Beer Monopoly





  International Reports








Posted April 2011

Obituary - Pierre Celis, founder of De Kluis Hoegaarden brewery, died 9 April 2011, aged 86

His life is the stuff of legend: from humble milkman to world-renowned saviour of the centuries-old unfiltered Belgian witbier style. Pierre Celis had vision, determination, perseverance ... and a sure touch for picking the wrong partners.

In Belgium he is revered as the man who single-handedly took an almost extinct beer speciality to grandeur. Belgium may be the country which hails the most unusual beer styles, but it really was his Hoegaarden beer that made Belgium the beer paradise it lays claims to today.

I am not sure if it is really true that he brewed his first batch of the coriander and orange peel spiced beer in his bathtub or that he built his first brewery in a cowshed. It does not matter. It only adds to his reputation as a beer maverick, who valued quality over profits and camaraderie over corporatism. Read on


Brazil – Who’s behind the rumour that SABMiller wants to buy Schincariol?

Looks like the end game of globalisation could turn nasty. The privately-owned Schincariol, Brazil's second-largest brewer, has strongly denied the claim that it has been put up for sale for about USD 2 billion and that SABMiller was the likely buyer. People familiar with the situation believe that Brazil’s market leader AmBev could be the source of the allegation, first published by the London Sunday Times on 3 April 2011, in the hope of denting Schincariol’s public image.

Being at the centre of a takeover speculation isn’t new to Schincariol. In 2006, media reported that Schincariol had received an offer from SABMiller, a claim Schincariol refuted.

Schincariol knows only too well that rumours, even if totally unfounded, are harmful to its business. If rumours that a company is for sale reach its distributors, the distribution channel can be destabilised and sales can be adversely affected. Moreover, top people might jump ship.

To Schincariol this rumour is bad news aimed straight at its heart and it's not random at all. Read on


Germany – Carlsberg Germany to be sold to Radeberger Group?

Poor souls. Having endured one restructuring after another, the recent rumour that Danish brewer Carlsberg will sell its local subsidiary will do little to put the minds of its German employees to rest. Carlsberg’s German unit Holsten (together with the Lübz brewery) continues to be churned through the rumour mill. About 18 months ago competitors alleged Carlsberg would close down its Holsten brewery in Hamburg and relocate production to Lübz. In March 2011, the German trade publication INSIDE speculated that Carlsberg Germany could be sold lock, stock and barrel to Radeberger Group. The privately-owned Radeberger Group happens to be Germany’s number one brewer and a few years ago was said to be in talks to acquire AB-InBev’s German unit.

While there is no denying that Radeberger Group is on the prowl to increase its market share to 20 percent from currently 13 percent, it’s far from clear which brewer could be Radeberger’s next target.

Although Carlsberg’s German top honchos were quick to deny that the group was for sale, employee representatives felt far from reassured. “The employees are extremely concerned,” the leader of Holsten’s works council, Rolf Dietzsch, told German media on 5 April 2011. “As far as we are concerned, a sale of Holsten has not clearly been refuted. Employees want to know the company’s future strategy.” Last year alone 80 jobs were axed at the Holsten brewery. Restructurings are a regular feature. “This does not contribute to employee motivation,” Mr Dietzsch reportedly said.

Carlsberg’s employees are right to be worried. Market observers have long wondered when – not if – Carlsberg’s German unit will be sold. The theory that Carlsberg only bought the German Holsten brewery group in 2004 to protect the southern glacis of its Scandinavian Fortress, to speak in military terms – never convinced us.

Like most brewers in Germany, Carlsberg has been suffering from declining beer consumption. In 2010 Carlsberg’s beer sales fell to 3.2 million hl and Carlsberg’s ranking among German brewers to 8th according to Kelch market research for Brauwelt. In 2008, Carlsberg still sold 4.8 million hl beer but that was before it sold two breweries: one to the cheap-beer-producer Oettinger and the other to the contract brewer Frankfurter Brauhaus.

