Financial analysis report of 4 company heineken, carlsberg, anheuser busch inbev and diageo

Dissertation submitted in partial fulfillment of the Requirement for the MSc in Finance FINANCE DISSERTATION ON FINANCIAL ANALYSIS REPORT OF COMPANY: HEINEKEN, CARLSBERG, ANHEUSER BUSCH INBEV AND DIAGEO TRAN THI MINH TRANG ID No: 19046123 Intake Supervisor: Dr Nguyen Quynh Tho September 2020 Tai ngay!!! Ban co the xoa dong chu nay!!! 17014126320461000000 EXECUTIVE SUMMARY Owing the changes in disposal income, consumer flavor and brewing technologies, the global brewer market have experienced remarkable growth and expansion With an abundant portfolio of products and regions of business, some prominent breweries in the global market such as Heineken, Boston Beer Company, Carlsberg Group, Molson Coors, Anheuser-Busch InBev, SABMiller and Constellation Brands have dominated the market and made up for a considerable amount of market share Although performance and profits of breweries in 2020 are negatively influenced by COVID-19, this industry still promises the investors with high returns in the near future This present research firstly focuses on analyzing the global brewery markets with market value, market trends, and factors influencing the firms in the markets Then, different techniques such as SWOT analysis, ratio analysis and DCF model were employed to examine and evaluate performance and investment potential of the four firms, Heineken (HEIN), Carlsberg (CABGY); ANHEUSERBUSCH INBEV (ABI) and DIAGEO (DGE) Depending on the analysis, it is recommended that investors should hold the stocks of DIAGEO (DGE) and invest more in Heineken (HEIN), Carlsberg (CABGY), and ANHEUSER- BUSCH INBEV (ABI) TABLE OF CONTENTS CHAPTER 1: INTRODUCTION 1.1 An overview of the global brewery market 1.2 Area of the study 1.3 Study objectives 1.4 Methods of the study 1.5 Organization of the study CHAPTER 2: MACROECONOMIC ANALYSIS 2.1 The political outlook 2.2 The economic outlook 10 2.3 The social outlook 13 2.4 The technological outlook 15 2.5 The environmental outlook 17 2.6 The legal outlook 17 CHAPTER 3: INDUSTRY ANALYSIS 19 3.1 The performance of the global brewery industry 19 3.1.1 Key market insights 20 3.1.2 Market drivers 20 3.1.3 Market restraint 21 3.2 The competitive situation in the global brewery industry 22 3.3 The trends in customers’ demands in the global brewery industry………… 26 CHAPTER 4: THE HEINEKEN COMPANY 28 4.1 Business description 28 4.2 SWOT analysis 29 4.2.1 Strengths 29 4.2.2 Weaknesses 31 4.2.3 Opportunities 31 4.2.4 Threats 32 4.3 Ratio analysis and forecasted financials 33 4.3.1 Ratio analysis 33 4.3.2 Forecasting financial statements 38 4.4 Valuation models 40 4.4.1 DCF model 40 4.4.2 Suggested target price 42 CHAPTER 5: THE CARLSBERG COMPANY 43 5.1 Business description 43 5.2 SWOT analysis 44 5.2.1 Strengths 45 5.2.2 Weaknesses 46 5.2.3 Opportunities 47 5.2.4 Threats 47 5.3 Ratio analysis and forecasted financials 48 5.3.1 Ratio analysis 48 5.3.2 Forecasting financial statements 53 5.4 Valuation models 56 5.4.1 DCF model 56 5.4.2 Suggested target price 57 CHAPTER 6: THE ANHEUSER- BUSCH INBEV COMPANY 58 6.1 Business description 58 6.2 SWOT analysis 59 6.2.1 Strengths 60 6.2.2 Weaknesses 61 6.2.3 Opportunities 62 6.2.4 Threats 63 6.3 Ratio analysis and forecasted financials 63 6.3.1 Ratio analysis 63 6.3.2 Forecasting financial statements 71 6.4 Valuation models 74 6.4.1 DCF model 74 6.4.2 Suggested target price 75 CHAPTER 7: THE DIAGEO COMPANY 76 7.1 Business description 76 7.2 SWOT analysis 77 7.2.1 Strengths 78 7.2.2 Weaknesses 78 7.2.3 Opportunities 79 7.2.4 Threats 80 7.3 Ratio analysis and forecasted financials 81 7.3.1 Ratio analysis 81 7.3.2 Forecasting financial statements 84 7.4 Valuation models 87 7.4.1 DCF model 87 7.4.2 Suggested target price 88 CHAPTER 8: CONCLUSIONS AND RECOMMENDATIONS 89 8.1 Conclusions and recommendations 89 8.2 Limitations 91 REFERENCES 92 APPENDICES 97 Appendix A: Other forecasts of Heineken 97 Appendix B: Other forecasts of Carlsberg 98 Appendix C: Other forecasts of Anheuser-Busch 99 Appendix D: Other forecasts of Diageo 100 CHAPTER 1: INTRODUCTION 1.1 An overview of the global brewery market It is revealed by IBIS (2019) that beer is consumed as the most popular alcohol drinks worldwide As the end of 2019, the market value has reached US$ 606 Billion in 2019, increasing from $216bn in 2015 and $593,024 million in 2017 (Mordor Intelligence, 2019) During the period of 2015-2019, the global brewery industry has experienced a CAGR of 5.5% It is projected that the market will grow gradually with a CARG of 1.8% and reach $685,354 million by 2025 (Statistics, 2020) According to Business Wire (2019) over the five years to 2019, the global brewery industry has experienced several amid strong headwinds which leads to shifts in structure and business of beer manufacturing companies It is stated by Imarc (2019) that the market growth and consumption volume of this industry are attributed to such reasons as a rising number of social drinks in Asian and African countries, on account of improving economic scenario and growing middle-class population, the demand for beer has increased, rapid urbanization, cultural changes with the penetration of western culture into the global youth, introduction of new ingredients and innovative flavors, and so on Particularly, it is emphasized by Allied Market Research (2019) that thanks to social media influences and growth of global e-commerce sector, beer manufacturing companies have significantly improved their retailing channels and market presence, contributing to sales growth The report by IBIS (2019) indicated