Hmmm?!

Thursday, January 21, 2010

Morgan Stanley Sees More Growth Potential in Wine

Dear Client:

Does wine have better future growth prospects than beer and spirits? Morgan Stanley thinks so after studying results from a consumer survey and wholesaler survey, along with GuestMetric’s on-premise data. In their survey, the majority of wine, spirits and beer wholesalers agreed that the wine and spirits categories offer solid, long-term growth but promotions, demand and inventories in Q4 have brought short-term risks particularly in spirits.

In a note to clients, Morgan Stanley executive director Dara Mohsenian acknowledges that wine industry growth has slowed, but also believes that the market underestimates wine’s growth potential. Why are they upbeat? Because “we think the recent wine volume slowdown has been driven by macros, which is a temporary phenomenon, while long-term secular growth drivers are still in place.” They believe concerns over pricing “are overblown” and that mix “should turn positive in 2010 and beyond…import pricing should rebound as importers take pricing to offset negative FX, and we discount concerns over Australian oversupply given that Australia is only 7% of US volume.”

Morgan Stanley predicts that wine volume will grow 3% and pricing will gain 1.8% in the next five years (2010-2014). They expect spirits volumes to rise 2.5% and price to grow 1.5%. And finally, domestic beer volumes should rise about 0.3% with pricing up 2.8%.

Wine has the most “favorable perception” among consumers when compared to beer and spirits. It’s considered healthier to drink, more sophisticated, higher quality and increasingly more popular. In their survey, 66% of distributors agreed that wine has the highest long-term growth potential in the US. Twenty-two percent thought beer has the most growth potential and 13% chose spirits.

Read on, there’s more at Wine & Spirits Daily…