Many think that after this string of disposals, Carlsberg Germany has very little left to justify its presence in Germany.

Still, on 5 April 2011, about 250 of Carlsberg’s employees in Hamburg were asked to gather outside and form a 17 metre crowd in the shape of a Carlsberg bottle in celebration of the new global slogan “that calls for a Carlsberg”.

Carlsberg’s CEO Jorgen Buhl Rasmussen said in a statement that while Carlsberg's green logo is known around the world, its sales do not measure up to its brand recognition.

Carlsberg said it will introduce new packaging for the beer in more than 140 markets, hoping that the new branding will help it reach its goal to become the fastest-growing global beer company.

Consequently, by 2015, Carlsberg anticipates that the Carlsberg brand will have doubled its profits,” the company said.

Currently, the Carlsberg brand sells about 6 million hl world-wide (excluding its market of origin).


Ethiopia – Heineken submits highest offer for Bedele Brewery

Have they all gone mad? Or did global brewers suffer from a last minute panic attack in the scramble for Africa? According to Ethiopian media, Heineken, SABMiller, Castel and Carlsberg have submitted offers for the 290,000 hl state-owned Bedele Brewery, which many think blatantly over-valued. Heineken's bid of USD 85.2 million exceeded those of Carlsberg Brewery (USD 68 million), Castel Ethiopia (USD 64 million) and SABMiller (USD 70 million). In January 2011 Ethiopia’s privatisation agency PPESA invited bids for Bedele Brewery. These are currently being reviewed.

Obviously, Ethiopia is the last unconsolidated beer market in Africa. With 85 million inhabitants it ranks third among Africa’s most populated countries – behind Nigeria (150 million people) and Egypt (100 million people), while its beer consumption stands at only 4 litres per capita.

But does this really justify offers to the order of almost 20 times profits (EBIT)? These days you can build a new 290,000 hl brewery for probably half the price Heineken is allegedly offering. Read on


Ethiopia – Diageo has a tiger by the tail

So Diageo has made a bid for the Meta Abo brewery on its own. It’s another madcap offer – rumoured to run to USD 150 million, which is way over the top like Heineken’s USD 85 million bid for Bedele Brewery. But the interesting question is not why the world’s number one drinks group and brewer of Guinness beer is prepared to spend so much on a medium-sized brewery in a market where all the global big wigs will be stepping on each others’ toes. The more pertinent issue is: why isn’t Diageo going for Meta Abo in tandem with its Kenyan partner, East-African Breweries (EABL)? Read on


USA – August Busch IV sued over girlfriend’s death

Just as well August Busch IV resigned from AB-InBev’s board. The world’s media is not letting him out of their clutches now that the family of his 27-year-old girlfriend, who died last year of what authorities say was a drug overdose at the mansion of August Busch IV, is suing the Anheuser-Busch heir. According to U.S. media reports, Mr Busch is being accused of carelessness and negligence in the death that produced no criminal charges. Read on


USA – Beer freedom for Texas

The complexities of the Three-Tier System in the U.S. never fail to amaze us at Brauwelt. Here is another maddening anti-competitive regulation. Under Texas law, brewpubs may serve beer or sell it directly to the public for home consumption, but they are not allowed to sell it via distributors or retailers. On the other hand, a brewpub in California isn't subject to Texas restrictions, so it can sell beer on site as well as package it for distribution to other states, including Texas. A Texas brewpub can't do this. So in Texas you have a situation where you can buy beer from a California brewpub at your local shop, but you can’t buy beer from the brewpub down the street. The only place to get a Texas brewpub beer is from the source. Read on

