By Ian Neubauer
Brewers and bottlers may no longer be able to rely on higher profit margins derived from premium products if consumer confidence continues to slide, an analyst said.
JP Morgan analyst, Stuart Jackson, said consumers could stick with mid- or budget-range products or trade down from premium-range products to more affordable brands because of increasing living costs.
“The main risk we see to the earning of the food and beverages stocks on the back of an economic slowdown is through cessation, or even a reversal, of trading up by consumers,” he said in a note to clients, The Sydney Morning Herald reported.
Brewing is traditionally regarded as a recession-proof industry. But Jackson warned that increasing commodity costs, such as PET resin used to make some bottles, makes it riskier than usual.