Beer Industry

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  • Topic: Goldman Sachs, Molson Coors Brewing Company, Henry Paulson
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October 23, 2012

Global: Beverages: Brewing
Equity Research

Beer bifurcation – separating the fizz from the flat
Not all EMs are created equal
We prefer EM exposure to DM exposure for beer. However, we believe it is increasingly important to differentiate between structurally attractive and structurally unattractive EMs and DMs.

SABMiller looks best positioned
With the most material exposure to early-stage EMs, as well as a relatively attractive DM portfolio, SABMiller is in our view the best positioned of the global brewers. Heineken has some of the most attractive EM exposure, offset by some of the least attractive Western European exposure. ABInBev lacks long-term growth in its EMs but has a more attractive DM portfolio than all except SABMIller. Efes has high EM exposure but not to our preferred regions, while Molson Coors has the lowest EM exposure. Carlsberg combines some of the least attractive DMs with the least attractive EM exposure overall, due to its reliance on Russia. GS SUSTAIN industry positioning RELATED RESEARCH

ABInBev: Quality at a price – down to Sell on valuation, October 23, 2012 European Consumer Staples: Better than ever: Why quality staples stocks deserve an increased premium vs. history, October 23, 2012

Some EMs might already be DMs
Beer is an early-stage consumer staples category, typically achieving its strongest growth early in a country’s economic development. Several major EMs, including Russia, Brazil, South Africa and Mexico, are already close to DM consumption levels for beer, meaning the structural growth opportunity has a short time horizon.

Company ABInBev Anadolu Efes Carlsberg Molson Coors SABMiller

Rating Sell Neutral Sell Neutral Buy

PT € YTL Dkr $ GBp 62.5 25.5 493 47 3,525

Price Upside 65.9 ‐5% 26.9 ‐5% 513 ‐4% 44 7% 2,638 34%

Source: Datastream, Goldman Sachs Research estimates.

Africa and India are the most attractive
Early-stage EMs such as those in Africa and India combine greater long-term growth with typically higher market consolidation, greater customer fragmentation and lower regulatory risk. Asia offers long-term growth potential but China is fragmented. Eastern Europe offers lower growth with greater regulatory risk and typically greater fragmentation. Mitch Collett +44(20)7774-1060 mitch.collett@gs.com Goldman Sachs International Conor Parsons +44(20)7552-3401 conor.parsons@gs.com Goldman Sachs International Judy E. Hong (212) 902-0490 judy.hong@gs.com Goldman, Sachs & Co. Nina Dergunova +7(495)645-4230 nina.dergunova@gs.com OOO Goldman Sachs Bank

100% 80% 60% 40% 20% 0% SABMiller Heineken Efes ABInBev Carlsberg Molson  Coors 36% 26% 94% 68% 68% 65%

Source: Goldman Sachs Research estimates.

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S. Global Investment Research

The Goldman Sachs Group, Inc.

October 23, 2012

Global: Beverages: Brewing

Table of Contents
Overview: Differentiating between structually attractive and unattractive EMs and DMs Eight charts that explain our view SABMiller is the best positioned brewer on the GS SUSTAIN scorecard SABMiller is also best positioned on GS global beer country scorecard Valuation fails to reflect positioning GS global beer country scorecard identifies structurally attractive markets Consolidation is highest in EMs Consolidated markets offer better margins and more sustainable returns Growth is most attractive in early-stage EMs Beer is an early-stage consumer...
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