Beer Monopoly




    International Reports







Posted April 2012

Dominican Republic - AB-InBev in the lead to acquire CND?

Uh-oh, the rumour mill is spinning wildly out of control. Two weeks ago, Heineken was supposedly the forerunner to buy Cerveceria Nacional Dominicana (CND), this week (16 April 2012) it's AB-InBev. And by the time you are reading this, it could be someone else altogether. What is more, the asking price for CND seems to have almost doubled in the course of a few weeks to USD 2.5 billion - and that for a business that in 2010 only had an EBITDA of USD 120 million.

AB-InBev's Latin American unit AmBev has been operating in the Dominican Republic, a country of 9.6 million people, since 2004. It is believed that AB-InBev and CND's majority owner, the cigarette manufacturer Grupo León Jimenes, which owns 84 percent of CND, are working on a complex deal which would still give AmBev control of CND.

What CND's other bedfellow, Heineken, thinks of such an arrangement remains to be seen. Heineken owns 9 percent of CND. Read on


Austria - Death of Thai tycoon sparks bullish worries for Red Bull

Not sure if Red Bull gives wings to people, but lots of people give wings to Red Bull's turnover. Publishing its 2011 results in March 2011, Red Bull said a total of 4.6 billion cans of the energy drink were sold worldwide in 2011, representing an increase of 11.4 percent over 2010. Turnover rose 12.4 percent to EUR 4.3 billion year-on-year.

The privately-owned company does not release any profit figures. All Red Bull would say was that sales had gone up in key markets like the U.S. (+11%) and Germany (+10%), and in markets like Turkey (+86%), Japan (+62%), France (+35%) and Scandinavia (+34%). Red Bull's products are sold in over 160 countries.

Although sales of Red Bull’s energy drink have soared, branching out into other beverage segments has proven difficult. Last year, the company decided to stop selling Simply Cola – a soft drink free from artificial flavours and preservatives – in the United States. The firm did not explain the move but American media reported at the time that sales of the drink were devastatingly low ever since it was placed on shop shelves.

Already in 2010, the German business publication Manager Magazin had wondered what would become of the Red Bull company, once the CEO Dietrich Mateschitz, 68, retires or will have to relinquish the day-to-day running of Red Bull.

It argued that Mr Mateschitz' partner, the family of Thai patriarch Chaleo Yoovidhya, who invented Red Bull, might lay claim to his role. Until now the Thais have not taken on operational roles at Red Bull - not least because of the profound cultural differences between their traditional Thai family business and the formidable Austrian marketing machine.

But speculations have swirled around again as to who will run Red Bull in the future following the death of Mr Yoovidhya on 17 March 2012, aged 89. Mr Yoovidhya was married twice and - reportedly - has eleven children. Usually rather media-shy, Mr Mateschitz felt compelled to tell the Austrian news agency APA that Mr Yoovidhya's passing will not impact the company at all.

The Thai tycoon, whose personal fortune Forbes magazine put at USD 5 billion, was the low-key partner behind the iconic energy drink Red Bull. He developed the drink's formula while the Austrian Mateschitz, whom he partnered in 1984, created the marketing buzz. Like Mr Mateschitz, Mr Yoovidhya owned 49 percent of the company. His son Chalerm has 2 percent.

In its obituary The New York Times newspaper on 18 March 2012 wrote that with little formal education, Mr Yoovidhya founded a small pharmaceutical company, TC Pharmaceutical Industries, in the early 1960s. He started producing antibiotics but later turned to concocting a beverage that was loaded with caffeine, as well as an amino acid called taurine and a carbohydrate called glucuronolactone.

Branded "Krathing Daeng" — “red bull” in Thai — it was marketed to laborers and truckers in need of a boost. Only Mr Mateschitz saw the product's potential and, having coined the slogan “Red Bull gives you wings”, he succeeded in taking the drink international.


Austria - Stamping out nefarious practices

For more than ten years, Austria's biggest brewers refused to supply independent wholesalers with draught beer. An Austrian court, in early March 2012, decided that this was unlawful and moreover reeked of price fixing - despite the brewers' claims that hygiene and beer quality would have been at risk had the brewers not supplied the publicans directly.

The court would have none of this and sentenced the brewers Ottakringer, Stiegl and Brau Union to EUR 1.1 million in fines. Heineken-owned Brau Union is to pay EUR 750.000, Ottakringer EUR 190.000 and Stiegl EUR 140.000.

It's consoling to see that some are willing to stop the rot and even do something about it.

