Beer Monopoly




    International Reports







Posted February 2015

Denmark – Carlsberg’s CEO retires

Would the Kremlin know or care that its politics made a Danish CEO lose heart? Carlsberg announced on 18 February 2015 that its CEO Joergen Buhl Rasmussen, 59, will retire on 15 June this year and be replaced by Cees ‘t Hart amid reports of a weakening Russian ruble plus declining beer sales in Russia and the Ukraine, which led to a sharp drop in the brewer’s fourth-quarter profits.

To outsiders, the timing of the succession may seem a bit odd. There is a crisis brewing in Carlsberg’s biggest market, its profits have dropped massively in the previous quarter, and yet its CEO choses to retire. Read on


USA - Beer Monopoly turns to craft brewers

It’s a cruel world. For years, brewer SABMiller was talked up as the ultimate takeover target for AB-InBev and there was very little they could do to silence this kind of unwanted speculation.

The beer monopoly game among the world’s biggest brewers seems to have run its course, at least for the time being. But AB-InBev’s money still seeks a home. And it’s finding it where the new growth is: among U.S. craft brewers.

Now that craft brewers are attracting AB-InBev’s attention, plenty may find out what it’s like being the butt of industry gossip.

Following AB-InBev’s purchase of three craft brewers in the space of merely one year, bar stool strategists over in the U.S. are finally convinced that the leading brewer in the country will gobble up another craft brewer.

Well, it does not take much insight to subscribe to this view. However, it takes some cheek to actually come up with a list of potential takeover targets among craft brewers, as did the website MarketWatch on 12 February 2015. Read on


Poland – Heineken’s unit Zywiec suffers drop in profits in 2014

What has happened here? Polish brewing group Zywiec saw a 41 percent decline in 2014 net profits to PLN 159.4 million, following an 11 percent drop in revenues and a 3.6 percent fall in volumes to 10.7 million hl, it was reported on 11 February 2015.

Last year was not a bad year for beer. Thanks to the Football World Cup, Polish beer sales would have been flat (at worst) over 2013, which saw a 2 percent drop.

True, the Polish beer market is mature; after displaying phenomenal buoyancy between 1990 and 2007/2008, it seems to have stabilized at around 38 million hl, with per capita consumption at 96 litres. Its EBIT pool is the third-largest in Europe behind Germany’s and Spain’s, according to Nomura, a bank.

But this still does not explain Zywiec’s plight. Heineken’s Full Year 2014 financial presentation could have shed some light on the situation in Poland, had the information been given in plain English rather than in that Orwellian lingo called “Financial Newspeak”. Read on


Netherlands – Heineken reports profit growth in 2014

Thank goodness, there was the Football World Cup in 2014. Its effects made Heineken’s group revenues rise 0.1 percent to EUR 21.2 billion, the brewer reported on 11 February 2015.

Group operating profit in 2014 increased 5.2 percent to EUR 3.35 billion. Total net profit grew 11 percent to EUR 1.8 billion.

Group beer sales were up 1.8 percent to 198.8 million hl. The Heineken brand alone stood for 29.5 million hl in global sales in 2014, up 5.1 percent over 2013.

As could be expected, sales in western Europe declined slightly and more significantly in central and eastern Europe, especially in Poland and Russia (“a bad surprise”, commented CEO Jean Francois van Boxmeer).

Luckily, these declines were more than offset by a sales hike in Mexico, Nigeria, Brazil and Vietnam. Read on


China – Yanjing Brewery said to mull sale of a stake

It may just be a rumour: Beijing’s Yanjing Brewery Co., China’s third-largest brewer, plans to sell about a 20 percent stake to a foreign strategic partner, media reported in early February 2015.

The company, backed by the Beijing municipal government, is said to have reached out to potential investors including overseas brewers. The stake could be valued at about USD 700 million based on Yanjing’s current share price. Yanjing’s market value is USD 3.6 billion. Read on


Sweden – Ladies’ only beer club launches its first beer at Systembolaget

What’s become of Pippi Longstocking? In case you are not watching Scandi noir TV series, you would not know that there are only two kinds of Swedish women around: grumpy female cops or anxious female victims.

We are glad to report that in actual fact there is another group in evidence which enjoys a beer and likes to do this in the company of other women.

Two years ago a woman called Elin Carlsson from Gothenburg set up a women’s beer club on Facebook, called Fem Ale. The group would alert women to bars that had interesting beers on tap. Fem Ale also arranged tastings at local breweries.

