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US beverages down but fare better than market

US beverages down but fare better than market

Shares of U.S. beverage makers tumbled this year, but not as much as the broader market as consumers still reached for soft drinks such as Coca-Cola, Pepsi and beers like Bud Light _ even as they cut spending elsewhere.
Pressured by an uncertain economy and fluctuating costs, beverage makers trimmed spending by cutting jobs, but still planned new products launches to entice consumers.
Even as consumers cut back spending, they're reaching for name brands they know and trust, said Christopher Shanahan, an analyst with Frost & Sullivan. Investors recognize that such brands survived the Great Depression of the 1930s, and they'll most likely make it through the current economic crisis too, he said, meaning they're more likely to invest in these stocks than in others.
"These are relatively safe," he said. "You run the risk of losing more money because it's more volatile but I think in the end all these companies are still going to be around."
Overall, U.S. beverage company stocks lost 21 percent in 2008, according to the Dow Jones U.S. Beverage Index. In the same period, the Dow Jones Total Market Index slid 40 percent and the Standard & Poor's 500 lost about 39 percent.
But while the companies' stocks haven't taken as bad a beating as the broader market, beverage makers are cutting expenses.
Drink companies from the newly formed world's largest brewer, Belgium-based Anheuser-Busch InBev, to Purchase, New York-based PepsiCo Inc. cut thousands of jobs, but the effort did little to stop the slide in stock prices as the credit crisis and economic uncertainty hurt the broader market.
PepsiCo's and Atlanta-based Coca-Cola's shares lost about 27 percent in 2008
But the future is uncertain. PepsiCo announced plans this fall to cut 3,300 jobs and shutter six plants in an effort to save $1.2 billion over three years. It plans to use the savings primarily to revive lagging U.S. soft drink sales.
Morgan Stanley analyst Bill Pecoriello said Coca-Cola Enterprises has cost-cutting plans worth about $100 million over the next two years while Coke will save $400 million over three years.
In the beer sector, Anheuser-Busch's stock soared amid rumors and then confirmation of a sale to InBev rising 33 percent to $68.58 before the $52 billion deal closed in November.
Cost-savings, in part, motivated the deal, the companies said, and in December Anheuser-Busch InBev said it would cut 1,400 U.S. jobs _ or another 6 percent of its U.S. work force _ to help save at least $1.5 billion a year. The bulk of the cuts will come from the company's North American headquarters in St. Louis.
Before Anheuser-Busch announced the deal with InBev, the company said this summer it was offering an enhanced retirement program to certain employees to cut costs. It expected to reduce its salaried staff by 10 percent to 15 percent.
Denver-based Molson Coors Brewing Co. and SABMiller's Milwaukee-based U.S. unit joined together to form MillerCoors this year to save money and better compete against Anheuser-Busch. The pairing, which has brands like Coors Light and Miller Lite, expects to save $500 million over three years.
In November the company, which will set up a joint headquarters in Chicago later next year, announced it had cut 269 jobs since the joint venture began this summer in its efforts to save money. Molson Coors' stock dipped less than 7 percent in 2008.


Updated : 2021-04-21 09:22 GMT+08:00