that over the past five years, the global brewery industry has been highlighted by some takeaways Firstly, the industry’s revenue amounted to $606bn in 2019 with 29,711 operating companies The market has witnessed a slump in saturated and developed markets such as North America while emerging and developing markets such as Asia Pacific and Latin America have experienced a significant growth in sales The increase in demand and rising preferences for craft beer are the major drivers for growth of developing markets Geography trends of the industry is shown in Figure 1.1 Furthermore, in recent years the brewing industry has renovated the production processes with new ingredients and innovative flavors which enables beer to become one of the most popular drinks of consumers Particularly, craft beers with different flavors have become the consumption trend among consumers worldwide Source: Mordor Intelligence, 2019 Figure 1.1: Industry by geography trends In terms of competitive landscape, owing to the market saturation the competition in the brewery industry, it is critical that the brewing firms focus on value over volume and consumer preferences to stay competitive in the market It is recommended that Testing different strategies and inventing diverse products is going to be vital for players to maintain their leadership positions in the coming years Offering a wide range of product portfolio, many prominent players in the global market, like Anheuser-Busch InBev, Molson Coors, Heineken, Boston Beer Company, Constellation Brands, SABMiller and Carlsberg Group accounted for a considerable market share globally Over the past few years, expanding companies’ presence in the emerging economies has been one among their key strategies responsible for their growth The recent years have witnessed the rise of AnheuserBusch InBev SA/NV to become a global leader in the beer market Following the acquisition of SABMiller, Anheuser-Busch InBev SA/NV held roughly a 27% market share in the global beer industry, with Boston Beer Company and Carlsberg Group following behind The market leaders of the global brewery industry is presented in Figure 1.2 Source: Mordor Intelligence, 2019 Figure 1.2: Competitive landscape 1.2 Area of the study This current study is intended to analyze business performance over the fiveyear period of 2015-2019 and growth outlook under the effects of the spread of the coronavirus disease (COVID-19) and subsequent lockdowns of four giants of the global brewery industry, including Heineken (HEIN), Carlsberg (CABGY); ANHEUSER- BUSCH INBEV (ABI) and DIAGEO (DGE) Areas of focus of this study involve macro-economic analysis, industry analysis and company analysis while the geographic analysis refers to the two biggest market areas of beer, Asia Pacific and the US Depending on report findings, some recommendations will be generated for sustainable and profitable investments in these four companies 1.3 Study objectives This study is dedicated to investigating the current business performance during 2015-2019 and growth prospects of the global brewery industry and to propose meaningful and valuable investment recommendations for investors Therefore, the following specific objectives are derived from the overall aims: 1) To obtain a comprehensive understanding of the global brewery industry during 2015-2019 and the growth outlook; 2) To examine the effects of macroeconomic factors on the industrial growths in the two biggest markets; 3) To investigate the brewery industry with reference to performance, competition and market trends; 4) To evaluate business performance of four market leaders, Heineken (HEIN), Carlsberg (CABGY); ANHEUSER- BUSCH INBEV (ABI) and DIAGEO (DGE) through analyzing financial statements with reference to finance ratios; 5) To value four selected businesses through DCF model; and 6) To propose profitable investment recommendations regarding four market leaders of the global brewery macroeconomic, industry and company analysis markets depending 1.4 Methods of the study This current research is administered with the quantitative method focusing on the analysis of financial statements of four investigated firms, including Heineken (HEIN), Carlsberg (CABGY); ANHEUSER- BUSCH INBEV (ABI) and DIAGEO (DGE) Data involves different secondary sources such as Market Line, Bloomberg, Global Insights and other financial websites Financial ratios including Profitability ratios, Leverage ratios, Liquidity ratios; Investment ratios and Cash Flow of four firms during the period of 2015-2019 are used for the analysis Additionally, macroeconomic analysis and industry analysis are also utilized with different models to justify the growth potentiality for investment decisions 1.5 Organization of the study This current thesis is divided into eight chapters, including Chapter 1: Introduction, Chapter 2: Macroeconomic Analysis, Chapter 3: Industry Analysis, Chapter 4: The Heineken Company, Chapter 5: The Carlsberg Company, Chapter 6: The ANHEUSER- BUSCH INBEV Company, Chapter 7: The Diageo Company, and Chapter 8: Conclusions and recommendations After this first chapter with a brief introduction of the global brewery industry during the studies period 2015-2019, study objectives, areas of study and methods of study, the second chapter focuses on analyzing how macroeconomic factors in the global market may influence business performance of beer manufacturers PESTEL model is employed in this chapter for macroeconomic analysis Then, Chapter analyzes the markets in which the four beer manufacturers have been operating in with reference to the global performance and outlook,