Beer Monopoly





  International Reports








Posted January 2009

USA – Breakthrough for stevia sweetener

Odwalla, Inc., a USD 190 million health beverage company in the U.S. and owned by The Coca-Cola Company, has added two new reduced-calorie juice drinks to its product portfolio in December 2008. Odwalla Mojito Mambo and Odwalla Pomegranate Strawberry are sweetened with TRUVIA natural sweetener, developed jointly by Cargill and The Coca-Cola Company. Why is that news? Because TRUVIA, which is made from the stevia plant, has never been approved by the U.S. Food and Drug Administration (FDA), which has kept stevia off the GRAS list of approved food and beverage ingredients for well over a decade (to protect aspartame profits, critics charge).   

Shortly before Christmas 2008, Coke started delivering stevia-sweetened Odwalla Mojito Mambo and Odwalla Pomegranate Strawberry nationwide and hoped to introduce Sprite Green in New York and Chicago before the end of the year.

Pepsi will follow with SoBe Lifewater in three flavours (black and blue berry, Fuji apple pear and yumberry pomegranate) as well as a 50 percent reduced-calorie orange juice, Trop50.

The launch of these drinks marks Coke’s victory over the FDA which has taken its own sweet time over granting the stevia-derived sweeteners the status of “generally recognized as safe” (known as GRAS in the industry).

For years, Coke has been lobbying for a GRAS status for TRUVIA.

Industry pundits say that GRAS is a short-cut to get approval for an ingredient without going through the usual array of studies on the safety and health effects intended to prove an ingredient safe. This short-cut saves the industry a lot of money and potential test animals a lot of suffering.

GRAS has another benefit: advocates of stevia-based sweeteners feared that sweetener manufacturer Cargill would get an approval exclusive to their highly purified version of stevia sweetener, called TRUVIA. But GRAS status should allow competitors to enter the market. Some stevia-based sweeteners and even softdrinks are available on the market already, being marketed under the "dietary supplement" label, a regulatory loophole which allows the sale of products with less safety testing.

In retrospect, the battle to get TRUVIA permitted in the U.S. had very little to do with stevia’s safe or unsafe use. Instead it seems to have been all about power – or who wields more power: the FDA or industry.

Just consider this. In November 2008, Coke’s patience with the FDA is running out. Early in December, The Coca-Cola Company announces it will begin selling beverages sweetened with stevia even without FDA approval. How could this be done? Well, Coke would simply "self-affirm" TRUVIA as being a safe sweetener.

Obviously, the FDA sees its authority threatened by Coke. If Coke can simply declare ingredients to be safe and start using them, then what's the point of having FDA approval?

The FDA isn't happy about Coke threatening an end-run around the FDA's regulatory power, so it begins to look at ways to make life difficult for Coca-Cola. Hence, on 10 December 2008 the FDA fires a shot at Coke, saying its Diet Coke Plus products are illegally labelled. Funnily, Diet Coke Plus has been on the market for over 18 months, but only now, after the TRUVIA threat, did the FDA decide to move against Coke.

Coke responds by saying its products are legally labelled. The FDA does not respond.

Or rather, it responds on 17 December 2008 by issuing a letter "authorizing" Coke to market stevia-sweetened beverages. The other option would have been to halt the marketing of stevia products.

It appears that the FDA felt it does not have the political power to pull that off against Coke. With its hand forced by The Coca-Cola Company, the FDA issues a "letter of no objection" that allows Coke to sell stevia-sweetened beverages and still maintains the appearance of FDA authority.

In the battle of Coke vs. the FDA, the regulator’s reputation has been tainted. The truth of the matter is that Coke was about to market the products anyway, without FDA approval. As was argued, the FDA has become little more than a regulatory ragdoll. Having worked so closely with other businesses (namely the producers of other sugar substitutes) it had no credibility left to move against The Coca-Cola Company.

The recent ruling by the FDA still has not cast a decision if stevia-based sweeteners are really safe to use. GRAS-status is not the same as “safe”.

Although the stevia plant has been used by inhabitants of its native growth zones for centuries as a sweetener, even its defenders admit that it has side-effects, namely that it can adversely affect human fertility.

Studies have suggested that stevia sweeteners can have cancer-causing effects and mutagenic effects, as well as reducing male fertility. But all the news is not bad. In Japan, for example, the natural low calorie stevia sweeteners have been preferred over artificial sweeteners for the past four decades.

Food standards agencies in Australia and New Zealand have also approved stevia as an ingredient for food and beverages in October 2008.

Only the EU is holding back on approval for use of stevia in food and beverages.


Peru - Backus increases domestic market share to 86 percent

It takes some courage to enter a market where the dominant player controls almost 90 percent of sales. But that’s exactly what the Ajegroup has done. In August 2007 it opened a USD 50 million brewery in its homeland to brew the Franca beer brand. Even though the Franca beer brand is positioned as an economy brand – usually a recipe for success - and the Peruvian beer market has been growing, the Ajegroup still has not managed to penetrate the countryside beyond Peru’s urban centres.