Well, in this case, the court got some help from a whistleblower, who was revealed by the Austrian media to be Brau Union. It's more than a juicy tidbit that Brau Union happens to be Austria's major brewer with brands like Zipfer, Gösser and Kaiser and a market share of 50 percent. It would have benefitted most from the brewers' gentlemen agreement. Read on


United Kingdom - Beer leads to ... whey hey hey, banned Budweiser commercial implies

The puritans on the board of the Advertising Standards Authority lack any sense of irony, or on 10 April 2012 they would not have banned a radio commercial for Budweiser beer, after a complaint that it suggested that men who drink beer on a night on the town would be more likely to "pull" (ie attract the opposite sex) than .. than ... sadly the commercial would not say.

According to a transcript leaked to British media, the offensive commercial featured an American football coach giving a motivational pep talk before a lads’ night out. Read on


Kenya - Heineken opens regional office in Nairobi

SABMiller and EABL will not exactly be trembling in their shoes now that Heineken has opened a regional headquarter in Kenya's capital, as local media reported in March 2012. But it shows that global brewers are taking the East African market serious.

The Dutch brewer supplies its Heineken beer to the Kenyan market through a local distributor, Maxam Ltd, which is associated with businessman Ngugi Kiuna who has held the franchise since 2007.

Heineken's regional office in Nairobi will be headed by Koen Morshuis, General Manager East Africa, which underlines Heineken's intention to get a larger share of the East African beer market, albeit through imports only.

Mr Morshuis has moved to Nairobi from Vienna where he was Heineken’s marketing manager for central and eastern Europe.

Also in March 2012, Heineken announced it would open an office in Tanzania to help push its brands into the market, which is dominated by East Africa Breweries Limited (EABL) and SABMiller. Read on


Russia - Independent directors - aren't they a pain in the neck?

Why does Danish brewer Carlsberg plan to spend up to USD 1.2 billion to buy the 15 percent of Russia's Baltika brewery that it does not already own? Anybody in a rush? And why did it promise to pay so much (the maximum 1,550 rubles/USD 52 per share represent a 25 percent premium on the current stock price), although everyone and his dog know that the Russian beer market spells trouble?

Beer consumption dropped 10 million hl between 2007 and 2010 as Russia was hit by the global economic crisis and a crisis of its own making, the 200 percent tax increase on beer in 2010. Last year volumes declined another 3 percent. And the outlook isn't all that good as more restrictions on the sale of beer will come into effect in 2013.

Call it unfortunate timing that Carlsberg's announcement on 20 February 2012 to buy out Baltika's shareholders came when the Danish brewer reported a drop in full-year profits, due to weakness in its eastern European operations, aka Russia.

Carlsberg is dependent upon Baltika performing well. In 2011, Baltika contributed about 40 percent to Carlsberg’s beer volume sales and 45 percent to its EBIT. Before the crises hit, Baltika's EBIT contribution stood at 52 percent in 2009.

Compounding Carlsberg's problems, Baltika's market share in Russia has fallen 2.5 percentage points to about 37 percent since 2008. Hardly surprising, last year Baltika's CEO was forced to fall into his sword and remove himself to Baltika's supervisory board. Read on

Austria - 1516 ... and all that

Visiting Vienna will make Munich beer lovers eat out their hearts. How come Munich sports only three brewpubs whereas Austria's capital, which at 1.7 million inhabitants is hardly bigger than Munich, has so many brewpubs? By Conrad Seidl's count "about ten" - depending on who's actively brewing or just using the brewing kit for decor. Conrad is the man to know because the Viennese beer writer and man- about-town publishes an annual beer guide of Austria's best pubs and bars.

I am not sure why people go to brewpubs. That means I have never actively conducted an impromptu poll outside a brewpub. Still, I frequently wonder: do people go there because they like the restaurant concept? Or do they specifically seek out the beers?

When visiting the 1516 recently I was forced to reconsider my either-or-classification. It was a mid-week evening and the place was heaving. Oh yes, and English was the lingua franca.

The 1516, like all successful brewpubs, is probably a bit of both. It is a place of pilgrimage for beer aficionados who enjoy its American-style beers. And it is the home away from home for homesick tourists and the new class of about 10,000 itinerant professionals who work at Vienna's many international agencies - the United Nations and OPEC, to name but two. Above all, it's a very affordable place to eat and drink, which may be the reason why lots of people come there as soon as its doors open at 10 in the morning.

It also helps that 1516 is very centrally located, just a few hundred steps away from Vienna's main drag, the pedestrianised Kärntner Strasse, and that Austria has not yet introduced a ban on smoking in bars and restaurants. The 1516 has two bars on two floors, one for smokers and one for non-smokers, which is a good thing as it keeps the militant non-smokers at a safe distance. I will not deal with the smoking/non-smoking issue here at length. Suffice to say that Austria's bars and restaurants will take a massive cut in business and that even highly profitable ones, like the 1516 with a total staff of about 50, will suffer should any future Austrian government bring in anti-smoking legislation.

