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Posted December 2011

Germany – Munich’s Paulaner to build a new brewery

Finally. The news we have been waiting for. At the end of November 2011 Schörghuber Group, which owns the majority stake (75 percent – the rest is owned by Heineken) in Munich’s Paulaner brewery, announced it would relocate the brewery to a larger outskirts site (190,000 sqm). Ground will be broken in 2012.

The German trade publication Inside estimates the project could run to EUR 300 million, including real estate.

I think this is a modest estimate, considering that the new Paulaner brewery will have a capacity of about 3 million to 5 million hl. At its current site, which has been bursting at the seams, Paulaner produces 2.5 million hl beer annually. Read on

 

UK- Heineken buys more pubs

It’s a mystery. Why did Heineken agree to buy the 918-strong Galaxy Pub Estate for GBP 412 million (USD 646 million) from Royal Bank of Scotland (RBS) on a cash-and-debt-free basis? The deal was announced in early December 2011.

True, the RBS was bust and needed a series of government bailouts in 2008 and 2009, which left the U.K. government holding an 83 percent stake.

But the pubs did not come cheap. Although the RBS apparently accepted a loss of around GBP 28 million on the sale, which it described as a “good result in a difficult market”, the transaction still values Galaxy at about 7.9 times its 12- month EBITDA.

What is more, Heineken is buying a tenanted pub estate and not a managed pub estate. Tenanted pubs are leased to and operated by third parties. They make up the vast bulk of the UK's pubs. However, managed pubs, which are run directly by the operating company and generally have greater control on pricing, have fared better during the economic downturn. Read on

 

USA – That’s Kräftig stuff

Billy Busch, half brother to August Busch III, has finally started serving his Kräftig beer in St Louis bars – only to get served a USD 600,000 suit by consultancy Rio Creative in a breach of contract. Rio filed a suit on 21 November 2011 against the William K. Busch Brewing Company and company founder William K. “Billy” Busch, St Louis media reported. Read on


 

Australia – Foster’s CEO to depart with a golden handshake

The incoming owner of Foster's has immediately put its stamp on the brewer, appointing one of its top operators to replace CEO John Pollaers.

SABMiller and John Pollaers have agreed that he will step down on 16 December 2011, making way for Ari Mervis. SABMiller is set to formally take control of Foster's that day.

To ensure a smooth transition Mr Pollaers will be available to provide advice to SABMiller during the first few months of 2012.

The South-African born Mr Mervis will leave his Hong Kong-based post as Asian Director with SABMiller, to live in Melbourne.

Mr Mervis will have the dual titles of Foster's Chief Executive Officer and Managing Director Asia-Pacific, keeping responsibility for SABMiller's expansion into China, where its Snow brand is already the top-selling beer, media reports say.

Mr Pollaers, who is set to collect a golden handshake of about AUD 5.6 million (USD 5.7 million) after less than two years on the job, comprising a year's base salary of AUD 711,000 plus AUD 4.9 million in lieu of shares issued under the company's long-term incentive scheme, has wasted no time promoting himself to prospective employers.

In his farewell email to Foster’s employees – which was circulated widely as probably was intended – he once more underlined his achievements.

My departure,” he wrote, “will not be a surprise to many of you who know me well. I have always made it clear that my passion is to be CEO of a large public company. Being CEO of Foster’s and Managing Director of CUB has been the highlight of my career and I can only hope that the next company I lead will be filled with as talented and dedicated people as we have here at Foster’s.”

He went on to list his successes: “We’ve halted an eight-year decline in our market share when nearly everyone said it wasn’t possible. We’ve rejuvenated CUB’s brands with fresh marketing, industry-leading innovation and a sales team focused on results.  We’ve restructured the business to make it more efficient and productive, and less bureaucratic.”

Most importantly, this team has started believing in itself and we’ve embraced our heritage and refocused on beer and cider. We’ve started believing that what we do matters and makes a difference in the lives of Australians every day. We now fundamentally believe that if a whole lot more people raised a beer in friendship, the world would be a better place,” he concluded.

No doubt, Foster’s employees felt proud reading this.

 

Europe - What happens if the euro zone falls apart?

