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Posted January 2015

Australia – Beer sales down almost 3 percent in 2014

That sinking feeling. According to estimates, beer sales in Australia declined over 2.6 percent in 2014. How come? Has beer become too expensive? Or have consumers switched to other drinks? The only one not worrying is Coopers Brewery from Adelaide. The family-owned brewer saw sales increase 7.4 percent in its past financial year (end of June 2014). In the calendar year 2014 it brewed slightly under 800,000 hl beer, which means that Coopers now holds about 5 percent of the total Australian beer market, the company’s strongest position in its 153-year history. Read on

 

Germany - Brewers look back on a successful year

After a preliminary review, the German Brewers Association reported on 12 January 2015 that beer sales in 2015 were slightly up on the previous year. The rise in sales was triggered by the stable consumer climate, a relatively short winter and the good weather in spring and early summer, especially during the Football World Cup. The German Brewers Association estimates that per capita beer consumption in 2014 (alcoholic and non-alcoholic beer) rose to 107 litres, the first increase in many years. Considering that 2014 also saw a beer price increase, the result is even more impressive. Now German brewers worry that 2015 may prove tough going. Read on

 

Iceland – Brewer Stedji slammed over whale beer

What a screamer: Icelandic microbrewery Stedji has produced a beer in time for the country’s mid-winter festival, Thorri (23 January until 22 February 2015) which has the world up in arms. Stedji’s Hvalur 2 beer (hvalur = whale) is made with the testicles of fin whales that were smoked in a “traditional way” with dried sheep dung. What makes the beer so political is the fact that fin whales are classified as endangered on the conservation Red List.

The outcry from conservationists was, well, loud. Vanessa Williams-Grey, anti-whaling campaigner at Whale and Dolphin Conservation, was quoted as saying: “This is a calculated move, not only to dishonour a beautiful and endangered creature by using its most intimate of body parts as a marketing tool, but also sends a clear ‘two fingers’ to the conservation community and those who love and respect whales.”

She added: “Right-minded people would no sooner drink beer brewed with whale testicles than they would order similar drinks made with tiger, elephant or rhino testicles and our hope, of course, is that visitors to Iceland will treat this latest offering with the disdain it deserves.”

Dagbjartur Ariliusson, from the brewery, reportedly said: “We live in a country that allows whaling and the whaling is very well controlled by the Icelandic authorities, but fisheries here are self-sustainable and very responsible.

“According to our research the fin whale in North Atlantic is not at risk of extinction.”

In the old Norse calendar, Thorri was the name of a month that ran from roughly mid-January to mid-February. Thorri is a reference to the ancient deity of frost and winter, which is fitting since it was usually the coldest month of the year. During this month there was usually a blót, or a sacrifice combined with a festival, to appease the god and ensure the return of summer. With Christianization this tradition died out, but was resurrected by romantic nationalists in the 19th century, and Thorrablót celebrations (minus the sacrifice) have today become a firmly established tradition.

During modern Thorrablóts, it is customary to eat some of the old-fashioned foods Icelanders used to consume before they had refrigerators. The dominant flavours are pickled, salted, dried and smoked. Some of the food is quite good, but a lot of it will seem very strange to those unfamiliar with it, like blood pudding, singed sheep head, fermented shark and pickled rams’ testicles (yes, you read correctly).

This is the second time Stedji has produced a beer containing bits of whale. Last year it launched a beer for Thorri containing whale meat, which caused an online s***storm.

Unfortunately, the beer sold out quickly and I was unable to get hold of it during my visit to Iceland in June last year. However, a very knowledgeable salesperson at Vinbud, Iceland's state-owned monopolist alcohol retailer, told me that he had tried the beer and could not sniff or taste anything “fishy” about it.

Call me a monster but I did try whale sushi. It was not particularly nice. It tasted like squidgy, slimy and chewy black snot. I, for one, would not have wanted that taste in my beer.