USA - Federal small brewer excise tax bills introduced in Congress

Belgium, the Czech Republic, Germany, the UK, France, Poland: all have progressive duties for beer (with variable thresholds and reductions) which benefit the smaller guys. So why has it taken the U.S. a quarter of a century of craft beer growth to think about alleviating the excise burden for craft brewers? Of course, tax regimes in “Old Europe” don’t mean anything to American politicians. That’s why it’s a brave and laudable move by The Brewers Association (BA), which represents America’s craft brewers, to try to convince their legislators in both Houses of Congress that a change to a graduated beer excise rate is really needed. Read on


Russia – Russia’s Ministry of Finance wants to raise the price of vodka

Wars have started on less. Remember La guerra del fútbol, the four-day war fought by El Salvador and Honduras in 1969 over lost football matches? Should Russia’s Ministry of Finance push ahead with plans to quadruple the price of a half-litre bottle of vodka to over 400 roubles (EUR 10) by 2012 from less than 100 roubles (EUR 2.50) today, there will be a revolution Russia-style: everybody will be heading for their dachas, firing up illegal stills and producing moonshine.

In March 2011 Russia’s Minister of Finance Alexej Kudrin made another attempt to wean his countrymen and -women from vodka while filling up his tax coffers.

The current budget foresees a rise in alcohol taxes by 10 percent as of January 2012. The Minister does not think this is enough. He plans to raise it by 20 percent. In July 2012 there will be another tax hike as there will be in 2014.

All in all, excise on vodka could rise to 900 roubles (EUR 22.50) by 2014, running to a stream of almost EUR 15 billion in government revenues, it was reported.

Russia-watchers doubt that such an exorbitant take hike will ever come into effect. The fact that it is scheduled to become law only AFTER the next parliamentary elections to be held in December 2011 is an indication that the Minister of Finance’s push for it is half-hearted at best.

In the past, the ministry has made several attempts to implement higher taxes on vodka and cigarettes but to no avail. In the end, Russia’s strong alcohol and tobacco lobby always had its way and ambitious goals were trimmed down to very moderate levels.

Regulating the sale of vodka smacks very much of political window-dressing. Last September, Moscow banned the sale of vodka in shops after 10 at night. However, the ban had very little material effect on vodka consumption around the capital as vodka is still freely sold late into the night at restaurants and bars that serve food.

Let’s bear in mind that no Russian government to date has been able to stem the production of moonshine. In 2009, unofficial vodka production was estimated at over 30 percent of total production, according to Synergy, a Russian drinks group.

Moreover, in March 2011 Russian parliamentarians decided to allow alcohol back into the Duma's canteen, five years after drinking was banned in the building, Russian media reported.

Call that taking a tough stance against alcohol abuse?

China - China Resources and SABMiller don’t get Heineken’s stake in Kingway Brewery

Let this be a warning to all armchair strategists: the much discussed tie-up between AB-InBev and SABMiller could run into troubles in China if the latest deal is anything to go by. At the beginning of April 2011, Kingway Brewery announced that its controlling shareholder GDH Ltd has exercised its right to buy the 21.37 percent stake currently held by a Heineken joint venture.

In a filing to the Hong Kong bourse, Kingway said the state-owned GDH, a wholly-owned subsidiary of Guangdong Holdings Ltd, would buy the stake for 1.08 billion yuan (USD 164.94 million), increasing its holding in the Chinese brewer to 73.82 percent. That way Kingway Brewery will remain in Chinese hands. GDH is owned by an investment arm of the Guangdong provincial government. Read on


USA - Fortune Brands buys Skinnygirl RTD brand

Wimmin, stop popping Prozac. There’s an alternative: it isn’t fattening, not even addictive and doesn’t require a prescription. Mother’s little helper is called Skinnygirl, a ready-to-drink (RTD) Margarita cocktail, which sells at a store near you.

In the U.S., RTDs seem to be back in fashion. Especially if they promise the full flavour of a cocktail without putting all those calories on your hips. That makes Skinnygirl particularly appealing to American women, who constantly worry about their looks – if their TV shows are to be believed.