When you are reading this, the world will have come to an end. Why? Olli Rehn, the European Economic Commissioner, said recently that the euro zone has only until 12 December 2011 to save itself. So what exactly will happen on 12 December?

It's hysteria over reason. The warnings on Europe by so-called business journalists are beginning to sound more and more shrill and apocalyptic as time goes on. On 30 November 2011 Wolfgang Münchau, commentator for the Financial Times Germany, wrote that in the current situation Germany's chancellor Angela Markel was facing only two options: bankruptcy or ruin. That's like saying: turn up your toes and hope to die. What a load of irresponsible nonsense.

Weathered journalists should not denigrate the euro zone's problems, but likewise they should not act as a crisis booster either. Just imagine what happens if the escalating prattle of the euro zone's imminent crash takes us all to the point-of-no-return and millions of Europeans rush to their banks to withdraw their savings?

Hopefully, European consumers keep calm and continue to ignore these doomsday scenarios. As it is, the whole economic situation is far from rosy and all these elements of insecurity will only undermine consumer confidence further.

While politicians are frantically thrashing out plans to save the euro and media commentators are losing their cool, big companies are quietly drafting contingency plans. Drinks company Diageo, on 30 November 2011, admitted that they have a "Plan B" in case the unthinkable happens and the euro zone breaks up.

Still, Diageo's public statement was fundamentally a note of confidence. They said that they will be able to counterbalance tough trading in the "euro zone problem markets" with strong growth in markets like Turkey and Russia.

Consumers and shareholders should be grateful for this information.

The maker of Smirnoff vodka and Johnnie Walker whisky bought Turkey's raki maker Mey Icki this August to double the percentage of its European sales coming from fast-growing emerging markets such as Russia, eastern Europe and Turkey to 20 percent.

Diageo's Europe chief Andrew Morgan said in an interview that he sees these markets continuing to grow in double-digit percentages, helping to offset the troubled markets of Greece, Italy, Iberia and Ireland.

"Barring some external factors such as the break-up of the euro we will see improving trends in Europe, and over time - such as 2 to 3 years - we want to be in growth," he was quoted as saying.

Mr Morgan added that it was prudent to plan for a possible break-up of the euro zone, which could lead to massive devaluations and so make Diageo's imported spirit brands more expensive.

Fortunately, Mr Morgan refrained from elaborating further what a break-up of the euro may look like, probably because he did not want to stoke fears.

If Diageo, which realised 26 percent of its sales in Europe (in its past financial year ended 31 June 2011), has a Plan B, what about Europe's major brewers Heineken, AB-InBev, Carlsberg and SABMiller?

When approached by Brauwelt, both Heineken and SABMiller refused to reply.

Which may mean something or nothing.

At AB-InBev, at least, they don't seem all too fazed by economic developments in Europe. As we all know, AB-InBev has only limited exposure to Europe as a whole and especially little to the southern part of it. In the first nine months of 2011, western Europe represented 8 percent of AB-Inbev's total global volumes, 11 percent of total revenue and only 7 percent of the normalized EBIT of the group. These numbers include the UK business, the largest business unit in the zone by volume and revenue.

Therefore, no reason to panic. A spokesperson told Brauwelt: "While we won't speculate on the evolution of the European economy, the euro, or our future sales in western Europe, we do believe we have the right focus brand strategies and plans in each of our key markets."

A spokesperson for Carlsberg would not say if the Danish brewer has a contingency plan in a drawer but said that they are looking at some difficult years (!) ahead.

Also on 30 November 2011 Carlsberg said they will reduce the number of positions in headquarter functions across Europe by 130 to150, of which 95 had already been scrapped in Denmark, Poland and Switzerland. On top of this, Carlsberg is planning to transfer 25 employees from Carlsberg IT to BSP, its business standardisation project. Part of these changes will be implemented during 2012.

Further, Carlsberg is establishing an integrated supply organisation for Europe, which will incorporate the group procurement, supply chain and logistics functions. The organisation will be located in Switzerland and will be in place by the end of 2012.

The job reductions and the setting up of a pan-European supply organisation, could be interpreted as the brewer's drastic actions to fight the crisis. However, the bundling of supply functions is already standard business practice among the world's leading brewers - and Carlsberg has just been tardy in implementation. As to the job losses - haven't brewers been axing jobs even when the times were good?

