What Do Beverage Analysts Think of the Sector?

This week we interviewed some of the most prominent analysts in the beverage sector to get their insight on the communication strategy of the companies in the industry. Some of the topics covered in this interview were: the most relevant sector metrics, quarterly communication, challenges and opportunities for the industry, among others.

Most Relevant Metrics For The Industry

The most important metrics for analysts are price and volume (breaking down volume by segment, to analyze the product mix), as well as EBITDA and profitability margins. Other relevant indicators were: consumption trend per capita, the cost of raw materials, and the exchange rate effect in international operations.

What About The Earnings Report / Call?

Regarding the earnings release, in addition to the financial statements and cash generation, some of the most important sections are: KPIs by region / segment, as well as pricing structure, hedges, cost and expense analysis, and overall details regarding operation.

As for the CEO’s message, similar to what we have mentioned in previous blogs, most of the analysts think that providing an overview of industry conditions and the company’s strategy going forward (where it is heading, disclosing specific targets/goals) is especially useful. The CEO’s optimism/pessimism can be perceived in this section of the report, as well as the quality behind the results. Lastly, one of the analysts mentioned that it’s also important to include comments and updates related to ESG.

Regarding the earnings call, analysts think that it can be a good opportunity to provide information regarding investment on fixed assets and M&A. It is particularly important that speakers address industry trends, as well as its challenges and risks, and the way in which these may affect the company’s strategy or cashflows in the medium and long-term. The cost of raw materials is also relevant (PET, aluminum, sugar, etc.), which makes the earnings call is a good space to talk about it.

Strengths and Weaknesses

Some of the concerns were: substitutes and competitors, dependency on a predominant client, as well as the costs of PET and aluminum. Changes in consumption trends and the use of resources are also uncertainties that were mentioned. Lastly, analysts think that information from the beverage industry in Mexico could be supported with more historical data.

The main strengths mentioned about the sector were: brand quality, availability of products in different countries, and supply strategy. The companies’ ability to distribute the highest number of products and capability to develop the pricing structure were also mentioned. Product innovation and flexibility were also important.

Opportunities and Challenges

According to analysts, the most relevant challenges for the sector in Mexico are: preservation of resources (especially water and energy), regulation and health issues in the country, traditional sales channel and inflationary effect (both for companies and consumers).

Potential growth opportunities for the industry are: digitalizing the traditional sales channel, growth through M&A activity, expanding its brand portfolio and income sources, and taking advantage of industry trends. The multicategory division is also considered one of the biggest opportunities at the moment.

How Can Companies Improve Their Communication?

1. Companies must be as transparent as possible with their communication, and the management team should remain neutral when releasing results. When quarterly results are below expected, it must be recognized and addressed proactively, detailing how the company will improve results in the future. Use the CEO’s message and results conference call to address these topics.
2. Provide regular updates regarding cost and expense control (specifically about raw materials) since this is a common uncertainty among analysts.
3. Talk proactively about the plan to preserve natural resources, since the market is aware of how important this topic is nowadays.
4. For the quarterly conference call, address information that is not included in the earnings release (to avoid it from being a summary of the report and take advantage of the opportunity to provide clarity to stakeholders on other relevant topics). Keep in mind that the Q&A session is the most important part of the call, which is why there must be enough time allowed.
5. Lastly, we recommend addressing the challenges and threats for both the industry and the company, to avoid losing credibility and to keep a good communication strategy.

At Miranda IR, we are more than happy to help you improve your IR materials. We specialize in clear and efficient communication with the market.