Distribution, distribution, distribution. Ask any newcomer to a market and they will tell you that distribution remains the biggest obstacle to any business success. The privately-owned Ajegroup probably underestimated the problems it would encounter when it started brewing in Peru. Having mastered the challenges of building its first brewery ever near Lima, the family owners probably thought that selling beer in a country of 27 million people whose beer consumption has been rising significantly over the past decade would be easy. Alas, it was not to be.


Although the Ajegroup priced its Franca beer much lower than the market leader Cristal (Backus/SABMiller), most consumers had trouble literally laying their hands on a bottle. Thanks to exclusivity contracts with retailers, the market leader Backus managed to keep Franca off the shelves in Peru’s sales outlets.


Keeping Franca away from the doors while reducing overall market prices for beer – a move the Goliaths of the market will find easier to stomach than the Davids – meant that also the Caral brand, another economy brand targeted at young consumers, which was launched by the Ajegroup in March 2008, found itself unable to crack open the market.


In view of an overall price decline of 40 percent in recent years it is remarkable that the country’s three brewers, Backus, the Ajegroup and AmBev, found the money to engage in an all-out TV war. In the first six months of 2008 (which includes the low-consumption autumn period!), the Ajegroup spent USD 18.5 million on advertising its brands Franca and Caral on Peruvian TV. Backus, on the other hand, invested only USD 21.5 million in the same period in all of its brands (Pilsen, Cristal, Cusqueña, Barena and Trujillo) and in all media. AmBev, not wanting to be left out, spent USD 6 million, it was reported, to accompany the launch of its own economy brand Zenda, but only achieved a market share of 1.27 percent in July 2008.

In December 2008, SABMiller announced with a certain amount of pride that its brands achieved a market share of 86 percent, an increase of 5 percentage points over the previous year.

What SABMiller did NOT say was that the share of economy brands (Franca, Caral, Pilsen, Trujillo, Brahma) has risen to 30 percent in 2008 from 28 percent in 2007 and that they could NOT prevent that.

While the Cristal brand is said to have lost share nation-wide last year, Backus’ premium brand Cusqueña managed to increase its market share from 7.4 percent in April to 10.6 percent in November 2008. The Cristal brand continues to lead the market in Lima, with a share of almost 55 percent.

In its press release of 18 December 2008 SABMiller cites market research which gives AmBev Peru a market share of 8.5 percent in Lima.

Franca’s market share in Lima could be close to that – the Ajegroup had hoped to realise a share of 10 percent in 2008 – as the group had already grabbed a national market share of 4 percent in the first year after its launch.

Peru, with its total beer consumption of 10 million hl in 2007, is the smallest beer market in Latin America. Per capita consumption has been growing steadily for years and was 37 litres in 2007 but still significantly lower than at its peak in 1987 when Peruvians downed 42 litres each.


United Kingdom – Budweiser brewery in London to be closed

Well, InBev only promised not to shut down any North American breweries owned by Anheuser-Busch. That did not include Anheuser-Busch’s London brewery. The newly formed A-B InBev plans to close a historic West London brewery under a restructuring of its operations in the United Kingdom. After talks with employees and trade unions the brewery is scheduled to cease production in 2010. With Stella Artois’ volumes in decline, it’s an educated guess that Anheuser-Busch’s London volumes are to be transferred to InBev’s three breweries in the U.K.

Read on


Australia – Foster’s not to be split up?

It’ about time they published the results of Foster’s strategic review. The ongoing market speculation whether Foster’s is going to be split into its wine and beer divisions or not cannot do company morale any good. The deadline for the review of Foster’s wine division is now mid-February 2009. In the meantime the new CEO Ian Johnson advised that the company’s overall performance in the 2008/09 year “was in line with expectations.” Many observers reckon that the group is less likely to hive off its AUD 5 billion wine business, the world's second largest, early in 2009 as there are few obvious buyers and funding is hard to find.  Read on  


Germany – Prinz Luitpold relinquishes executive position at Kaltenberg Brewery

When August Busch III ended his tenure as CEO of Anheuser-Busch after 27 years and became Chairman of the company in 2002, no one thought this transition peculiar. So why does the German brewing industry think that the stepping down of HRH Prince Luitpold, 57, as Managing Director of Kaltenberg Brewery at the end of December 2008 is somewhat premature? After all, Prince Luitpold has been at the helm of Kaltenberg Brewery for 32 years. He co-owns the brewery. And he has a right to put executive responsibilities into the hands of managers while he becomes a general partner. His successors at Kaltenberg Brewery are Klaus Dieter Nicola (distribution) and Frank Salzer (administration), who have worked alongside Prince Luitpold for the better part of last year.   Read on 


Australia - CC-Amatil on track for record profits

Coca-Cola Amatil (CCA) expects a record second-half profit and questions Lion Nathan’s efforts to take-over the group. CCA posted a record first-half profit of AUD 171.9 million in August. At the end of November 2008 CEO Terry Davis said CCA’s growth remains on track. He expressed concern about Lion Nathan’s ability to fund a higher takeover offer.