So we may draw comfort from the fact that at least two of the world's leading brewers say that for them it's business as usual.
 

Austria - Heineken's Nico Nusmeier leaves

Another one bites the dust. Nico Nusmeier, 50, who joined Heineken 26 years ago and became President of Heineken's Central & Eastern Europe business (CEE) in 2005, has decided to leave Heineken and will be replaced by Derck van Karnebeek on 1 January 2012, Heineken announced on 29 November 2011. Derck van Karnebeek is currently Managing Director for Heineken in Romania.

The change at Heineken follows Carlsberg's announcement last month that Isaac Sheps will become its new Senior Vice President for eastern Europe. Anheuser-Busch InBev, meanwhile, has appointed Stuart MacFarlane, formerly head of AB-InBev's UK operations, to run its central and eastern European business from Moscow as of 1 January 2012.

It was not immediately clear why a Heineken veteran like Mr Nusmeier has decided to quit. There was no mention where he is moving to. All this could be interpreted that he had very strong personal motives to chuck it all in. Read on

 

Australia - SABMiller receives final approval to buy Foster's

Having vented their anger at Foster's Annual Meeting on 25 October 2011 over the allegedly excessive bonuses awarded to Foster's CEO John Pollaers, shareholders in brewer Foster's nevertheless gave an overwhelming go ahead to the takeover by SABMiller. On 1 December 2011 at the Scheme Meeting, 99 percent of the shareholders voted in favour of the deal. An OK from at least 75 percent had been required by Australian law.

Following the vote, on 2 December 2011 Foster's was de-listed from the stock exchange. Read on

 

Germany - Brauwelt hosts anniversary party in Nuremberg

This August, Hans Carl Publisher celebrated 150 years of its Brauwelt publication. While the anniversary issues have already been out, the party was only held in Nuremberg on 8 November 2011 on the eve of Brau Beviale to give advertisers and readers, authors, partners, as well as staff members and members of the owners' families a chance to attend. Read on

 

Germany - Toxic vodka warning

Where does Europe's "Wild East" begin? East of Poland? Or perhaps further to the west, in Germany itself? In early November 2011, German customs officers raided a distillery in the eastern German state of Thuringia, which they suspected had handled and re-sold moonshine from eastern Europe thus defrauding the taxman of EUR 1 million (USD 1.3 million) in excise.

A EUR 1 million tax fraud must be considered peanuts compared to the EUR 230 million tax evasion scheme involving the carbon market that six managers are currently being tried for at a German court. Still, EUR 1 million in un-paid excise translates into almost 80,000 one-litre bottles of vodka. Hardly small fry.

According to media reports, the plant was shut down immediately and the main suspect, a 37-year-old man, was put into custody.

So far so bad. Two weeks later the German Government's consumer watchdog issued a warning for the brands “Vodka V 24 Original”, “Vodka AntiVirus” and “Premium Vodka Cosmos”, produced by another Thuringian distillery called Bärenkrone ("bear's crown"), after laboratory tests found that the drinks contained methanol, a highly dangerous type of alcohol that can cause blindness and even death if over-consumed.

Especially, the brand "Vodka AntiVirus" showed circa 17.5 g of methanol per litre, which is about 2,000 times the legal level for methanol in vodka. Anybody drinking half a bottle of this vodka would have been very seriously ill.

The consumer watchdog fears the vodkas have been distributed all over Germany and has banned the brands from further sale.

Both cases beggar belief. How did these two spirits companies manage to stay under the radar despite their allegedly shady dealings? Read on
 

UK - Five men sentenced over counterfeit vodka plant

Where does Europe's "Wild East" begin? Apparently as far west as the UK. On 25 November 2011 five men, who masterminded a major counterfeit vodka manufacturing and bottling plant in Leicestershire, were sentenced to a total of 17 years and ten months at Hull Crown Court, UK media reported.

The men were all charged with Conspiracy to Cheat the Revenue.