The name - 1516 - will ring a bell with brewers. 1516 was the year when the Bavarian Reinheitsgebot was forced upon unsuspecting brewers. I don't think that the regulars at the 1516 get the reference or, if they do, that they care. To them, the 1516 is an American-style brewpub, where they are addressed in English by the friendly staff (number one reason for visiting)... and where they serve different beers with distinct hoppy notes (not sure most punters would notice). The beers at the 1516 may be Reinheitsgebot, like the unfiltered 1516 lager, or not, as in the case of Eejit's oatmeal stout, but I firmly believe that to the majority of visitors the whole issue is really beside the point.

Like many Vienna brewpubs, the 1516 has been going for quite a while. Since 1999, to be precise. It's owned by Horst Asanger, a former ice hockey player. Horst is a very nice and quiet person and prefers to run things unobtrusively and efficiently from behind the bar. He is not one for the limelight or for giving interviews to journalists. That's what he got Conrad for, who has been involved with the 1516 right from the start. Which is probably a good thing as Conrad would make a good brewer and an even better beer marketer if he did not already have a day-job as a political editor for Der Standard.

The other thing about the 1516 is that, thanks to Conrad's outgoing nature and Hans' generosity, it has become part of a network of microbrewers from around the world, who always seem to end up in the 1516 when in town. The way to honour these friendships is to brew each others' beers, it seems. 1516 brews several special beers whose recipes have been developed by others, like, for example, the Victory Hop Devil IPA which they brew under licence (I am not sure if this is the term among friends) from the American micro Victory Brewing Company in Downingtown near Philadelphia.

Whether you are interested in tasting very flavoursome Austrian beers or just need a rest from the wife's power shopping - if in Vienna, make sure to visit the 1516. It will be time well-worth wasted.

Dominican Republic –

Heineken rumoured to take over Cerveceria Nacional Dominicana

Neither AB-InBev nor Heineken has confirmed it, but a persistent rumour in the Caribbean has it that the two brewers are in a USD 1.5 billion race to buy the Dominican Republic's biggest brewer Cerveceria Nacional Dominicana (CND).

The brewer of Presidente beer, which is available in many other Caribbean islands, has allegedly been put up for sale by the nation's biggest company, the tobacco manufacturer Grupo Leon Jimenes, which holds a majority stake in CND. In 2010, CND had a turnover of USD 455 million and an EBITDA of 120 million according to company data.

Heineken already owns a 9.3 percent stake in CND. Acquiring a majority stake in CND would seem like a logical thing to do, given that in December last year Heineken increased its stake in neighbouring brewer Brasserie Nationale d'Haiti (Brana) to 95 percent from 22.5 percent. Read on


Czech Republic – The sober view on Molson Coors’ heady USD 3.5 billion deal

It’s the wrong sort of emerging market and it’s the wrong sort of price. Molson Coors' multi-billion foray into central Europe with the acquisition of Czech Republic-based StarBev, the brewer of Staropramen beer, which was announced on 3 April 2012, left investors more than underwhelmed. On the day the deal became public, the U.S.-Canadian beer group’s stock dropped 5 percent.

StarBev, the former AB-InBev unit in central Europe (13 million hl), was sold by CVC, a private equity firm, after merely holding it for three years. The purchase price represents about an 11x EBITDA multiple. That’s less than what SABMiller paid for Foster’s but still a lot, as for Molson Coors the acquisition may turn out to be light on revenue growth. Even management has already admitted that cost savings will be minimal, at best. Read on

USA – AB-InBev plans marketing blitz for nineteen new products this year

After three years of straight volume declines, AB-InBev thinks it’s got a plan. As the President of North American operations, the Brazilian-born Luiz Edmond, told the Wall Street Journal on 29 March 2012, the brewer will produce more beers this year, while leaning on its distributors not to carry the competition’s beers.

Already in November 2011, AB-InBev informed the more than 500 wholesalers who distribute their products across the U.S. that it wanted them to sell fewer rival brews. Because of the three tier system in the U.S., brewers and distillers cannot sell alcohol directly to the retailers but are required to distribute it through intermediaries.

The toughening rhetoric has made a growing number of wholesalers "anxious''. They probably remember the old ways of Anheuser-Busch. In 1996 Anheuser-Busch launched a “100 percent share of mind” programme, which included some incentives to distributors so that they dropped non-A-B brands and concentrated on only the important A-B brands. The message to wholesalers in those days was: “We want their efforts and focus aligned with ours.”

