29th June, 2021 by Nicola Carruthers. From The Spirit Business.
The global spirits sector faces losing US$168 billion if restrictions on marketing are enforced, a new report has found.
The new Brand Finance Marketing Restrictions 2021 report builds on previous Brand Finance studies in 2017 and 2019 that looked at the potential impact of plain packaging regulations. In particular, this report analyzed the impact of marketing restrictions in general on the alcohol, sugary drinks, savory snacks and confectionary categories.
For the 2021 report, Brand Finance examined nine brand owners: Diageo, Pernod Ricard, PepsiCo, Heineken, AB InBev, The Coca-Cola Company, Treasury Wine Estates, Nestlé and Mondelēz International.
To begin, the report explains how plain packaging and limitations on advertising damages how a brand differentiate itself from others in the market, Brand Finance said.
And since “brands are integral to how the world operates, and in times of crisis are the most valuable and strongest in their categories” says David Haigh, CEO of Brand finance, “Severe marketing restrictions are catastrophic, not only for brands, but for all stakeholders, from consumers and society, to investors and governments.”.
This means that If restrictions and bans were enforced, Brand Finance predicts the value that brands contribute to the overall business of these nine companies would fall from US$553 billion to US$286bn, with overall enterprise value dropping from US$1394bn to US$1127bn. Also, The nine companies could each lose nearly a quarter of their enterprise value on average and more than 50% of brand contribution, Brand Finance found.
Major alcohol players, such as Diageo and Pernod Ricard, could face 100% revenue exposure if plain packaging and limited advertising rules are implemented globally. Specifically, Diageo is set to lose 71.6% of the added value that its brands contribute to the business – more than any other company analysed in the report. In comparison, Absolut owner Pernod Ricard could potentially lose 27.4%.
By alcohol category, spirits brands stand to lose the most, at US$168bn by brand contribution value, the report found. In comparison, beer could lose US$105bn and wine could lose US$12.7bn.
To read the full article, click on the following link: https://www.thespiritsbusiness.com/2021/06/marketing-restrictions-pose-168bn-risk-to-spirits/.