Posted August 2015
Belgium – Government mulls introduction of sugar tax
Governments have every reason to be concerned about the damaging impact of sugar on health - from people's rotting teeth to type 2 diabetes and bulging waistlines. But the jury is still out on the question if a sugar tax is the appropriate measure to make people change their consumption habits.
This has not stopped the Belgian government from pushing ahead with a “sin tax” on “unhealthy” foods and beverages, as was reported at the end of July 2015.
What the Belgians mean by this tax is not immediately clear. It can only involve some sort of sugar and fat tax. Insiders are rightly worried that all beverages containing sugar or sweeteners, namely soft drinks, Radlers, fruit beers and beer mixes like Desperados (Heineken), will become a target. Read on
Germany – AB-InBev to sell the Gilde brewery in Hannover
AB-InBev must be glad that they have found a buyer for their Hannover brewery, which has long been surplus to their requirements in Germany. According to estimates, beer production at Gilde is only 150,000 hl although the plant has a capacity of over 1 million hl. The buyer will be TCB, a German producer of private label beers with three plants – two in Germany and one in France – which have a combined capacity of 10 million hl beer. The rumoured price is EUR 15 million. Read on
United Kingdom - Jobs threat after Coke’s European bottlers merge
Hasn’t Coca-Cola’s corporate strategy in recent years resembled a zig-zag course? Six years ago, The Coca-Cola Company touted it wanted to re-engage with bottling, thus pulling the two sides of its value chain – marketing and bottling - closer together. All this was to help Coke and its bottlers to double their combined revenues to USD 200 billion by 2020. Now Coke wants to pull out from botting again and assign the more arduous – and capital intensive - task to independent bottlers.
That’s, at least, the implication of the recent mega-merger among its bottlers, announced on 7 August 2015, which will see Coca-Cola Enterprises (CCE) combine with the privately held Coca-Cola Iberian Partners SA and Germany's Coca-Cola Erfrischungsgetränke AG to create a European Coke bottler with pro forma 2015 revenue of about USD 12.6 billion and EBITDA of USD 2.1 billion.
The new entity, called Coca-Cola European Partners (CCEP), will be Coke’s biggest bottler in Europe, ahead of Coca-Cola Hellenic Bottling Company (Coca-Cola HBC). CCEP will be headquartered in the UK for tax reasons, it was reported. Read on
USA – Coke’s CEO Muhtar Kent gets a deputy and possible successor
The Coca-Cola Company has promoted an insider to the number two job which got media pundits and analysts speculating that Chairman and CEO Muhtar Kent needed a powerful deputy to help manage the far-flung business and try to reverse flagging soda sales.
On 13 August 2015 the company said it named the Englishman James Quincey, 50, President and Chief Operating Officer. Mr Quincey has been with Coke for 19 years. Read on
United Kingdom – Britain back on the map as brewing powerhouse
A surge during the past two years has seen microbreweries opening up at rate of three every week. Figures from the British Beer and Pub Association show there are more than 1,400 breweries in the country.
Even though microbreweries may be on the rise, the demise of the pub continues. Twenty-nine pubs close each week across the UK, according to the Campaign for Real Ale. Read on
USA - Brewers add alcohol to root beer
How hard is this? After the “hard ice tea” craze, the U.S. is falling for another fad: “hard soda drinks”. The first such drink to see alcohol added to it is root beer.
Root beer, which soared in popularity as a pre-Prohibition temperance drink, is leaving its roots behind. An alcoholic version called Not Your Father’s Root Beer with 10 percent ABV has become one of the fastest-growing products in U.S. beer aisles. It was first introduced late last year by the Small Town Brewery located in Wauconda, Illinois. Read on
Belgium – A beer paradise no more
Isn’t it funny that the Belgian government should announce a beer excise hike at the end of July 2015 when everybody was on holiday? The timing was impeccable. No media outcry ensued. Which must have been the whole point of the summer exercise.
The planned beer excise hike is far from minuscule. Although the government has not said yet when the new excise regime will be implemented – some reckon 1 January 2016 – and how high it will be, it could have far reaching consequences, especially if Belgian brewers pass the increase directly on to consumers and don’t absorb it themselves.
Belgian brewers could be presented with an excise hike of 15 percent, which translates into an excise load of EUR 25.47 (USD 28) per hl of beer with 4.8% ABV.