The plot was uncovered in an industrial unit by HM Revenue & Customs (HMRC) when they carried out raids in September 2009. They seized 9,000 bottles of fake vodka, branded as "Glen’s", manufacturing equipment, bottles and counterfeit packaging – labels and cardboard boxes - at the remote industrial unit at Moscow Farm (how appropriately named!) near Great Dalby, Leicestershire.

The bottles of vodka seized featured professionally printed labels, duty stamps and bottle tops – all of which were counterfeit.

The excise loss to the Exchequer on this haul alone was GBP 1.5 million (EUR 1.8 million).

There was no mention during the court proceedings as to where the vodka had come from.

Apparently, this was a substantial production, bottling and distribution plant with the infrastructure to distribute large quantities of counterfeit Glen’s vodka to independent stores throughout the country.

As in Germany, the gang planned to adulterate the vodka with poisonous methylated spirit.

In the raid over 25,000 litres of pure denatured alcohol (methylated spirits) were seized, enough to make around 100,000 bottles of vodka.

Denatured alcohol is used as a solvent and is coloured purple to distinguish it from drinkable alcohol as it is not fit for human consumption.

Evidence found suggests that bleach was used by the gang to remove the colouring to make it clear before diluting to the required strength.

There was no mention in the media which bleach the gang used - whether it was chlorine or peroxide. Hopefully it was not chlorine, which would have been the cheaper option, as the use of chlorine would have created a very fine mess in the final product, chemists say.

At least a further 165,000 bottles of fake vodka were manufactured at Moscow Farm during 2008 and 2009.

We never thought that the Russian "Na zdrowie" ("to your health") should be taken literally in western Europe too.

 

Germany - Bionade adds grist to the rumour mill

Ho-ho, could it be that German hacks have already had too much advent punch? At the end of November 2011 they spread the rumour that Bionade's former owner Peter Kowalsky was in talks about setting up a cooperative to buy back Oetker's 70 percent stake in his company. Read on  
 

Germany - Jägermeister to change track?

That's a tipsy rumour if ever there was one. On 22 November 2011 the German edition of the Financial Times reported of a big board-room brawl at Germany's privately-owned Mast-Jägermeister company, which is world-famous for its Jägermeister schnapps and its corporate secretiveness. Sluggish growth of its Jägermeister brand in recent years seems to have given board members a bit of a headache. While some board members appear unperturbed and would like the company to continue as a single-brand business, other more powerful members favour a bit of M&A activity to get the company out of the doldrums. Read on  
 

Australia - Retailers Coles and Woolies start another booze price war

Let's hope SABMiller know what they are getting themselves in. The country's major retailers Coles and Woolworths are locked in a discount liquor price war as the festive season approaches. With prices cut by up to 31 percent at its Liquorland and 1st Choice chain of stores, Coles declared a "war on liquor prices" on 16 November 2011. That was not long before Woolworths countered by saying that prices in its Dan Murphy stores would always be lower.

Market observers say it will be interesting to see SABMiller's reaction to discounting practices in due course. Foster's tried to stop the price wars earlier this year by refusing to supply the chains with its beer ...after it had heard of a plan to sell them for AUD 28 (USD 28) a carton (24 bottles), well below cost.

Did Foster's last minute action make any impact? Alas, no. Read on
 

USA - Draught beer on the rise again

When it comes to on-premise beer, the U.S. has always sported strange customs. Go to any bar and, more likely than not, you will be served a beer in a bottle rather than a draught beer. Thankfully, things are changing. And it's because of craft beer.

Currently not quite one in ten beers sold in the U.S. is draught, but should rise to 10 percent of U.S. beer volume next year, Lester Jones, the Chief Economist of the Beer Institute, a trade association, told delegates at the Beer Insights Seminar in November 2011 in New York.

Draught volume grew 1.1 percent between 2009 and 2010 in a market which went down 1.3 percent. Read on  

 

USA - What's left of Anheuser-Busch?

... very little, it seems. Exactly three years after Anheuser-Busch was taken over by InBev, the local St Louis newspaper, St Louis Post, on 26 November 2011 ran a story on the new culture at Anheuser-Busch's headquarters in St Louis, which highlights the profound changes.

Most obvious to bystanders are the changes in numbers and in corporate dress code. Fewer people report to work each day at the St. Louis brewery and adjacent office building. And they wear jeans to work now. Read on

 

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