The next logical step for them was to brew their own beer, a Pale Ale. They found a willing partner in the Ocean Brewery in Gothenburg. Being social media savvy, word was soon out what Fem Ale had got up to. But making the beer available to others via the state-owned chain of alcohol-shops, Systembolaget, took some effort.

As of early February 2015, “We can do it” has been listed by Systembolaget, alas as a label by Ocean Brewery.

The pale ale retails at SEK 29.80 (EUR 3.16/USD 3.60) per 500 ml bottle.


USA – AB-InBev’s Super Bowl gaffe: accidental or deliberate?

Ahmegawd, a Budweiser ad caused such uproar during Super Bowl that it got the beard-and-sandal brigade running into verbose overdrive on social media during the week that followed.

What had AB-InBev’s marketing guys done? Well, they had poked fun at craft beer and craft beer drinkers. No more, no less. The outcry in the U.S. was, well deafening.

Relayed over a pulse quickening, drum-heavy hard-rock soundtrack, the messages in the 60 seconds ad read: “Budweiser proudly a macro beer.” “It’s not brewed to be fussed over. It is brewed for drinking not dissecting.” The punch line, which probably made hipsters cough up on their craft beers, said: “Brewed the hard way. Let them sip their Pumpkin Peach Ale.”

Need I say more? The ad can be viewed here:

It was as if Budweiser’s ad had hit all the right buttons with the wrong people. Craft beer aficionados shrieked “murder most foul”, but in more words than that. They felt that Budweiser had purposefully rubbished craft beer and its elite club of snobbish consumers.

I, for one, cannot understand what the fuss is all about. After years of near-coma inducing Super Bowl beer ads (last year’s Bud ads starring the ageing Terminator star Arnold Schwarzenegger were the ultimate in tedium), AB-InBev finally gave us a really funny ad, a thigh-slapping satirical one to boot, that people will talk about in years to come.

Well, come on guys, don’t be such soreheads. Can’t you take a joke? By the way, craft beer drinkers were not the intended target of the ad. It was aimed squarely and firmly at Budweiser’s core group of consumers - those who have been deserting the brand for longer than most craft beer consumers can probably remember. According to a New York Post article, Budweiser sales have plummeted from its peak of 50 million barrels in 1988 to 16 million barrels in 2014.

Thankfully, one AB-InBev distributor got AB-InBev’s rationale for the ad. He told Beer Business Daily, a dedicated news site, that “it's about time ABI tries to change the craft narrative. If the craft snobs are offended at least they know how traditional (probably old) drinkers have felt when they spout their drivel about their craft being so great.”

If the ad hit all the right buttons with the right people, who may have been intimidated by craft beer’s hype and taken to enjoying their Budweiser only on the sly, Budweiser’s fortunes could be revived and AB-InBev will stand vindicated. Bear in mind: returning to the high side with Budweiser would be by far bigger for AB-InBev than any gains on craft.

As to calling the ad a gaffe – no, I’d say this was a planned humorous attack. AB-InBev runs such a tight ship that its marketers would have only been given the go-ahead after the executive suite had studiously analysed reams of spread-sheets and tons of data, carefully waging the pros and cons.

Mind you, AB-InBev must have spent nearly an arm and a leg on it. Super Bowl’s airtime is excruciatingly expensive. Average cost for a 30 seconds ad was around USD 4.5 million this year, it was reported.

The craft beer community clearly relished the final message of the ad: “Brewed the hard way. Let them sip their Pumpkin Peach Ale.” This they interpreted as an assault on AB-InBev’s latest acquisition target, Elysian Brewery, which also brews a “Pumpkin Peach Ale.”

Since the deal has not been bedded down yet, the craft beer community hoped that Elysian’s still-owners would now walk away from the deal. Fat chance. They have not (yet).

Elysian Brewing co-founder Dick Cantwell emailed a kind of distressed response to the Super Bowl ad to the Chicago Tribune newspaper that read: “I find it kind of incredible that ABI would be so tone-deaf as to pretty directly (even if unwittingly) call out one of the breweries they have recently acquired, even as that brewery is dealing with the anger of the beer community in reaction to the sale. It doesn't make our job any easier, and it certainly doesn't make me feel any better about a deal I didn't even want to happen. It's made a difficult situation even more painful.”

Consider for a second: Even if the deal did fall through because of the ad, what would happen? Simple. AB-InBev would find another craft brewer to buy. There is a rumour going round that they are after Florida’s Cigar City Brewing Company.

