Beer Monopoly




    International Reports







Posted August 2014

USA – Anheuser-Busch not to miss out on Mexican beer bonanza

Corona, Modelo, Tecate, Dos Equis …: nearly 55 percent of all imported lagers in the U.S. are from Mexico. Not wanting to let this opportunity pass, AB-InBev’s U.S. unit Anheuser-Busch (A-B) will import its Mexican brand Montejo to Southwestern U.S. as of September this year, media reported in early August.

This will be the first time the Montejo beer, launched in 1960 in Mérida on the Yucatán peninsula, will leave Mexican territory in search of new markets. These days, Montejo is brewed by Cervecería Modelo, located in Tuxtepec, in the Mexican state of Oaxaca.

AB-InBev bought the rest of Grupo Modelo it did not own in 2013. In order to get anti-trust approval in the U.S., AB-InBev had to relinquish all the Modelo brands previously imported to the U.S. to its previous partner Constellation Brands. Montejo was not part of the deal, which is why it can now be brought to California, Texas, Arizona and New Mexico, where 70 percent of Latinos in the United States live.

Hispanics make up more than a quarter of the U.S. population today. Hispanic foods and beverages were an USD 8 billion market in 2012, according to consumer research firm Packaged Facts. By 2017, that number may reach USD 11 billion.

There's obviously a growing consumer demand for Mexican beers in the U.S., due to demographics, of course, but also to price. Mexican beers tend to be cheaper than other imported beers because import costs are low. It helps that Mexican beers - generally characterised by a light, crisp body and mild taste - have “an aura of vacation and relaxation” that appeals to U.S. consumers, Euromonitor, a market research company says.

A-B does not yet have plans to expand Montejo beyond the Southwestern U.S., where most sales of Mexican imports occur. Which may be just as well. Montejo is entering a crowded marketplace. Competing Mexican brands already command more than 8 percent of overall U.S. beer volume, it was reported. Read on


Russia – Coke’s volumes to fall in Russia

Coca-Cola HBC, the world's number two bottler of Coke products, on 7 August 2014 issued the warning that volumes would fall for the rest of the year, citing a “sudden deterioration” in Russia, its biggest market.

The bottler, which operates in 28 countries in Europe and Nigeria, posted a 6 percent rise in second-quarter profit to EUR 135 million (USD 181 million) from EUR 127 million in the same period a year earlier.

But the company warned that difficult economic and trading conditions had forced it to review its outlook for volumes, and it expected the trend of declining volumes to continue for the rest of the year. Volumes fell 3 percent in the first half.

In Russia, volumes declined 5 percent during the second quarter, leading to a spill of red ink. Coca-Cola HBC said the escalation of the crisis in Russia and Ukraine had affected consumer spending in the region.

Already in May, two fruit juice plants had to be shut down because of declining demand. The plants, located in Moscow and Novosibirsk, belong to The Coca-Cola Company’s Russian subsidiary Nidan, which had been acquired by Coke in 2010.


Russia – Pepsi responds to Russian sanctions

As Russia thumps Western sanctions, it has introduced a one-year ban on agricultural and food product imports from the countries that she no longer considers her friends. Moscow has already imposed bans on Ukrainian juice and dairy produce, Polish apples and Australian beef and has said it might target Greek fruits and U.S. poultry.

PepsiCo, because of its Ukrainian subsidiary, is among the companies that might suffer from this ban. On 8 August 2014, it told Russian media that all of its products sold in Russia are made in Russia. Read on


Australia – Foster’s former wine group now on the market

Having fought off an AUD 4.70 per share bid from private equity outfit KKR earlier this year, Treasury Wine Estates probably thought they were safe from a takeover. Well, that pious hope only lasted until early August. The new AUD 5.20 offer from KKR and its partner Rhone Capital is large enough to force Treasury’s board to the negotiating table.

Treasury is the world’s largest listed wine company. Home to more than 80 brands sold worldwide, Treasury has for years lured suitors - even before its 2011 spinoff from Australian brewer Foster’s Group.

The revised offer values Treasury at about AUD 3.7 billion (USD 3.4 billion), which is about 34 times Treasury’s 2013 profits (EBITDA) and about 14 times its estimated 2014 EBITDA.