 

USA - Craft brewers are running out of names for their brands

It’s a big worry: with over 3,000 breweries operating in the U.S., basically every large city, landscape feature, creature and weather pattern has been grabbed and trademarked as the name of either a brewery or a beer. For newcomers to the increasingly crowded industry, finding names for their beers, or even themselves, is becoming harder and harder without risking a legal fight.

Of course, no brewery will intentionally infringe upon another's trademarked name, image or font style. Yet, with tens of thousands of brands in the American beer market, it happens often. As there are only so many words and names to associate with beer, it’s not surprising that many people will come up with the same ideas. Doing research if your dreamed up name has already been taken by another brewer can be both time-consuming and costly.

Name overlaps may not matter if the beers are sold in different regions, but when two large breweries with broad distributions are involved, the matter often needs to be resolved by lawyers. Read on

 

Ethiopia – Heineken officially opens Addis Ababa brewery

In a ceremony attended by 300 guests, including the Ethiopian Prime Minister Hailemariam Desalegn, Mrs Charlene de Carvalho-Heineken and hosted by Jean-François van Boxmeer, CEO of Heineken, the EUR 110 million brewery was unveiled on 15 January 2015.

With a total capacity of 1.5 million hl, the Kilinto brewery on the outskirts of Addis Ababa is already producing the recently launched Walia beer, together with Bedele and Harar beer brands. It is planned that the site will also brew other brands including the flagship Heineken beer.

Employing around 280 people, the new plant complements the Bedele and Harar breweries, which were acquired from the Ethiopian government in 2011 for USD 163 million. The new brewery is part of a total EUR 310 million investment in the country by Heineken since 2011, taking its brewing capacity to an estimated 2.4 million hl. Read on

 

Denmark – Investors bet that Carlsberg’s share price will drop further

Since the end of November 2014 Carlsberg has seen 15 percent of its market capitalisation wiped out. On 12 January 2015 it was valued at DKK 74 billion (EUR 9.94 billion/USD 11.7 billion). Some analysts estimate Carlsberg’s value could decline by another 10 percent this year. So far, Carlsberg’s efforts to reassure investors it can weather continued losses in Russia have shown little sign of working.

Media reported in early January 2015 that, as the biggest brewer in Russia, the Danish company was pummelled by a 39 percent slump in the ruble against the euro in 2014 - the worst decline of all currencies except for Ukraine’s hryvnia.

Speculation that Carlsberg won’t be able to bounce back from the currency shock has led to a surge in bets (“shorts”) that the company’s shares will decline further.

Short interest in Carlsberg rose to 4.7 percent of the company’s free-floating stock on 6 January 2015, which is 11 times the level recorded less than half a year ago, according to data compiled by Markit and Bloomberg. None of the world’s three largest brewers – AB-InBev, SABMiller and Heineken - has short interest above 1.8 percent, according to Markit. Read on

 

USA – Craft brewers to toast 2014

How good can it get? Craft beer has yet to reach its saturation point. The industry’s U.S. revenue hit an estimated USD 4.2 billion in 2014, and it is now the fastest-growing alcohol category by revenue.

In 2013, the craft beer industry represented less than 8 percent of the total beer market by volume, but has likely surpassed 10 percent in 2014. Analysts expect it will own a 20 percent share of the U.S. beer market by 2020.

The Brewers Association reckons that there are now 3,200 licensed breweries in the U.S. after 1,650 at the end of 2009. The U.S. is adding 1.5 new breweries a day and they’re all fighting for a piece of a shrinking market — or, at least, a shrinking light lager market.

With beer, many consumers want to experiment with bolder flavours. They are dropping mild lagers like Budweiser for bitterer India Pale Ales, coffee-flavoured porters and barrel-aged stouts. Budweiser has gone from being one of four beers available on draft in a typical bar to one of 10 or more”, the Wall Street Journal reported on 28 December 2014.

We are late to the game,” Luiz Edmond, AB-InBev’s North American president was quoted as saying. “It took us more than it should to recognize the trends.” He added that “you shouldn’t be surprised” if the company buys a few more craft brewers. Read on

 

Korea – Diageo and customs office strike deal on tax fine

There is always a way, even with fines. The years long tax dispute between Diageo Korea and the Korean Customs Office came to an end on 7 January 2015 after the Korean branch of the world’s largest distiller decided to accept a court’s mediation, Korean media reported.