Trust me, in six months’ time no one would have been talking about the aborted transaction. My case in point is last year’s super-merger between the ad giants Omnicom Group and Publicis Groupe. Although much publicised, the two called off their USD 35 billion merger at the last minute. Does anyone remember this mega- blooper? QED. Read on


USA – AB-InBev likes its craft brewers small in territory but big in cache

The rumour mill about some well-established craft breweries looking to “change ownership” is swirling like a tornado. The Elysian and 10 Barrel sales to AB-InBev in the space of a few months have made craft beer consumers exceedingly worried about their loyalties.

What if there are plenty more around, who have already secretly put up a “for sale” sign? On Twitter it was recently suggested that in water-stretched California many brewers could have put themselves up for sale, fearing that their breweries and businesses will eventually run dry.

If I have read AB-InBev’s recent purchases correctly, there is a pattern behind them. They seem to go for “virgin brands”, by which I mean craft beer brands with a great reputation in the beer community, which are also strong in their core market but have not expanded much beyond it.

Why? Because in the U.S. market success depends on distribution. It’s the distributors who ultimately make or break a brand.

For example, Jim Koch, who founded Boston Beer, relies on about 400 distributors across the country to sell his beer. Although distributors are nominally independent, they are still aligned through licences with either of the big brewers for the bulk of their beer sales. Then there are distributors whose main business is spirits or wines. Craft brewers cannot be too choosy when deciding on distributors. They need to get into all of these “houses” if they want to sell their beers. The bigger a craft brewer becomes, read the wider its beers are distributed, the more complex its distributor network. In the end it will consist of AB-InBev, MillerCoors and other alcohol distributors.

It’s the beauty of smaller craft brewers that they don’t have a complex distributor system yet. Because once the brewer is taken over by AB-InBev, its distribution system will need to be untangled (a costly and time-consuming process) so that AB-InBev can mainstream the brand and brew it in its breweries closer to the predominantly AB-InBev-aligned distributors. That’s how AB-InBev will grow the brand and turn it into a success: through production efficiencies and in sync with its friendly distributors. Read on


New Zealand – Craft brewer raises NZD 500,000 in half an hour

As crowdfunding goes, this was quick! The well-known Kiwi craft brewer Yeastie Boys recently conducted a highly anticipated share offer. On 28 January 2015 fans of Yeastie Boys’ award-winning ales were able to buy a piece of the company, via an equity crowdfunding campaign on PledgeMe.

Amazingly, in merely thirty minutes Yeastie Boys raised NZD 500,000 (EUR 324,000 / USD 371,000) which represents 12.5 percent of the company. The founders Stu McKinlay and Sam Possenniskie will each retain 39.37 percent of the company.

You have to give it to Yeastie Boys and their fans: they are an optimistic lot. Yeastie Boys is a six-year old company. Revenues have risen rapidly over the past few years, but profits have been scarce, as you would suspect from an upstart. In their financial year 2014/2015 Yeastie Boys expect revenues in excess of NZD 600,000, yet forecast zero profits. For the next financial year they have already projected a loss of NZD 49,000. Only after then do they hope to turn a profit. Read on


United Kingdom – New rules for craft brewers going international

Looks like craft brewers are about to set new benchmarks for going international. “Have suitcase, 8,000 followers on Twitter, will travel”, is today’s modus operandi.

The agreement between New Zealand’s Yeastie Boys and the UK’s BrewDog is a case in point.

In the Oooold and Slooooow Days, setting up an export business, let alone contract brewing arrangements, would have taken years, if not decades. That’s how the Heineken model for going international worked.

It followed a three-step model: from direct exports, to licenced production to eventually buying a stake in the brewer that had produced their local volume. This model held true until globalization took over and buying local brewers outright in order to expand a brewer’s world-wide reach became the rule of the day (see the rise of the four big major brewers over the past two decades).

Keen and eager craft brewers don’t want to wait that long. And they have devised ways and means to be much faster on the hoof.

This is how it they do it.

First, you need to have beers that win awards. That way you establish a reputation with craft beer lovers around the world. That may take a few years but once you enjoy social media credibility, as demonstrated by the number of your friends on Facebook and your followers on Twitter, you seem to have no problems entering new markets with great fanfare and with the help of a friendly craft brewer.

