The empire strikes back: Drinks companies recover

The world’s biggest spirits groups Diageo and Fortune Brands Inc are planning to spend more money as they expect the return of a global demand for booze! But is there really recovery? Nobody knows.

Fortune’s Chief Financial Officer Craig Omtvedt: “We believe there is going to be recovery here. It may ramp up a little more slowly than it has in the past, but there will be recovery here.” The drinks company raises its marketing spending by a double-digit percentage rate this year. Diageo has a $10 billion spirits market in North America, their marketing spending will rise over 10 percent in the first half of 2010.

Fortune brands even plans to add new distilling capacities. “In the spirits business we said we’ll be ramping up … It’s going to be very targeted on what we see as the opportunities for both core growth as well as emerging products,” Omtvedt says.

Beer sales going down

Fortune concentrates on core products, such as Jim Beam in North America and Courvoisier Cognac in UK, but also Maker’s Mark bourbon in Australia or Teachers scotch whisky in Brazil.

Fortune is the the world’s No 4 spirits group after Diageo, Pernod Ricard and Bacardi (privately owned). The company focuses on growing its scotch whisky business in Brazil and India. The company sells about 80% of its volume in North America, Europe and Australia – only 5% in emerging markets.

75% of Fortune’s revenues come from its spirits. Other products suffer, minly the super premium segments suffered a lot. Beer has suffered a lot more than the spirits industry: Beer sales U.S., Canada and Britain remain difficult. The wine and spirits industry has not suffered as badly as beer through the downturn.

Source: Reuters