Roll out the barrel: positive signs ahead for global beer brewers?

The beer market is highly concentrated with the top five brewers producing about 50% of global volumes and controlling 65% of industry profits.  Volume growth has slowed and has been broadly flat in recent years due to both macro and more structural issues.  A recovery in emerging markets where per capita consumption of beer is still relatively low should see the category back to growth, but more structural volume headwinds particularly in developed markets persist.  In many developed markets demographics are less favourable, per capita consumption is mature and younger generations of consumers are drinking less alcohol than their parents and grandparents.  However, it is not all doom and gloom in developed markets.  While volume growth has stagnated, consumers aspire to “drink better” trading up to more expensive craft beers, low/no alcohol beers and flavoured malt beverages.  Emerging markets have also seen increasing demand for premium products, and the roll out of higher-priced global brands has accelerated.   Premiumisation in both developed and emerging markets has driven category value higher even as volume has remained stable.

Paul Flood – multi-asset manager, Newton Investment Management

The beer market is highly concentrated with the top five brewers producing about 50% of global volumes and controlling 65% of industry profits.  Volume growth has slowed and has been broadly flat in recent years due to both macro and more structural issues.  A recovery in emerging markets where per capita consumption of beer is still relatively low should see … read more

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Horror on the high street: ‘Experiences over things’ revs up retail apocalypse

Increasingly we are seeing a trend towards consumers valuing ‘experiences over things’ and this is having an impact on the performance of certain sectors. There have been a string of high street casualties in recent weeks, with a number of household names falling into administration. Other brands have been forced to seek help through Company Voluntary Agreements – arrangements with their creditors usually to try and improve lease terms on stores.

Restaurants are not immune to the squeeze in consumer discretionary spending, so while the growth in the sector may seem counterintuitive compared with headlines seen in recent months, it is in particular mid-market chains that are shrinking. We see greater consumer appetite for healthier eating, informal and experiential dining and an increased focus on food provenance and sustainability.

These trends are not unique to the UK, in the US footwear and apparel sales are also lagging other sectors. We believe these trends will materialise at different paces in different countries but for now the ‘experiences over things’ idea remains very much a developed market phenomenon.

Anna Martinez – fixed income analyst. Newton, a BNY Mellon company

Increasingly we are seeing a trend towards consumers valuing ‘experiences over things’ and this is having an impact on the performance of certain sectors. There have been a string of high street casualties in recent weeks, with a number of household names falling into administration. Other brands have been forced to seek help through Company Voluntary Agreements – arrangements with … read more

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Santa’s little helpers shun shops for sofa

Retailers without a significant online offering have faced an uphill struggle so far this festive season. The two key trends visible this year in both the US and UK have been the fact that promotions are spread over a longer period than last year, and the switch to online shopping is even more pronounced.  Stores were relatively quiet on ‘Black Friday’, now deemed to be the start of the sales on both sides of the pond, while cyber traffic was up. More shoppers are increasingly choosing to shop on mobile phones too, which adds yet another dimension for retailers to consider. Alongside the consumer’s ongoing search for value, the growth of online shopping is a trend we believe will continue to grow in influence and one we think will further highlight the divergence in the sector. Online sales growth is typically less profitable for bricks and mortar retailers as it adds variable cost without diluting fixed costs. These factors underline our cautious and selective stance on the retail sector globally.

Rosie Bichard – Newton, a BNY Mellon company

Retailers without a significant online offering have faced an uphill struggle so far this festive season. The two key trends visible this year in both the US and UK have been the fact that promotions are spread over a longer period than last year, and the switch to online shopping is even more pronounced.  Stores were relatively quiet on ‘Black … read more

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Pride comes before a fall…

Peaks in UK consumer confidence

Both common sense and history would encourage us towards thinking equity investors have a greater chance of strong returns when confidence is low not high. Likewise, unemployment, car sales and house prices… People are still talking about stocks positioned for the recovery, but we are five years on from the last trough in the market. A lot of investors say it is about feel good factor, but in the UK the feel good factor is driven by house prices. There is very little evidence of a sustainable, non-volatile recovery and the more I hear people saying it is inevitable house prices will go up the more I think they look dangerously high. People have such short memories.

Paul Stephany, Newton 

Both common sense and history would encourage us towards thinking equity investors have a greater chance of strong returns when confidence is low not high. Likewise, unemployment, car sales and house prices… People are still talking about stocks positioned for the recovery, but we are five years on from the last trough in the market. A lot of investors say it … read more

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Taxing times for Japan

The consumption tax rise and why this time it’s different

In 1997 the Japanese government engaged in fiscal retrenchment and raised the consumption tax from 3% to 5%. Soon after the policy came into force, there was a recession and a sharp increase in Japan’s government debt-to-GDP ratio. Japan was about to enter a 15-year period of deflation – the timing was terrible. If only the underlying economy had been stronger, it might have been different.

But this time around we believe it is different. There is momentum behind the Japanese economy and there is significant political capital invested in the move by Prime Minister Shinzo Abe and his government. We expect it to work and we expect to see the positive effects of the tax rise in the coming quarters.

Miyuki Kashima, BNY Mellon Japan’s head of Japanese equity investments

 

In 1997 the Japanese government engaged in fiscal retrenchment and raised the consumption tax from 3% to 5%. Soon after the policy came into force, there was a recession and a sharp increase in Japan’s government debt-to-GDP ratio. Japan was about to enter a 15-year period of deflation – the timing was terrible. If only the underlying economy had been … read more

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As safe as houses… (again)?

House price growth vs earnings growth

UK housing market data suggests the UK once again finds itself in a cycle of consumer spending supported by credit rather than wage gains. Is history repeating itself?

Peter Hensman, global strategist at Newton.

UK housing market data suggests the UK once again finds itself in a cycle of consumer spending supported by credit rather than wage gains. Is history repeating itself? Peter Hensman, global strategist at Newton.

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