That’s why Fortune Brands, which makes Jim Beam, must be glad they managed to buy the Skinnygirl cocktail brand, created by reality TV star Bethenny Frankel, at the end of March 2011. No terms were disclosed.

Skinnygirl, which was launched in 2009 by Bethenny Frankel, 40, and David Kanbar (whose uncle created Skyy vodka), is currently distributed mainly in New York, New Jersey and Florida. Annual shipments exceed 100,000 nine-litre cases, it was reported. Read on


UK – Rum revolution comes to Sheffield

With a rumoured backing by the Bacardi Company, Inventive Leisure launched its first Cuban-themed rum bar on April Fool’s Day. It was no joke. Inventive Leisure, which has built a chain of 64 Revolution vodka bars across the country since opening its first outlet in Manchester in 1996, is now branching out into rum because they believe that Revolucion de Cuba, as the bar is called, has the potential to see similar growth to the Revolution chain. Nevertheless, any further openings would depend on the success of the launch.

At Inventive Leisure they think that rum has become fashionable again, particularly in the student and young professionals market, with cocktails like the Mojito, Cuba Libre and Caipirinha.Read on


Germany – If sugar is the new tobacco …

why are Bionade’s sales in decline? The lemonade for LOHAS (that’s consumers seeking a Lifestyle based On Health And Sustainability) once proved immensely popular. From its launch in 1995, when it was solely sold in health food shops, the brand grew to become the almost uncontested leader in its “better lemonades” segment. Having grown at a rate of almost 300 percent each year, Bionade sold over 200 million bottles (600,000 hl) in 2007, ranking fourth among Germany’s most popular lemonades – behind Fanta, Sprite and Sinalco. Since 2008 when turnover reached EUR 40 million, sales of the premium-priced lemonade, have been in free fall: by 2010 it had dropped to about 230,000 hl, it was reported. Many wonder: what are the reasons for this decline? Read on

USA – What’s the next Coke?

For the sixth year in a row, total volume of sales for the carbonated soft drinks industry was down in 2010, says Beverage Digest. Fortunately, total moneys made – thanks to higher prices – were up from the previous year. So gloom all around? Not quite. Because Americans are increasingly shifting their preference to diet drinks.

The Coca-Cola Company is still holding on to 42 percent of the domestic market, far outpacing PepsiCo's 29.3 percent and Dr. Pepper Snapple's 16.7 percent. Read on


Australia – Those dastard retailers (oh really?)

For a few days in March 2011 Australia's major brewer, Foster's, stopped delivering its VB, Carlton Draught and Pure Blonde brands to Coles’ First Choice liquor stores and Woolworths’ Dan Murphy's chain after learning that the two big retailers intended to sell them for AUD 28 per carton of 24 bottles. The usual wholesale price of a VB carton is AUD 33, and the usual retail price is AUD 38, it was reported.

As if this was not enough, Foster’s had to send out its troops a few weeks later to buy back heavily discounted wine from Coles’ liquor outlets. Australian media say that Coles was selling Penfolds 389 wine for AUD 37 a bottle or AUD 7 below the AUD 44 wholesale cost. Read on


Australia - Aldi plans to sell booze in NSW
The German discount retailer Aldi has been selling liquor in the state of Victoria for seven years, offering about 70 varieties of non-refrigerated beer, wine and ready-to-drink spirits, most of which are Aldi brand products. In March, it was reported, Aldi applied for the right to sell alcohol in its New South Wales (NSW) stores too, which is its latest attempt to disrupt the Woolworths and Coles grocery and liquor duopoly.

The German retailer confirmed that it had applied to sell liquor in all its 102 NSW stores and had begun the licence application process. Read on


Australia – Foster’s shareholders to vote on the demerger

The Supreme Court of Victoria has ruled that a meeting of shareholders of Foster's Group will take a vote on the proposed demerger of Foster's beer and wine operations. The shareholders meeting will be held in Melbourne on Friday, 29 April 2011. Foster's had said in February that they would proceed with the separation of their beer and wine operations into two separately-listed companies. It has finally been revealed that under the terms of the demerger, shareholders will receive one share in the wine unit, Treasury Wine Estates, for every three Foster's shares.

