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Beverage Industry Set To Bounce Back In 2021, Provided Bars Can Open: Moody's

By Steve Wynne-Jones
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Beverage Industry Set To Bounce Back In 2021, Provided Bars Can Open: Moody's

The global beverage industry is likely to grow by high-single to low-double-digit percentage points over the next 12 to 18 months, provided bars and other away from home venues can open, Moody's has said.

This outlook follows 'unprecedented declines' in the first half of 2020, and a second half which is likely to similarly show declines, albeit with a 'sequential improvement' on H1.

"Growth will accelerate in 2021 assuming away from home venues are open, but we do not expect beverage companies' EBITDA to return to 2019 levels until 2022," said Moody's Investors Service analyst Linda Montag.

'Wide Variation'

According to the Moody's report, Growth will rebound in 2021, as long as away from home venues remain open, the continued uncertain environment creates a 'wide variation' in potential outcomes for the beverage industry.

'However our outlook remains stable because a worsening of the coronavirus pandemic could keep bars, restaurants and other venues closed or operating at reduced volumes and derail the magnitude or timing of the sector's recovery,' it said.

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Performance is likely to vary by market and product mix, with the recovery set to be stronger for companies operating in markets that saw deeper declines in the first half of 2020, due to the closure of the HoReCa channel.

Developing markets, too, are likely to remain growth engine for the global beverage industry – partly due to their handling of the COVID pandemic.

Margins are likely to improve as on-premise venues re-open, while cost cutting across several major players is likely to preserve financial flexibility, enabling businesses to improve their profit standing as volumes start to return. Moody's also predicts that demand for more profitable premium products will remain strong, again lifting performance.

However, the threat of trade tensions, such as tariffs on US whiskey exports and certain beverage imports to the US, continue to present challenges, with Moody's noting that trade relations 'continue to be an ongoing source of uncertainty'.

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Revised Outlook

While Moody's has issued a 'stable' outlook for the sector', it said that it would revise its outlook to positive 'if there were greater certainty of uninterrupted recovery and we expected operating profit growth to consistently exceed 5% over the next 12-18 months.

This would most likely occur if growth accelerates in emerging markets, and business conditions improve, including a sustained return to normalcy for away-from-home channels.

'We would revise the outlook to negative if we were to expect operating profit declines,' it added. 'We last changed our outlook to stable from positive in March.'

© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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