In so doing the vanguard among craft brewers has rewritten the rules in the brewing industry. Today is does not matter if a craft brewer does not own any production facilities. In fact, gone are the days when U.S. craft brewer Sam Adams was ridiculed by the industry because its production was contracted out.

As a result, the distinction between “contract brewed” and “brewed on site” is becoming less important ... to all but the ardent purists. These days craft brewers proudly call themselves “gypsie” or “phantom” brewers, if they rely on others to faff around with production issues.

Think of Denmark’s Mikkeller, a microbrewery founded in 2006 in Copenhagen, which does not operate an official brewery and, instead, collaborates with other brewers to produce their recipes or experimental one-off brews. This way they managed to sell about 8,500 hl beer in 2014, it was reported.

“Collaboration” is the operative term among microbrewers. As the global buzz word in the craft brewing industry, it not only overcomes potential competition concerns, it underlines that craft brewers do things differently. Major brewers compete, the little guys collaborate.

What is more, “collaboration brews” between microbrewers have taken the foul whiff of licensed or contract production. Whereas in the past, contract beers were frowned upon by consumers (hence the popularity of genuine imports in the U.S. market) as somewhat inferior, collaboration brews are now hailed as superior and the real thing.

Second, size does not matter for going international. For example, Yeastie Boys, based in Wellington but contract brews at various locations, produces only about 1,000 hl beer a year for a turnover of about NZD 700,000. But even before its recent fundraiser to boost exports, its beers were already enjoyed in the U.S., Asia and parts of Europe.

Perhaps being a microbrewer in the full sense of the word can really help you find craft brewer willing to further your aims elsewhere. This is underscored by the tie-up between Yeastie Boys and BrewDog in the UK.

Third, it’s the brewery’s clout and not a particular brand that will travel. While Dutch brewer Heineken has been pushing its Heineken brand and AB-InBev its Budweiser to consumers around the world, persuading them that these brands are truly aspirational, in the case of Mikkeller, consumers will be happy to lay their hands on any beer that Mikkeller is offering in 40 countries around the world.

Consider this: for brewer Heineken it’s a measure of success that each year its brand’s share of the International Premium Segment has risen. Mikkeller, on the other hand, is praised for the number of beers it has launched in one particular year (124 beers in 2013), although only a handful would have been available per market.

In sum, when going international, craft brewers are not following in the footsteps of the Big Brewers and this is by design. They are gradually finding their own route to market and in the process rewrite the rules book.

Where do they go from there? Well, as they always like to say: The sky’s the limit.


Russia – Vodka production drops to new low as moonshine booms

Is this a sign how bad things have become? Vodka production in Russia has fallen dramatically in the past year. According to figures released by the statistics office Rosstat, 660 million litres of vodka were produced in 2014, a decline of 22.3 percent over 2013. In November and December the drop was most marked: in December, there was a decline of nearly 47 percent.

Vodka is Russia’s national drink. It is often consumed excessively. Studies have shown that a quarter of all Russian men die before the age of 55 with alcoholism being the most likely cause.

In its fight against alcoholism, the Russian government has hiked the price of vodka considerably in recent years. But that has not diminished consumption. It only meant that consumers have increasingly resorted to moonshine. A spokesperson for the brand Russian Standard estimated that the share of illegal vodka has risen to over 60 percent of total consumption over the past 18 months. Read on


USA – And another craft brewer goes to AB-InBev

Remember the counting song “ten green bottles hanging on a wall”? It comes to mind as AB-InBev buys yet another U.S. craft brewer. The target this time is Elysian Brewery, a 50,000 barrel (58,000 hl) beer company from Seattle. The deal was announced on 23 January 2015, though no financial details were disclosed.

This transaction is AB-InBev’s third in the craft beer industry in merely one year. In November 2014 it bought 10 Barrel Brewing of Oregon, which followed the purchase of Blue Point on Long Island, New York, earlier in the year. It also bought Chicago’s Goose Island Beer Co. in 2011 and already owns a 30 percent stake in a Northwest group that produces Red Hook, Widmer and Kona beers.