The latter figure matches the median EBITDA multiple in wine and spirits deals since 2004.

Media have speculated that Treasury’s board would have clearly loved its management team to have the opportunity to execute its own turnaround strategy for the company, but the reality is that shareholders have lost patience with internal attempts to revive Treasury’s earnings performance.

A succession of chief executives has failed to get traction and succeeded only in disappointing the market. All of Treasury’s CEOs implored investors to look at the longer term picture. This is not surprising, given that wine making is an agricultural business which has long-term horizons for performance and plenty of volatility along the way, observers say.

Thus, Treasury is the prime example as to why wine companies do not make for listed companies. Wine’s long-term vision does not square with the stock markets’ short-term focus on profits. Read on


Australia - Coopers says it's worth AUD 500 million

Australia’s third-largest brewer, Coopers Brewery, has valued itself at around AUD 500 million (USD 464 million) as it prepares to undertake another share buyback. Media report that shares in the company are worth AUD 357 each. Not bad for a brewer that sells around 750,000 hl beer.

This puts the value of the business AUD 80 million higher than was offered by the Australian brewing giant Lion in a bitter takeover battle that ended in 2005 when family shareholders voted against selling out.

That offer of AUD 310 per share included a handsome takeover premium and valued Coopers at the time at AUD 420 million.

Coopers’ Managing Director Tim Cooper confirmed recently that Coopers’ shares had been valued at AUD 357 each in a dividend re-investment plan and share purchase plan undertaken by the brewer in June.

Coopers is an unlisted public company and Dr Cooper said subject to board approval there would be another share buyback undertaken in February and March 2015. Read on


USA - Alms for the poor? The moralistic debate over crowdfunding breweries

You have to give it to the Americans: they were the first to have moved the regulars’ table with its low-hitting talk from the pub to the internet. Or how else to explain the recent electronic squabbling over Stone Brewery’s crowdfunding initiative?

In July, California-based Stone announced plans to build new breweries on the U.S. East Coast and in Berlin. This news has been widely reported on both the beer and business sites on the internet. With at least USD 85 million dollars needed for the new expansions, it was a little surprising to see Stone launch an Indiegogo campaign to raise USD 1 million of the total cost through crowdfunding. Stone is admirably clear that the new breweries will get built regardless. A mere million is only about one percent of the total they are going to spend on the two-headed expansion.

If I were unkind, I would call “crowdfunding” the “new begging”. It basically works along the same principles. Except that in the case of Stone, you will get a special edition beer and not just an e-card saying “thanks” if you donate.

Crowdfunding seems to be a popular means these days to raise money – not from banks but from the general public: from people like you and me. On the internet site Kickstarter, which is devoted to this sort of soliciting, there have been nearly 300 brewery projects advertised since 2011.

The remarkable thing is that of the 300 crowdfunding campaigns on Kickstarter one out of two proved successful. According to my count, only 15 were cancelled before completion, while 140 never reached their target.

A quick look at those projects reveals that their targets range from several thousand dollars to about USD 50,000. Some try to get USD 5,000 to build a tasting room, others want USD 25,000 to start a brewery, while others again look for USD 50,000 to buy equipment for a brewery. There is usually some kind of low-end bauble for reward: stickers, bottle-openers, coasters, t-shirts and the like, all staggered in value according to how much you donate.

I have no problem with electronic begging. If people want to give their money to these undertakings – fine by me.

But, whoa, this view is not shared by everyone. Read on


USA – Craft beer sales rose 18 percent during first six months

This news will make some chew their hankies. Small and independent craft brewers enjoyed continued growth in the first half of 2014, according to new mid-year data released by the Brewers Association (BA). U.S. craft beer production volume increased 18 percent during the first half of the year, while overall beer sales are estimated to have declined 0.5 percent.

From January through the end of June 2014, approximately 10.6 million barrels of beer (12.4 million hl) were sold by craft brewers, compared with 9.0 million barrels during the first half of 2013.

The 18 percent growth rate is based on the tweaked craft brewer definition and derived from comparable barrel total from the first half of 2013. But even so it’s impressive.

