.

That hardly sounds like impending disaster. True, many predictions for 2012 have been wrapped in a modest amount of circumspection about the path of the global economy, but none of the chief executives involved is given to exaggeration.

Examine their records: regularly they beat their own forecasts. So it is sensible to assume that when both Paul Walsh of Diageo and Pierre Pringuet of Pernod Ricard said earlier in the autumn that the North American market was back on a growth path and that they were looking at global growth of between 5% and 6% respectively in the year to the end of next June, they were relying on solid numbers, not simply licking a figure and holding it up to the wind.

Nowhere is the upward trend in global sales more pronounced than in the Scotch whisky sector. In the first nine months of this year exports totalled nearly £3 billion, a record, and a massive 23% increase over the same period in 2011.

While there is an element of Scotch being the “flavour of the month” behind those figures, it is also due in large measure to expert marketing in key regions, providing products the consumer wants.

The same is true of Cognac. Fifteen years ago the category seemed in exorable decline, yet today it is booming.

Premiumisation and the rapid emergence of substantial middle classes in Asia and Latin America are key to the growth strategies.

But it is also noticeable how, as the drinks business reported recently, consumers want quality. Most said they would prefer to buy a quality product, but perhaps less frequently, than remain downmarket.

On the home front, however, UK retailers are facing more difficult times. The “commoditisation” of wine and the increasing dominance of the supermarkets in the off-trade are well known phenomena.

Many on-trade groups are also trying to steer through tricky trading conditions. Inside the M25, however, and especially in central London anecdotal evidence suggests that bars, restaurants and hotels are enjoying brisk business, especially at the premium end of the product spectrum. Top end Champagne producers cannot supply demand.

The soothsayers are pointing to a difficult year for Britain in 2012, but even recently reduced forecasts predict that the economy will continue to grow, not shrivel.

That is subject to further revision in the light of global events. But raw material cost increases are falling back and inflation overall is set to decline rapidly next year.

Britain has enjoyed more buoyant times but globally there are millions of consumers eager to spend and willing to pay for quality products. There are healthy profits to be made by supplying what they want.