What makes this deal special is that it involves a craft brewer from the state of Washington, which is considered the heartland of craft brewing in the United States. The state ranks number two in the U.S. for its number of breweries (over 250 in 2013). In terms of breweries per population it ranked 7th: one brewery per 27,775 inhabitants. Read on


USA – Top 10 beer brands lose volume in 2014

At the trade publication Beer Marketers Insights (BMI), they kept themselves busy in January this year, adding up the sales figures for 2014. According to their estimates, it was not a good year in terms of volume sales for the country’s biggest brewers. The top 10 beer brands in the U.S. collectively lost 1.2 percent in sales over 2013, or a total of 1.4 million barrels beer (1.6 million hl). Read on


Belgium – Brewers hike beer price

The good news first: Belgian brewers sold more beer in 2014. The volume growth in 2014, although not spectacular, could run into several thousands of hl, the Belgian magazine Trends reported on 28 January 2014. The increase in volumes should not be surprising at first sight because 2013 was a bad year, with a very long and cold winter and spring. On the other hand the summer months of July and August 2014 were very wet and often cold.

Still, AB-InBev last year managed to sell more beer, registering an estimated 4.5 million hl. Its top brands are Jupiler, by a wide margin, followed by Leffe and Stella Artois, says Trends.

The brewer may also have been lucky that there was a Football World Cup last year, with a Belgian team taking part. In June, the brewer saw volumes climb, but in July, the fun was over. Incidentally, the Belgian team played its final match on 5 July. In that month, volumes declined for AB InBev.

August was even worse. It saw consumption decline by about 15 percent compared with 2013, a year with an excellent summer.

However, AB-InBev’s Belgian sales ended up a few thousand hl above 2013 sales. And that is remarkable, says Trends, because earlier in January 2015 the Belgian market leader announced a price increase for lager. That’s the bad news. From 1 February, AB-InBev charges EUR 0.02 extra per glass. Declining volumes were quoted as the reason. Read on


United Kingdom - Beer sales up for the first time in ten years

A silver lining? A decade of decline in UK beer sales has come to an end, with a 1.3 percent rise in UK beer sales in 2014, the British Beer & Pub Association (BBPA) announced on 30 January 2015. Beer sales in pubs have begun to stabilise, showing a small decline of 0.8 percent in 2014, but this was the smallest decline in sales since 1996. Off-premise sales grew by 3.5 percent, matching the growth of last year, and taking off-licence and supermarket sales above on-premise sales, for the first time on record.

According to the BBPA, the rise in 2014 followed nine consecutive years of decline, which saw beer sales slide by 24 percent. Read on


United Kingdom – Former South African Minister joins SABMiller’s board

Shrewd move. The world’s number two brewer SABMiller has appointed Trevor Manuel, 58, as an independent non-executive director with effect from 1 March this year.

Mr Manuel was a minister in the South African government for more than 20 years and he could be a judicious replacement for Cyril Ramaphosa, an ANC politician who served on SABMiller’s board from 1999 until 2013, when he retired in order to become more active politically. Read on


United Kingdom – SABMiller hurt by bad weather in China

And we thought the sun would always shine on China beer (metaphorically speaking). But see what a spell of bad weather can do to a brewer that has a national market share of approximately 24 percent and operates 95 breweries across the country.

SABMiller on 21 January 2015 reported a 1 percent drop in lager volume in the third quarter of its financial year (ended December 2014), hit by continued weakness in China because of bad weather and lower U.S. sales. Fortunately, its soft drink volumes continued to expand, rising 4 percent. Read on


Ireland – Diageo extends terms of payment to 90 days

Globally, Guinness’ net sales declined 4 percent in the six months to December 2014, driven by a weaker performance in Nigeria, Indonesia and Britain, and the drinks company’s suppliers are going to feel the heat. Diageo, which owns Guinness beer has around 200 Irish suppliers, is extending its standard repayment term to 90 days from 60 days, Irish media reported on 30 January 2015. Read on


United Kingdom – Magners adds whisky to its new cider

If brewers can add spirits to their beers – think Desperados - so can cider manufacturers. Now there are spirit ciders – or “spiders” – to grab the attention of trend-conscious younger consumers. This burgeoning “spider” category has a new entrant in the form of Magners with Irish whiskey.

Each 500 ml bottle of the 5.5% ABV cider contains 25 ml of Irish whisky. The Irish C&C Group, which owns the brand, has termed the launch a “game changer.” The original Magners cider has 4.5% ABV.

The new variant will be rolled out to pubs and bars in March.

Spiders first appeared back in 2013 with the launch of a tequila cider, Manzana Loca, from drinks distributor Hi-Spirits. Last year the UK company SHS Drinks introduced Orwell’s, a 5.5% ABV amaretto-flavoured cider, combining two drinks that are very popular among the cool crew.

Buoyed by spiders’ initial success, marketers believe the category will be worth GBP 50 million in the UK alone by 2018. Read on



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