10+1 trends of Russian beer market 2015-2017Despite of the moderately negative prognoses for 2017, the beer market can be stabilized soon. Yet the years of the negative dynamics have resulted in marketing being limited just to “optimization” and the art of balancing between price and volumes. Bigger supermarkets share means stronger trade marketing. These processes are connected to the majority of the described trends. At the same time, the federal brands inflation leads to searching for new tastes, sales channels and contact formats that expand the product range and diversify the beer market, but do not imply a substantial volume increase. Let us enumerate and further discuss the ten trends of the beer market we can see in 2015-2017 as well as the major event of 2017.
Beer market of Ukraine 2017In the first half of 2017, the Ukrainian beer market goes on decreasing slowly. Yet, the companies manage to compensate their lost volumes by raising prices and improving the sales structures. This results in the mid price market segment reduction while the sales of premium brands are rising. These processes are connected to position strengthening of companies Carlsberg Group and Oasis and the market share reduction of Obolon. Most of the novelties by the market leaders belong to craft or hard lemon categories.
Beer market of Russia 2016: PET goes to draftThe beer market of Russia was warmed up by the hot summer, but the preparation for large volume PET prohibition has already impacted it negatively. The year was successful for Efes, MBC and regional producers; Carlsberg’s positions were virtually stable but AB InBev and Heineken lost a part of market share having focused on the sales profitability. The dynamics of big brands was determined by how much the companies were willing to keep the prices down or by their promotional activity. In this context the economy segment of the beer market and sales of inexpensive draft beer were increasing. The premium segment started shrinking due to license brands migrating to the mainstream segment.
Beer market of Vietnam: “Young tiger”Vietnam is one of the few big beer markets that continue to grow steadily. The beer popularity results from its low price, street consumption culture, and social motives. The outlooks of beer market as well as the Vietnamese economy inspire optimism, though the country is heavily dependent on export of goods. The state regulation can be called liberal, but the key risk for brewers is harbored in intensive rising of excise. Within TOP-4 there are two leaders, Sabeco and Heineken that grow at the fastest rates. The first company effectively employs its capacities, the second one focuses on marketing technologies. Almost 80% of the market belongs to century-old brands, yet the middle class and the youth are shifting their interest toward international premium that is growing taking share from the mainstream.
Is Ambev the Perfect Stock?
One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock, then decide if Ambev (NYSE: ABV ) fits the bill.
The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:
- Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
- Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit.
- Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
- Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
- Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.
- Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.
With those factors in mind, let's take a closer look at Ambev.
|Factor||What We Want to See||Actual||Pass or Fail?|
|Growth||5-Year Annual Revenue Growth > 15%||9.6%||Fail|
|1-Year Revenue Growth > 12%||8.8%||Fail|
|Margins||Gross Margin > 35%||66.5%||Pass|
|Net Margin > 15%||30%||Pass|
|Balance Sheet||Debt to Equity < 50%||27.6%||Pass|
|Current Ratio > 1.3||1.22||Fail|
|Opportunities||Return on Equity > 15%||32.5%||Pass|
|Valuation||Normalized P/E < 20||20.92||Fail|
|Dividends||Current Yield > 2%||3.9%||Pass|
|5-Year Dividend Growth > 10%||46.3%||Pass|
|Total Score||6 out of 10|
Source: Capital IQ, a division of Standard and Poor's. Total score = number of passes.
Ambev pours up an attractive score of 6. As part of an even larger network, the Brazilian beverage maker focuses on one of the fastest-growing regions in the world.
Ambev is a subsidiary of the larger Anheuser-Busch InBev (NYSE: BUD ) , which itself has had a long and storied history of mergers and acquisitions. Ambev produces a wide range of beers and soft drinks throughout Central and South America, as well as distributing PepsiCo (NYSE: PEP ) products in Brazil and elsewhere in Latin America.
Thanks to its presence in a growth market, Ambev hasn't seen the same top-line pressure that the recession caused for some of its brewing competitors, such as Molson Coors (NYSE: TAP ) . Ambev's growth has not only defied Molson's contraction over the past five years to remain positive but also outpaces the growth of Mexican rival FEMSA (NYSE: FMX ) . And although its Anheuser-Busch InBev parent is saddled with debt, Ambev has a relatively clean balance sheet.
As long as Brazilian growth continues to help the entire continent expand faster than the U.S. and other developed nations, Ambev should continue to grow. Its shares are somewhat pricey right now, but with a good dividend, Ambev might get even closer to perfection in the years ahead.
No stock is a sure thing, but some stocks are a lot closer to perfect than others. By looking for the perfect stock, you'll go a long way toward improving your investing prowess and learning how to separate out the best investments from the rest.
18 Apr. 2011