Under the deal, the spirits company is expected to pay a fine of around 200 billion won (USD 184 million), a sharp reduction from the 400 billion won initially imposed by the Customs Office on charges of tax evasion.

The Customs Office claimed that the company had dodged a massive amount of tax by underreporting the prices of its imported spirits and received a combined 400 billion won in fines on two occasions. Diageo had refused to pay the fines and brought the case to an administrative court. Read on

 

USA – Coke to cut 1,800 jobs globally

Soft drinks giant Coca-Cola is set to cut up to 1,800 jobs worldwide as it continues its cost-cutting efforts, various media reported on 9 January 2015.

The Coca-Cola Company reported a 14 percent fall in earnings for the July to September quarter last year and sluggish revenue growth. The job cuts will affect the firm's Atlanta headquarters, as well as its international operations.

 

United Kingdom – Wetherspoon and Heineken settle dispute

In early January 2015 the pub operator JD Wetherspoon settled a dispute with Heineken that prompted the chain to ban the brewer’s drinks from its 926 pubs in Britain and Ireland. The argument erupted in December after Heineken’s Irish arm refused to supply its eponymous lager and Murphy’s stout to Wetherspoon’s new pub in Dún Laoghaire, County Dublin.

Industry analysts said Heineken may have been unhappy that Wetherspoon was undercutting other pubs in Ireland by charging EUR 3.00 (USD 3.55) a pint for its lager, compared with an average price of about EUR 5.00 (USD 5.50).

Wetherspoon responded by scrapping all Heineken’s drinks from its pubs putting GBP 60 million in sales a year at risk.

Announcing an end to the spat, Wetherspoon said its UK pubs would serve Heineken lager and the brewer’s other brands Fosters, Kronenbourg 1664, Strongbow, John Smith’s Extra Smooth and Amstel. Its Irish pubs will serve Beamish, Fosters and Symonds Cider but not Murphy’s or Heineken.

Who won in the end? Well, obviously, the “Aldi of pubs”, Wetherspoon, which is not afraid to take on the big guys. It has already fallen out with Diageo over the pricing of Guinness in Ireland, which means that Wetherspoon cannot serve Guinness at its Irish pubs. Although it seems that Wetherspoon did not get its way with Heineken either, over time the big brewers will have to reconsider their stance as Wetherspoon makes further inroads into the Irish pub sector.

The Dún Laoghaire pub, opened in December, is Wetherspoon’s second in Ireland, where it plans to open 30 pubs. Read on

 

Denmark – Carlsberg’s stock swoons as ruble plunges

Russia has just lost the economic war with the West, media touted in December, as her currency descended into free fall. Russia’s economy is facing a perfect storm – as is Carlsberg. Since July 2014, Carlsberg’s stock has lost what it managed to gain since 2011. In December alone, Carlsberg’s market value slumped more than USD 2 billion, giving it a market capitalization of DKK 70 billion (USD 12 billion).

In November 2014 Carlsberg said that its 2014 net profit would drop between 5 and 9 percent over 2013. But that forecast came before its fourth quarter results.

Carlsberg’s executives see no near-term fix to the company’s plight in Russia.

“The ruble’s decline is substantially watering down the group’s income,” Frans Hoyer, an analyst with the Danish Jyske Bank, was quoted as saying. He added the near-damning verdict: “Carlsberg's Russian business is associated with high risks, and earnings may well lead to some negative surprises next year. Under the circumstances, I am surprised that the share price has not fallen more,” Mr Hoyer said.

“The macro picture is looking very bad for Russia,” stressed Mr Hoyer, who recommends selling Carlsberg shares. “We reiterate our belief that negative GDP growth and inflation will push down real wages in Russia in 2015. Therefore, it is far too early to hope for a growing or simply stabilizing Russian beer market in the near future. The market will almost certainly fall further in 2015 after several years of volume decline, including a decrease of 6 to 7 percent in 2014.”

