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This brief paper will analyse and recommend the best firms to invest in for the most powerful premium drinks business, Diageo.
Firstly the business opportunities to merge have always been astrategic key to its development. The company was created by the fusion of Grand Metropolitan and Guiness, providing food and beverages all over the world. Then it decided to focus entirely on drinks, gettingrid of companies like Burger King and acquiring shares in Seagram, another company in the drinks industry. This specialisation was a huge step as it became the leading alcohol drink group in theworld.
The market environment of alcoholic drinks is very interesting as it differs in every region of the world. Diageo and its main competitors such as Beam Global Spirits & Wine, Inc., Pernod RicardSA and SABMiller plc all represent most of the Global market share.
The first observation to make is that alcoholic drinks are in complete stagnation in western Europe, In fact, in the UK, it hasreached a new record, with a fall of 13% in drinking from 2004 to 2009 (BBC news, 3 September 2010). The factors are all related to the new cultures of developed countries, focusing on health.Governments are reacting on the negative societal impact of alcohol and therefore they are increasing taxes on alcohol beverages and the penalties for drinking and driving. They have even been advertisingagainst high consumption of alcohol using very dramatic images. However in Asia, South and Central America and Eastern Europe, trends in alcohol consumption are growing very fast. There is a total volumegrowth of 55% in Asia (in 2008/2009), 19.5% in South and Central America and 19.5% in Eastern Europe. Furthermore there is an interesting strong trend in markets like Botswana, Tanzania andGhana.(source: Alcohol trends- market and innovation, Analyses and forecasts, compiled from Business Insights 2008/2009 reports, Anders Ulstein, April 2009).
It is also important to analyse the types of...
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