Since most small brewers produce quite some volume of higher strength beers between 6.2% and 9% ABV, the excise rise could be felt far and wide. For example, the Trappist tripel Westmalle might have an excise load almost twice the amount levied from a 4.8% ABV beer.
Belgium’s major brewers AB-InBev and Alken Maes (owned by Heineken) may squirm. However, they will ultimately console themselves by pointing to France where excise on beer was raised by 160 percent in 2012. Incidentally, domestic beer production in France – mostly pils-type beers - did not suffer as much as feared. But sales of imported Belgian beer specialties, in particularly in the higher alcohol range, dropped 10 percent in total because these beers had become excessively pricey.
Many insiders contend that this tax hike may not make Belgians drink less beer, it will only make them travel further to buy their beer. Cross-border shopping in Germany is most likely going to intensify. The Belgian on-trade will suffer accordingly. As to the government’s plan to raise revenues from alcohol – that’s wishful thinking.
The report “Economic effects of high excise duties on beer”, co-authored by Ernst & Young and Regioplan (19 December 2014) concluded:
“Analysis of increases in excise duty in the EU (2008-2012) shows that high excise duty rates (such as the ones in the Nordic countries) impact negatively on the economy. In addition to negative effects on employment, excise duty increases also ultimately failed to bring about a proportional increase in total beer-generated government revenues. In eight of the seventeen countries in which an excise duty increase was implemented (16 EU countries and Norway) beer-generated government revenues even decreased.”
Perhaps Belgium’s government thinks it will not share the Nordics’ experience, or, if it does, it will serve a higher goal, namely make Belgians drink less alcohol overall.
Last year, Belgium’s per capita beer consumption was 72 litres, far below Germany’s or the Czech Republic’s. Observers say that the registered decline in beer consumption in Belgium can partly be attributed to rising excise. This means that beer consumption will continue to drop as a consequence of the intended hike.
One thing is certain, though: following the government’s summertime excise coup, Belgium will move further away from Germany and closer to the Nordics. And no one, in their right mind, would call the Nordics beer countries.
So bid your adieus to Belgium’s beer paradise.
China – Beer sales decline 4.5 percent in first half of 2015
What’s going on in China? Last year’s 1.8 percent dip in beer sales could have been a one-off as many blamed it on poor weather. In fact it was the first year-on-year decline since beer sales statistics became available in 1998.
But the decline seems to continue. AB-InBev reported that total industry volumes dropped by approximately 6.5 percent in the second quarter and by 4.5 percent in the first six months of 2015. The sales decline affected value and core segments most strongly. Read on
USA – Diageo expects to return to organic sales growth this year
The world’s number one drinks company, Diageo, has had an increasingly tough time in North America, its largest and most profitable region. Consumer tastes in the U.S. have shifted toward smaller “craft” brands - and away from Diageo’s core brands like Smirnoff vodka, Captain Morgan rum, and Johnnie Walker whisky.
This trend continued in Diageo’s latest fiscal year, ended 30 June 2015. Diageo's organic sales in North America fell 1 percent, with sales volumes down 3 percent. Operating profits in the region, where Diageo makes 40 percent of its profits, dropped 2 percent. Read on
Netherlands - Heineken sells more beer in first half 2015
They should be pleased. Heineken’s global volume was up 2 percent in the January to June 2015 period, compared to a 1.6 percent decline for AB-InBev and a 1 percent drop for SABMiller.
Heineken’s net profit rose to EUR 1.1 billion (USD 1.2 billion), compared with EUR 631 million in the year-earlier period, the Dutch brewer reported in early August 2015. Read on
USA – Ten brewers make over 90 percent of all U.S. beer
The Brewers Association reports that there are more than 3,400 breweries in the U.S., the most since 1873. However, about 1,400 of them are brewpubs that aren’t putting beers on bar taps or store shelves. Also, the 1,900 or so microbreweries that exist are competing in a U.S. beer market in which exactly nine companies controlled 90 percent of all beer sold in 2014, according to Beer Marketer’s Insights. Read on
USA – Blue Moon celebrates 20th anniversary
Consumers may care a lot about company ownership when choosing a craft beer over a “crafty” one, but this seemingly has not stopped the rise of Blue Moon, the unfiltered Belgian-style wheat beer which is brewed by Molson Coors. In 2014, Blue Moon sold over 2 million barrels, which would make the brand, part of MillerCoors' craft beer division Tenth and Blake, one of the best-selling U.S. craft beers, were it not considered “crafty” because it is brewed by one of the Big Brewers.
