Beer Monopoly




    International Reports







Posted August 2012

Singapore – Heineken faces a new roadblock in its APB takeover bid

In Amsterdam they will be scratching their heads. Only days after Heineken’s takeover offer for Asia Pacific Breweries (APB), Kindest Place, a company controlled by Thai billionaire Charoen Sirivadhanabhakdi’s son-in-law, raised the stakes on 6 August 2012 by offering to buy the 7.3 percent of APB owned directly by Fraser & Neave (as opposed to shares owned in the joint venture with Heineken).

Kindest Place offered 55 Singapore dollars apiece for the stake, which is 10 percent more than Heineken's 50 Singapore dollars (USD 40) offer for Fraser & Neave’s entire APB holding.

On 3 August 2012 the board of Fraser & Neave had recommended to shareholders that they should sell their APB shares (direct and indirect) to Heineken. Read on

South Africa - Lawmakers target alcohol as public health problem

South Africa is crafting a new law to restrict alcohol advertising, raise the minimum drinking age to 21 from 18 and clamp down on drink driving, media reported in August 2012.The bill would also propose warning labels on alcohol containers, raising taxes and stricter licensing laws for alcohol outlets.

The bill will be discussed in South Africa's cabinet in the next few weeks before its release for public comment.

Politicians from South Africa to Kenya are under pressure to do something about a problem that is adding to Africa's burden of HIV, birth defects, road accidents and violent crime.

According to reports, South Africa has the world's highest measured rate of Foetal Alcohol Syndrome, caused by mothers who are binge drinking during pregnancy. In some towns in the Cape Town region, ten percent of children have the condition, which causes learning difficulties and stunts growth. Read on


USA – Craft brewers report growth

On 6 August 2012, the Brewers Association (BA), the trade association representing the majority of U.S. brewing companies, released strong mid-year numbers for America’s small and independent craft brewers. Dollar sales were up 14 percent in the first half of 2012, while volume of craft brewed beer sold jumped 12 percent during that same time period, compared with the same period last year, says the BA. Read on


Russia – AB-InBev shuts down one of its nine Russian breweries

AB-InBev intends to close its Kursk brewery, located about 500 km south of Moscow, in an effort to reduce costs, SUN InBev, the brewer’s Russian unit said in early August 2012. With Russia’s beer consumption in steep decline, the Kursk brewery's output fell 30 percent in 2011. Following its shut down, production will shift to other sites. From the plant's existing 275 staff, only 50 are expected to remain with the company. The Kursk brewery has a capacity of 1 million hl.


Australia – Foster’ to axe jobs

It was to be expected. With the loss of some licensed brands like Stella Artois and Carlsberg, Foster’s owner SABMiller took a long hard look at its production site at Abbotsford near Melbourne and decided to shut down one of its seven production lines by October this year. This will lead to loss of 33 jobs, hopefully through voluntary redundancies. Read on


Singapore – Heineken closer to deal with Fraser & Neave

Phew – no bidding war yet. After only two weeks of deliberations, on 3 August 2012 Fraser & Neave’s board of directors recommended Heineken’s USD 4.1 billion offer for its 40 percent stake in Asia Pacific Breweries (APB) to shareholders, the Amsterdam-based brewer said in a statement. Heineken already owns a 42 percent stake in APB.

Heineken was pushed into action to seek full control of Singapore-based APB following Thai Beverage’s bid for a 22 percent stake in Fraser & Neave (F&N) earlier in July. Thai Beverage, the brewer of Chang beer, is controlled by Thai billionaire Charoen Sirivadhanabhakdi. At the same time, a company owned by his son-in-law also acquired about 8.4 percent of APB, it was reported.

Analysts were relieved that Heineken was not forced to up its initial offer, which many believed was already very fair. Many had expected Heineken to raise its offer to secure control of APB, with which it has been involved since 1931 and through which it brews and distributes its brands in southeast Asia. Read on


Russia - Oasis right in the heart of action

Why would anybody want to build a new brewery in Kazakhstan? It’s not a terribly fair question because the question is loaded. It implies that Kazakhstan, a huge country south of Russia, is a somewhat peculiar market. Well, it is. Larger than Western Europe, it’s home to only 15 million people. Think Berlin - Paris and hardly anybody in between. Not good for shunting beer around. If you pardon the comparison, Kazakhstan is a bit like an island market in terms of brewers’ profits. Alright if you’ve got a monopoly. So-so if it’s a duopoly. And truly, shockingly bad if there are several players in the same field. Already, beer consumption stands somewhere between 30 and 40 litres per capita. Sorry, market researchers are a bit vague here. Whatever the exact figure, it would still be ok for an emerging market. It would be even better, nay spectacularly high, for a predominantly Muslim one, which is what Kazakhstan is.

But how much higher can beer consumption rise? In Turkey, another Muslim country, beer consumption is way below 20 litres per capita. And this is not for brewers’ lack of wanting or trying.

Which brings me back to my initial question: why would anybody want to build a new brewery in Kazakhstan? I think it becomes a slightly fairer question if you take into consideration that two long-established players have already cornered the beer market: Turkey’s Efes and Carlsberg. Together they allegedly control 86 percent of beer production which stood at 4.25 million hl in 2011, according to the recent Barth Report. Carlsberg has one brewery while Efes has three. Efes’ webpage curtly says: “For the present moment the company owns 2 breweries in Almaty region and [one in] Karaganda city.” Do they plan to have another one? Your guess is as good as mine.