Mr Edmund, in the interview with the Wall Street Journal, calls on the wholesalers’ loyalty. Wholesalers will have to decide which brewer they want to partner with most closely. "I'm loyal to my wholesalers. Why would I not expect the same loyalty to me?'' Mr Edmund was quoted as saying. Read on

Australia – Time to define “cider”

Australia seems to be in the middle of a cider boom. Walk into any big-name liquor store and you'll find shelves, once packed with bag-in-the-box wines, groaning under the weight of apple and pear cider bottles. One liquor store your correspondent visited on a recent trip to Australia claimed to stock 70 different ciders from all over the globe. Dozens of shiny brands from Australia and New Zealand, from Ireland and Sweden, were jostling for the consumers’ attention, alongside funky French farmhouse cidre and cloudy British scrumpy from the West Country.

How times have changed. A decade ago, it was hard to find any good cider in Australia - especially good imported cider. Now ciders represent 2 percent of total alcohol sales in the off-premise sector, having grown 14 percent per annum over the period 2005 to 2010.

Drinking cider in Australia can turn into an expensive affliction. Rekorderlig from Sweden costs over AUD 80 (EUR 63) per carton of 24 bottles or AUD 10 per pint (EUR 8.0) in a pub. That’s what many Australians would call “expensive” or even a “rip off”, particularly if they knew that in high-excise Sweden a pint of Rekorderlig will only cost them EUR 6.0.

Compare that to the price of a mainstream Australian beer brand: a similar-sized carton of any mainstream beer will set you back less than AUD 40.

Apparently, younger Australian consumers lace their cider with a shot of liqueur or brandy. Many will think this custom vile, unless they know how lacking in flavour many ciders are.

Brauwelt’s Australian reporter John Harvey and I conducted a cider tasting of twelve randomly purchased domestic and imported ciders last month and here are our findings:

Several sported a colour which was not inviting. Many showed poor noses, especially those which claimed to be pear ciders (or perry, to be precise) and had no pear notes whatsoever. Using a 20 points score, most ciders only achieved 10 points or less. Best performed the aforementioned Rekorderlig cider from Sweden and 5 Seeds Clean Crisp Cider (by Tooheys/Lion) at 16 points each.

What is really annoying is that consumers of cider often aren’t told how the ciders have been made. As there is no Australian legislation defining what actually constitutes cider, we often could not find out from studying the label if the ciders we tasted had been made from crushed apples, or if they had been blended (ahem), using an alcohol base and added flavours.

Rekorderlig, for example, states on the label that the cider “is made from the purest Swedish spring water and is bursting with deliciously ripe summer apple flavours.” It’s a nice product but not what we would have called a cider.

Our personal evaluation suggests that tighter regulations, leading to more informative labelling, could be beneficial for consumers.

For example, it would be good to know the types and sources of juices used: natural juice, concentrated juice or reconstituted juice.

Many orange juice products currently marketed in Australia carry labels which indicate the types and sources of the juices used … similar labelling for cider and perry would certainly be useful.


Czech Republic - MolsonCoors will buy StarBev

So all the pundits got it wrong. Neither Asahi nor another private equity firm were the forerunners in acquiring StarBev. AB-InBev's former central European unit went to Molson Coors. The brewer said on 3 April 2012 that it will buy StarBev from private equity fund CVC Capital Partners for EUR 2.65 billion (USD 3.52 billion) to expand in central and eastern Europe. Read on


Czech Republic - Back off from Budweiser, PM tells Minister for Agriculture

With the ruling centre-right party ODS lurching from scandal to scandal, the Czech Prime Minister Petr Nečas apparently did not want to open another battlefield with brewer Budweiser Budvar. In mid-March 2012 he finally had enough of his Minister for Agriculture's macho posturing and told him, probably in not so many words, to leave Budweiser Budvar alone.

More specifically, he ordered the Minister, Petr Bendl (ODS), to replace his cronies on the state-owned brewer's supervisory board with experts and cancel Budweiser Budvar's controversial audit by HZ Consult (as reported by Brauwelt).

The Prime Minister took it upon himself to announce on 14 March 2012 that there will be changes at the brewery. “Yes, there will be a restructuring of Budvar’s supervisory board. It will be smaller and there will be personnel changes, whereby experts close to the National Economic Advisory Council to the Government will be appointed,” Mr Nečas was quoted as saying.

