(The following statement was released by the rating agency)
Jan 10 - Asia-Pacific’s beverage market could grow significantly in the next few years thanks to generally favorable macroeconomic growth prospects, good demographics, and rising discretionary incomes, Standard & Poor’s Ratings Services said in a report published today.
“Major global beverage companies are increasing their presence in fast-growing Asia-Pacific economies, and major beverage companies in the region are expanding into other parts of the world, particularly through mergers and acquisitions,” said Standard & Poor’s credit analyst Machiko Amano. “The factors driving this move are generally increasing overall demand in key countries in Southeast Asia and China and a shrinking drinking population in Japan.”
We expect leading Asian beverage companies to widen their geographic diversification in the next few years through organic growth or M&A. They want to moderate the potential impact of either intensifying competition, in countries such as China, or maturing domestic markets, such as we see in Japan. They also aim to generate greater business opportunities through closer relationships with key existing customers.
However, sufficient control over investment targets will be critical to reduce execution risk, realize the benefits of cooperation, and adapt to different consumer tastes in unknown markets.
Industry consolidation is likely, in our view, and expansion will test management capabilities, particularly financial control. We expect the credit profiles of major beverage companies to diverge in the next year or two as M&A weakens the financial positions of those aggressively pursuing such activity while less-aggressive companies maintain their existing financial risk profiles.