Following market trends closely, it was only a matter of time before MillerCoors would turn to releasing their own IPA, given that AB-InBev beat them to it by launching a Shock Top Wheat IPA back in 2012. Read on
South Africa – Diageo severs ties with Heineken to go solo in South Africa
It is common wisdom that “two’s company and three’s a crowd”, meaning that with three parties and different agendas the complexity of the problems increases. This could have been one of the reasons why the world’s number one drinks company said on 28 July 2015 that it is dissolving a joint venture with Namibia Breweries (NamBrew) and Heineken in South Africa and neighbouring Namibia three years earlier than planned so Diageo can now go it alone in those countries.
Analysts say that the profit sharing agreement struck by the three partners would have been to the detriment of Diageo as, in recent years, spirits products have grown faster than beer. Read on
Malawi – Carlsberg discovers financial irregularities
Forensic auditors have uncovered financial malfeasance at Carlsberg’s brewery in Malawi, amounting to nearly DKK 80 million (USD 12 million), it was reported. This has led to the suspension of three local employees, suspected of defrauding the company. Read on
Brazil - AmBev buys local craft brewer Colorado
Who would have thought that the takeover of a Brazilian craft brewer by AmBev would have a fall-out as far away as Belgium? In early July, the Brazilian beer and beverages behemoth AmBev bought the local craft brewer Colorado for an undisclosed sum, thus continuing its new strategy of buying premium craft beer brands amid stagnant sales volumes in South America's biggest beer market.
Already in February this year, AmBev, which is the Brazilian unit of AB-InBev, took over the domestic craft brewer Wäls and integrated it into its higher-end Bohemia beer division.
Surprisingly, the takeover of the award-winning Colorado brewery caused unexpected reverberations in Belgium. Only in May Colorado had launched a saison beer called Marguerite (6.7 % ABV) in Brazil, in collaboration with the St. Feuillien brewery located in Roeulx. As is custom with brewing collaborations, Colorado was to do a special release beer with St. Feuillien in Belgium. St. Feuillien presumes that nothing will come of this now. Read on
USA – Belgium’s Duvel invests in another U.S. craft brewer
The non-committal headline says it all: Duvel Moortgat’s latest U.S. investment got everybody’s curiosity piqued: Did they buy Firestone Walker brewery outright (or just a stake) and how much did the Belgians’ fork out? On both accounts Duvel’s owners decided to keep the figures close to their chests.
In July 2015, Duvel Moortgat and California’s Firestone Walker brewery signed an agreement to combine their U.S. operations. The deal will see Duvel making an investment in Firestone Walker, but the Californian brewery will continue to operate independently in Paso Robles under its current leadership of brothers David Walker and Adam Firestone. Read on
USA – AB-InBev’s net profit declines in second quarter 2015
Have a guess: Which is AB-InBev’s fastest growing brand in the United States?
Despite all the publicity the world’s number one brewer got from its recent purchases of craft breweries, it’s not a craft beer brand.
As Caroline Levy, an analyst with global investment banking firm CLSA, noted in a report, craft beers represent only 2 percent of AB-InBev’s U.S. sales. Read on
USA - Pabst Brewing plans a return to Milwaukee
Of the breweries that made Milwaukee famous - Schlitz, Pabst and Miller – only one, Miller, made it into the 21st century. Schlitz closed in 1982 and Pabst in 1996. Although Pabst did not disappear from the market, it only existed as a virtual brewer curtesy of having others brew its beers.
Now Pabst Brewing is scheduled to return to Milwaukee. The brewer, which has since been bought by the Oasis group, announced in July 2015 that it will open a brewpub next year near the site of its original brewery. Read on
Brazil – AmBev pays multi million fine to settle with trust busters
The millstones of justice turn exceedingly slowly. After ten years, the Brazilian unit of AB-InBev has settled its dispute over a fine of 352.7 million reais (USD 185 million) with the Administrative Council for Economic Defence, or CADE, which had found its reseller loyalty programme anti-competitive.
CADE launched its investigation of the practice in 2004 when AmBev’s rival Grupo Schincariol filed a complaint. Initially, AmBev challenged the 2009 fine, which was then lowered to 229.1 million reais, but has now agreed to abide by the original decision, both parties announced in July 2015. Read on