Besides, running two breweries in Almaty, a city of 1.3 million people, must be one too many for Efes’ liking. But they cannot help it. One of these breweries dropped into their lap when Heineken decided to join forces there with Efes in 2008 and left the management of the Kazakh operations to Efes. Now why would Heineken have done such a thing, unless … well, unless they had struggled to continue going alone? Actually, Denmark’s Carlsberg followed Heineken’s example and in a flash of inspiration merged its Kazakh Derbes Brewing Company with Baltika-Almaty in 2010. In other words, the world’s major brewers knew when it was best to apply common sense: if you cannot beat them, join them.

My question, why anybody would want to build a new brewery in Kazakhstan, becomes fairer still if I reveal the location of the new brewery. It’s Almaty. From what I have heard it’s going to be a big brewery. The capacity is between 300,000 hl and 500,000 hl. That’s what I would call an optimistic capacity. Because to run such an operation profitably you will need volume. And quickly. You see, this is what is worrying me: Will Efes and Carlsberg welcome the new kid on the block? Will they say: “Come in, make yourself at home, let’s all be friends and share the spoils”? Will they generously relinquish some of their volume to accommodate the newcomer? If you remember what I said about island markets above, you will know the answer. Read on


UK – AB-InBev’s sales drop in the second quarter

The UK loses its taste for InBev lager, British media concluded with some ill-concealed glee in early August 2012, after AB-InBev released second quarter results on 31 July 2012 which showed that it suffered a double-digit slide in UK lager volumes because of heavy promotions by rivals.

AB-InBev said the wet weather between April and June left beer drinkers less thirsty than usual and contributed to AB-InBev registering a 10 percent decline of its UK lager volumes compared with the same period a year ago.

Read on

UK – SABMiller benefitted from Euro 2012 football tournament

Like its rival AB-InBev, SABMiller’s western European sales volumes in the quarter ended June 2012 suffered from a combination of poor weather and weak economic conditions. However, on an organic basis (excluding the impact of acquisitions and disposals), lager volumes for the group were 5 percent ahead of the prior year for the quarter, the brewer reported on 26 July 2012. Read on


USA – Speculation mounts on the AB-InBev deal with Modelo

Hopefully AB-InBev did not reckon without its host – which in this case is the U.S. anti-trust body at the Department of Justice. One of the biggest news stories in recent weeks was AB-InBev’s acquisition of the remaining stake in Grupo Modelo. Now the U.S. is abuzz with gossip that AB-InBev may have to sell off brands to clear antitrust hurdles.

Last year, AB-InBev had a 47 percent beer market share in the United States. Modelo, through its exports, had a 5.7 percent market share. Combined these would push AB-InBev over 50 percent market share in the United States.

Well aware that this would alarm antitrust regulators, AB-InBev has made a move to work around it by selling Modelo’s 50 percent stake in Crown Imports to Constellation Brands. This separate deal ensures that AB-InBev will maintain a market share of less than 50 percent in the United States.

But will antitrust regulators consider the Crown divestiture as sham and say that AB-InBev effectively owns the products being imported, which means that it does have a monopoly in the United States? In the U.S. having a 50 percent plus market share is considered a monopoly. Read on


USA – The impact of the AB-InBev-Constellation deal on U.S. beer market

We believe this transaction brings no change to the U.S. market,” AB-InBev’s CEO Carlos Brito told analysts when the deal was announced on 29 June 2012. Mark his words.

Several market observers beg to differ. As they see it, the deal could change things. For one, the price of imported beers could go up.

Traditionally, leading imports such as Corona and Heineken have cost more than mainstream domestic lagers like Bud or Miller Genuine Draft. But in recent years, because of the U.S.’ economic wobbles, import pricing has stayed flat, and the gap between the two segments has narrowed. The result has been weaker sales for the domestic brewers, because consumers don't have to pay as much of a premium for the imported brand. Read on

Germany – Did Radeberger mislead consumers and the taxman?

The scale of the Corona empties scandal can be measured in its ever-widening ripples. After the German environmental pressure group Deutsche Umwelthilfe revealed in early July that brewer Radeberger had deceived consumers for years about what happened to the Corona bottles once they had been returned to Mexico as empties (where they were not refilled and shipped back to Germany as required by German law), the matter has now been taken up by the Association of Private Breweries.

The Association of Private Breweries in Germany, a large professional organisation of German breweries, has asked the Hessian taxman to investigate if Radeberger dodged paying VAT because of the empties scam. Read on


Sweden – Carlsberg launches a craft beer called “Lawn Mower”

That’s hopeless. That’s truly hopeless. Carlsberg Sweden will launch a new “craft-style lager” named Lawn Mower in Sweden this October. What on earth possessed them to call a craft beer Lawn Mower? Don’t they know that “lawn mower” is the term Americans use for those inoffensive bland light beers men quaff on a Saturday afternoon after having mown the lawn? Selling Lawn Mower in a can makes matters even worse. Cans are the packaging of choice for those who want to chug a beer in no time. It’s not the conventional container for a craft beer.

So Carlsberg is either making the beer wrongly, or describing it completely wrongly.Or both. Read on




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