Earlier this year, Mr Bendl appointed his personal advisor, the lawyer Tomáš Jindra, to Budvar's board. Mr Jindra later acted on the Minister's behalf when he asked for copies of the brewery's accounts, which were denied to him by Budějovický Budvar’s director Jiří Boček, it was reported.

Media reports at the time hinted that Mr Bendl was looking for an excuse to sack Mr Boček from the brewery and privatise Budvar - but not before securing a cut for himself and his buddies.

All these plans are off - for the time being at least. But to many people in the Czech Republic, the attempted raid on Budweiser Budvar underlines what their country suffers from: namely politically malleable state agencies, greedy politicians, over-mighty businesses and a culture of impunity (The Economist newspaper).

Incidentally, the week after the PM finally managed to draw a line under the Budweiser affair, the Czech daily MF Dnes published wiretapping records of five-year old phone calls between the then-Prague mayor Pavel Bém (ODS) and the influential lobbyist Roman Janoušek. They discussed, apparently improperly, sales of city and state property and office appointments. The story immediately became a major political scandal, as it revealed the degree of the lobbyist's informal influence over the Prague City Hall's decision-making.

The provenance of the tapes has caused a separate scandal. Mf Dnes says the tapes were originally the work of the country’s security service and were leaked to a private company, then owned by a leading politician in another coalition party.

As if this wasn't bad enough, only days after the wiretapping story had made headlines, Mr Janoušek was in for more trouble following a traffic accident on 23 March 2012. Newspapers reported that he crashed his Porsche into another car and ran over its driver as she tried to stop him from fleeing. They also say he was drunk. Strangely enough, Mr Janousek was not arrested by the police after he was detained in a park, apparently doing a runner.

Looks like the Prime Minister will have his hands full for some time if he wants to clean up his party's corruption-tainted image. Budweiser Budvar should use this reprieve well.


Australia - More brands to leave Foster's

It's like a mass mutiny. First Stella, then Asahi and Corona, now Carlsberg. One by one, Foster's is being deserted by foreign brand owners. The latest ones to leave the Foster's stable are Carlsberg and Kronenbourg, both owned by the Danish Carlsberg Group.

In 2007 Carlsberg and Foster's signed a licensing agreement for the production and distribution of both the Carlsberg and Tuborg brands, which previously had been with Independent Distillers, a beverage company now owned by Asahi. The agreement between Foster's and Carlsberg was renewed in December 2010 and called "long-term" (What is long-term? Two years and a bit?). Read on


Belgium - The outrage of the month: Mr Brito's EUR 133 million super bonus

As could be expected, many on the bloggosphere screamed "à la lanterne" when an article appeared in the Belgian magazine Trends on 9 March 2012 which said that AB-InBev's CEO Carlos Brito was entitled to a super bonus of EUR 133 million. What had Mr Brito done to earn this? Bring down debt two years ahead of target that had been piled up following the acquisition of Anheuser-Busch.

Now, that's hardly news. Readers have known for years that executive options totalling about EUR 1 billion were given to CEO Carlos Brito and 39 AB-InBev executives provided they would cut debt to a set target.

What makes this scheme unusual is that the bonus was tied to a single criterion, a debt reduction target, and not to a host of criteria. But remember, the bonus was awarded at a time when the world was facing a severe financial crisis. And special circumstances require special measures. Read on

India - Heineken rumoured to be negotiating a further stake in United Breweries’

What did I argue a few weeks ago - that Heineken should make the UB Group's Chairman, Vijay Mallya, an offer he could not refuse and obtain majority control of United Breweries - now that Mr Mallya is struggling to prevent his ailing airline Kingfisher from getting grounded for good. So, lo and behold, what did several media report at the end of March 2012? That UB Group’s chairman wants to sell a 12 to 13 percent stake in United Breweries to Heineken, which would raise Heineken's stake to just over 50 percent from currently 37.5 percent.

According to sources, Heineken is expected to pay about EUR 250 million for the 12 to 13 percent stake. Negotiations are said to be in an “advanced phase”.

That's an obscene amount of money for such a small stake given that India's total beer profit pool (measured in EBIT) amounts to merely EUR 28 million. That's according to Heineken. Read on

UK - PM Cameron wants to introduce floor price for alcohol

In an effort to clamp down on binge drinking, the Prime Minister has radical plans. Taking his lead from Scotland, whose parliament voted on 14 March 2012 to introduce a minimum price per unit of alcohol as of next year, David Cameron, on 23 March 2012, proposed the same for England and Wales.

Mr Cameron favours a minimum price of GBP 0.40 (EUR 0.48) per unit of alcohol, which equals a small glass a wine. That would affect nearly half of all alcohol on sale, some experts think. Read on



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