Pacific Beverages, CCA’s 50:50 joint venture with SABMiller in Australia, had sales growth of more than 150 percent in the past year and it is estimated that alcoholic beverages will account for 25 percent of CCA’a earnings growth in the next two years with carbonated soft drinks estimated to contribute 30 percent growth. Read on 


China – Snow builds brewery in Shanghai

China Resources Snow Breweries, which is owned by SABMiller and China Resources Enterprise, started building a USD 95 million brewery in Shanghai. The plant will eventually produce 4 million hl of beer a year and compete with Suntory of Japan, which controls about half of the market in Shanghai, ahead of  Tsingtao Brewery, which holds about 20 percent.  Read on


Australia – This is not what they intended

There is a hidden danger in drink labels. Rather than serving as a warning, young drinkers are using them to work out the fastest and cheapest way to intoxication. That’s the finding of a study discussed at a conference of the Australasian Professional Society on Alcohol and other Drugs on 24 November 2008. Read on


USA - MillerCoors to take caffeine out of Sparks drink

In December 2008, after months of debate, MillerCoors agreed to stop producing Sparks as an alcoholic energy drink in a pact with the Attorneys General of New York, San Francisco and twelve other states. As part of the agreement, MillerCoors said it will eliminate caffeine, taurine, guarana and ginseng from the product and will no longer produce those caffeine-alcohol combos in the future. MillerCoors is the last of the big brewers to bow to consumer pressure, having found it increasingly difficult to present itself as a purveyor of beverages of moderation while making these types of products. Read on


Brazil – Say uncle, AmBev

The Brazilian anti-trust agency SDE will investigate a complaint by local brewer Kaiser (owned by FEMSA) that AmBev is using its exclusivity contracts with retailers to squeeze other brewers out of the market. The agency is also investigating whether AmBev is limiting competition by supplying retailers with refrigerators that can only store AmBev’s products.  Read on


France – Pernod Ricard sells four brands to Norwegian drinks group

Just before Christmas 2008 Pernod Ricard signed an agreement with Arcus Gruppen for the disposal of the Grönstedts Cognac, Star Gin, Red Port and Dry Anis brands. Without the divestment of these brands, the European Commission would not have agreed to Pernod Ricard’s acquisition of Swedish drinks group Vin & Sprit (Absolut vodka) finalised on 23 July 2008. Read on


Australia - New marketing initiative for Australian wine

The Australian Wine & Brandy Corporation (AWBC) has invited twelve influential individuals, including wine writers, sommeliers and beverage directors from hotel chains, from Asia, Europe and North America to a week-long tutorial and seminar in the Barossa Valley in June 2009.  Read on


Sudan – Hurray, a cool one!

Although the brewery is to open in a month’s time, SABMiller is still keeping shtoom about its yet-to-be-named beer. Expect it to be a lager, though. What else? Many investors have eyed up the predominantly Christian and semi-autonomous southern Sudan, but only SABMiller would take the risk of opening a brewery in its capital Juba. Once the USD 37 million brewery is up and running, imports of expensive beer from the three neighbouring countries of Uganda, Kenya and Ethiopia will probably drop drastically. Read on 


India – Trouble brewing at United Breweries

When it took over Scottish & Newcastle’s stake in United Breweries (UB), India’s major brewer, early in 2008, Heineken hoped to enjoy the same rights as its Scottish predecessors. This was not to be. Despite being an equal shareholder—Mr Mallya, the other shareholder, also controls 37.5 percent of UB —Heineken does not enjoy any management or business rights in a company that has nearly 48 percent of India’s beer market. UB has insisted that its business ties with Scottish & Newcastle (S&N) were specific in nature and not extended to Heineken. Now a breakthrough in the uneasy relationship between Heineken and UB seems to have been brokered.  Read on


Ukraine – Setting a signal

Slavutich Carlsberg may stop beer production at its Kiev plant in response to a price hike in water as of 1 December 2008 which made the price of water quadruple. Slavutich claims that water costs in beer production are quite significant. If the Kiev plant is shut down, production would be moved to the company’s Lviv and Zaporizhya plants. This would be a snub to Kiev’s bickering politicos, who preside over a 3 million people capital, where unemployment stands at 27 percent (official figure) but where the average one room flat costs in excess of USD 140,000 and restaurants charge brewers USD 20,000 just to have their beers included in their drinks menu.         Read on


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