Foster's Group has been working to split its beer and wine businesses -- calling the former New Foster's and the latter Treasury Wine Estates -- for more than a year, in a move it argues will realise better value for shareholders and probably attract takeover bids. Read on

USA – Craft beer volume up 11 percent in 2010

On 21 March 2011the Brewers Association, the trade association representing the majority of U.S. brewing companies, released 2010 data on the U.S. craft brewing industry. Small and independent craft brewers saw volume increase 11 percent and retail sales dollars increase 12 percent over 2009, representing a growth of over 1.2 million hl.

Beer lovers increased their appreciation for American craft brewers and their beers in 2010,” said Paul Gatza, Director of the Brewers Association.

The Association also reported a growth in the number of U.S. breweries, with eight percent more breweries than the previous year. In 2010, there were 1,759 operating breweries. Craft brewers produced 9.9 million barrels beer (11.6 million hl). Read on


USA – Carlos Brito named one of Barron’s top 30 CEOs

Mr Brito will be pleased. The business magazine Barron’s has named him one of the top 30 CEOs in the world among such notables as the investor Warren Buffet, Steve Jobs (Apple), Peter Löscher (Siemens) and Michael O’Leary (Ryanair). While 18 of the 30 CEOs run U.S.-based outfits, Australia, Ireland, Germany, Japan and several other countries are also represented.

The list was published at the end of March 2011.

It’s the first time Mr Brito is on that list. Barron’s says that “in just six years Carlos Brito has turned a South American brewer into the world's largest beer concern, AB-InBev. He runs it with a lean, flat management structure, with few perks and meritocratic promotion practices that pay little attention to seniority. He also encourages employees to use their imaginations. ‘Dreaming big or small takes the same amount of energy,’ he says.”

Beer Marketer’s Insights, in a delightfully irreverent comment, wrote that they were not sure if many U.S. distributors will agree. “Lots of them find AB in the U.S. increasingly dysfunctional with local employees fearful and/or unable to make decisions, while centralised AB-InBev management comes up with decisions inappropriate for local markets.” But, they concluded, to make it on to Barron’s list was quite an honour for Mr Brito.

USA – August Busch IV does not seek re-election to AB-InBev’s board

Adieu, then, August Busch. At the end of March 2011, AB-InBev said that August Busch IV will step down as a director at AB-InBev in April, which brings the Busch family's formal involvement in the brewing giant to a close.

Mr. Busch was CEO of Anheuser-Busch, when the largest brewer in the U.S. was taken over by InBev for USD 52 billion in 2008. Although he had tried to avoid a takeover, he was named a director of the newly formed company AB-InBev. Even then, many industry observers thought Mr. Busch's appointment to the board was largely ceremonial. Read on

USA – AB-InBev buys interest in Chicago’s craft brewer Goose Island

For the world's number one brewer, AB-InBev, spending USD 39 million on Chicago specialty brewer Goose Island is a joke. But the deal, announced on 28 March 2011, highlights a shift in consumer preferences that matters to the USD 91 billion brewer. In the U.S., sales of mass-market beers have been in decline while those of high-end beers are growing.

For investors in Big Beer, any move to buy more craft brewers won't be a big financial outlay. Anheuser-Busch can easily pay for Goose Island out of its petty cash.

Goose Island's annual production of 150,000 hl beer pales next to AB-InBev’s 348 million hl. However, Goose Island produces only high-end craft beers. While total U.S. beer sales fell about 1 percent in 2010, the craft beer category leaped by some 11 percent. Over at Anheuser, weak U.S. volumes, down 3 percent, drove a sales decline of 1.3 percent last year.

Growth in American mass-market beer sales is expected to lag GDP growth for the next five years, according to industry researcher IBISWorld. Read on  


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