Raising a Mug to the World Cup
During one of our recent research trips, it seemed that every television screen we saw was tuned to the World Cup soccer matches. That was certainly the case whenever we walked by a hotel bar. And in them, most of the patrons were drinking beer.

Evidently, beer is the most popular sports drink…well, sports spectating drink. In fact, several of the 11 Russian cities where the matches are being played are running low on, or – in at least one case – are entirely out of beer.1,2 Clearly, spectators are raising a mug to the cup. And not just in Russia: with 32 teams from continents involved, the cup matches are estimated to attract more than 3 billion viewers worldwide,3 many of whom will likely be drinking a beer while watching. More to the point, for our purposes as investors, many of them will be drinking branded and premium priced beer.

Throughout the world, the force of mass affluence is enabling consumers to move up the spending pyramid of “Bread, Booze and Bling,” affectionately known on our team as “the George Evans’ Hierarchy of Human Needs Pyramid.” This is why we have long owned one of the world’s major brewers, Heineken, as part of our Bread, Booze and Bling investment theme.

Beer is estimated to comprise 75% of the world’s alcohol market.4 Although the volume of beer consumed worldwide has not been rising, the value of the beer market is growing at roughly 6% annually, and is expected to continue doing so at least into the next decade.5 In the global beer market, less is more in terms of profitability for the brewers. Why? In the emerging market world, rising prosperity is enabling beer drinkers to shift from informally produced brews to branded beers that are more expensive but safer.6 In the wealthier regions of the world, beer drinkers are paying more for premium brands and craft beers. This evolution in consumer behavior is further supported by improved transport and storage infrastructure in many regions, and by better logistics and supply chain management nearly everywhere, providing choice and availability.7

We do not have any guarantee that these trends will continue. But as we watch so many fans drinking beer as they watch the World Cup, we’re reminded of why we invested in brewing.

 
  1. ^Source: “Russia Is Running Low on Beer During World Cup,” Modern Farmer, June 6/25/18. https://modernfarmer.com/2018/06/russia-is-running-low-on-beer-during-the-world-cup/
  2. ^Source: “Australian Fans Drink Russian City [Kazan] Dry at Fifa World Cup,” Stuff.co.nz, 6/19/18.https://www.stuff.co.nz/sport/football/world-game/104819242/australian-fans-drink-russian-city-dry-at-fifa-world-cup
  3. ^Source: “Soccer World Cup 2018: Global Audience to Hit 3.4 Billion, FIFA Revenue to Reach $6 Billion, The Hollywood Reporter, 6/14/18.
  4. ^Source: Deloitte report, “Craft Beer: A Multisensory Experience,” published 2017. https://www2.deloitte.com/content/dam/Deloitte/mx/Documents/consumer-business/2017/Craft-Beer-in-Mexico-2017.pdf
  5. ^Source: Deloitte report cited above and Zion Market Research, “Global Beer Market Predicted to Reach $750 Billion in 2022,” 3/2/18.
  6. ^Source: “Around the World, Beer Consumption Is Falling,” The Economist, 6/13/17. https://www.economist.com/graphic-detail/2017/06/13/around-the-world-beer-consumption-is-falling
  7. ^Source: “Global Beer Market in 2018 Set for Rapid Growth, Opportunity Till 2025― Trends, Demands and In-depth Analysis by Key Players, Regions, and Application,” Reuters, 3/28/18. https://www.reuters.com/brandfeatures/venture-capital/article?id=31876