In February 2014, the Brewers Association Board of Directors approved changes to the definition of a craft brewer. It now reads: An American craft brewer is small (producing less than 6 million barrels of beer), independent (Big Brewers must have less than a 25 percent stake in it) and – here it comes – “traditional”. Whereas before “traditional” meant that craft beers had to be all-malt, the BA’s board decided to soften its stance against the use of rice and corn as adjuncts to admit the three oldest U.S. brewers August Schell, Straub and Yuengling.

“The revised definition [of “traditional”] provides room for the innovative capabilities of craft brewers to develop new beer styles and be creative within existing beer styles,” Gary Fish, Chair of the BA Board of Directors said at the time.

As of 30 June 2014, there were 3,040 breweries operating in the U.S., 99 percent of which were small and independent craft breweries. Additionally, there were 1,929 breweries in various stages of planning.


Australia – SABMiller still struggling in Australia with beer

In its first quarter trading update published on 24 July 2014, SABMiller said that sales at its Australian unit CUB fell by 6 percent, while volumes slipped by 3 percent.

Only a week later, on 31 July, SABMiller announced that for “health and personal reasons”, the SABMiller veteran Peter McLoughlin has decided to step down from his role as Marketing Director and to leave CUB. This eyebrow-raising news followed the notice of quite a few redundancies on the previous day.

Cost saving was quoted in view of falling profits. Many say there will be more haemorrhage to come.

Already in May this year SABMiller closed the Cascade Maltings - the maltster reportedly finishes up this week. Besides, they have also recently shut down the hop extract plant, which insiders say, was an intrinsic component of Foster’s beer flavour. From what we have heard, there is no longer any product innovation at CUB.

SABMiller blamed “continuing category pressure” and “competitive intensity”. That’s nothing new. SABMiller quoted the same reasons to explain why lager volumes slipped at CUB during the last full year. Read on


Russia – X-Files star David Duchovny criticised for appearing in Russian beer advert

Call it bad timing. David Duchovny's latest role is stirring up more intrigue than any episode of “The X-Files”. The U.S. actor plays himself in a beer ad for AB-InBev’s brand Sibirskaya Korona (“Sibirian Crown”), imagining how proud he would be if he were Russian. The ad was first aired on YouTube on 25 July 2014, only days after the downing of flight MH17 in the Ukraine.

Mr Duchovny says in the video: “And I found out that being Russian, I'd have many things to be proud of.”

Western media in unison slammed Mr Duchovny for appearing in this ad, considering the international condemnation of Russia after a Malaysian airliner went down over eastern Ukraine, killing all people on board.

Mr Duchovny says at the start of the 2½-minute video: “This is the country [the U.S.] where I was born and raised. “But there is another country, where I got my family name from. And sometimes I wonder: What if things turned out differently? What if I were Russian?”

Incidentally, Mr Duchovny's family emigrated from what is now the Ukraine to the U.S., not from Russia. On his paternal side Mr Duchovny is Jewish from a family that previously lived in Ukraine and Poland. His mother hailed from Scotland, according to the UK’s Daily Mail newspaper.

Whether Mr Duchovny’s support of Sibirskaya Korona will save the Russian beer market from its decline is doubtful.

AB-InBev reported on 31 July 2014 that during the April-to-June quarter 2014 its beer sales in Russia dropped by about 10 percent. AB-InBev is ranked second in Russia with a market share of about 14 percent.

The Russian beer market is estimated to have declined 5 percent during the first six months this year. Read on


UK - Annual ‘Beer Day Britain’ launched

It took a trio of female beer experts to launch Beer Day Britain, which is hoped to become an annual festivity of the British beer industry starting in 2015. On 15 June next year, Beer Day Britain will celebrate all that is great about British beer.

The initiative is spearheaded by 2014’s Beer Sommelier of the Year, Jane Peyton, as well as Sophie de Ronde, Head Brewer at Brentwood Brewery, and Sara Barton, founder of and Head Brewer of Brewsters’ Brewing Company and former British Brewer of the Year.

CAMRA, The British Beer and Pub Association, The Society of Independent Brewers, Casque Marque, Let There Be Beer, and The Independent Family Brewers of Britain have all signed up to support the initiative, media reported on 30 July 2014. Read on



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