What does this mean for Carlsberg’s corporate strategy of decreasing its dependency on western Europe through raising its profile in Asia, with profits from Russia contributing the icing to the pie? Read on

 

Germany – Bullish Carlsberg expects to face off cartel fine

It’s going to be an interesting year for Carlsberg Germany. The German Federal Cartel Office expects that its case against Carlsberg Germany will go to court in the first six months of 2015.

As Brauwelt International reported: in August 2011 the Federal Cartel Office opened an investigation of Carlsberg Germany in connection with possible involvement in anti-competitive price fixing. In March 2014, upon completion of the investigation, Carlsberg was fined EUR 62.0 million for collusion, which it contested.

Following the Cartel Office’s investigations into the German beer cartel, Carlsberg and a host of German brewers were slapped with hefty fines, totalling EUR 340 million. However, only Carlsberg and Germany’s major brewing group Radeberger (allegedly penalised EUR 190 million) publically said they would contest their fines in court. Those who chose to pay up instead did so because they were only too aware of the hazards of a court case: the court does not have to stick to the Cartel Office’s fine. It is free to set a lower or a higher penalty.

So why would Carlsberg Germany burden itself with the risk of atrial whose final outcome is far from clear? Observers think that Carlsberg needs to buy time. The fine - plus potential compensation claims by the cartel’s victims - would have negatively impacted Carlsberg’s 2014 full year figures, which are currently the topic of hot speculation anyway, following the ruble’s slump (see article “Carlsberg’s stock swoons as ruble plunges”) .

For the time being, Carlsberg Germany insists that it was not involved in any illegal price fixing and expects the court to fully relieve it of the allegations raised and the fine. It is for this reason that Carlsberg Germany has not made any provision in its 2013 financial statements. Only when the court casts its verdict will the fine become payable. That could be some time off as the Cartel Office is not sure that court proceedings will actually start in 2015.

However, a spokesperson for the Federal Cartel Office also said that to date the Office has never had any of its accusations overturned in court. Read on

 

USA – Founders Brewery sold to Spain’s Mahou San Miguel

And here goes another one. The Spanish brewery group Mahou San Miguel has purchased a 30-percent stake in the Founders Brewing Company, located in Grand Rapids, Michigan. The transaction was announced on 17 December 2014.

Established in 1997, Founders ranked 26th among U.S. craft brewers in 2013 according to the Brewer’s Association. Co-owners Mke Stevens and Dave Engbers have grown the business into a 275-employee, 200,000-barrel-a-year operation, it was reported.

News of the transaction came after Founders declared in early December that it was embarking on a USD 40 million expansion (to 500,000 barrel capacity) that will grow its operation over its entire current city block.

Founders said the partnership would help the brewery tap the growing international market for craft beer, as well as allow Mahou to become directly involved in the U.S. craft beer market. Moreover, as Founders said, it will permit it to pay off some of its long-standing shareholders. “Many of our early investors are aging, and we believe it’s fair that they have the opportunity to realize a portion of their significant investments in the brewery. This is our way of saying thank you for their loyal support over the years”, Founders said.

Mahou San Miguel is the second European brewer to acquire an interest in a U.S. craft brewer after Belgium's Duvel Moortgat took a majority stake in Missouri's Boulevard Brewing Co last year. Read on

 

United Kingdom – Trade bodies call for 2% duty cut on wine and spirits

Will he even hear their call? The Wine and Spirit Trade Association (WSTA) and the Scotch Whisky Association (SWA) are imploring the UK’s Chancellor George Osborne to cut the duty on wine and spirits by 2 percent in his March budget. The “Drop the Duty!” campaign, launched on 15 December 2014, argues that a cut would give a big billion boost to public finances in 2015.

Research by Ernst & Young, commissioned by the two trade organisations, is being used to back their “Drop the Duty!” campaign.

Supported by the TaxPayers’ Alliance, the campaign will seek to highlight how UK consumers currently pay nearly 80 percent in tax on an average priced bottle of spirits and almost 60 percent on an average priced bottle of wine, it was reported. Read on

 

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