Beer Monopoly




    International Reports











Brazil – Heineken in talks to buy Kirin’s Brazilian unit

If the going gets tough – sell. This seems to be Kirin’s approach to its struggling business in Brazil. Since the middle of January media have been abuzz with rumours that Japan’s Kirin Holdings will dispose of its Brazilian beer operations to Heineken as soon as possible.

According to reports confirmed by Heineken on 20 January 2017, the two brewers have largely agreed to an arrangement under which Heineken will reportedly pay USD 870 million for Brazil Kirin – as the unit is called – which is less than a quarter what Kirin paid for it. Brazil Kirin, which operates 12 factories in Brazil, was created in 2011 after the USD 4 billion purchase of local brewer Schincariol.

Kirin is expected to take huge losses on the deal.

Brazil is the world’s third-largest beer market behind China and the US, but has seen beer volumes drop because of the country’s protracted economic woes. According to Bloomberg estimates, beer consumption in 2016 declined to 114 million hl, equal to the 2010 level, while at its peak in 2014 it stood at 140 million hl, says the Barth Report.

When Kirin bought Schincariol, the company ranked second behind AmBev, a unit of AB-InBev, and produced 19 million hl beer (2011). But due to volume and market share losses, Kirin’s beer sales reached only an estimated 10 million hl in 2016.

In 2016, AB-InBev still led the market with nearly a 70 percent share, now followed by local brewer Petropolis (13 percent), Heineken (9 percent) and Kirin (8 percent) – if estimates are to be believed. Read on


Germany – Beer sales up slightly in 2016

Preliminary data by the German Brewers Association suggest that German brewers sold more than 96 million hl beer in 2016, which represents a small increase over 2015 when sales stood at 95.7 million hl.

Exports, which had risen to 15.7 million hl in the January to November period, helped boost beer production, increasing by 4.2 percent year-on-year.

According to the German Brewers’ Association, exports to countries outside the EU, in particular Asia and America, increased strongest. Read on


USA – Is Samuel Adams becoming the Budweiser of craft beer?
It may be an unfair comparison, but a pertinent one. When Boston Beer reports its full year results in February 2017, the craft brewer is expected to record lower year-over-year revenue. That would be a first for Boston Beer since 2003.

Observers say this is a worrisome development because, unlike the last time this happened, growth in the craft beer industry has slowed down. Boston Beer cannot count on any broad momentum in the industry to help it out of this slump.

Not only is the brewer seeing volumes declining because of the continuing weakness of its flagship Samuel Adams brand, but now its Angry Orchard and Coney Island brands of hard cider and soda are ailing, too. In the past, Boston Beer’s ciders and alcopops more than compensated for its struggling beer sales. No longer, it seems. Read on


Switzerland – Craft breweries make alpine country rank 4th in Europe

It’s a record of sorts. Who would have thought that, with 740 breweries in December 2016, Switzerland ranks 4th behind the UK (1,880), Germany (1,400) and France (793) and ahead of Italy (688)? For a country of only 8 million people, that’s a huge number of breweries. Statistically that’s one brewery per 11,000 inhabitants. In comparison the US has only one brewery per 64,000 people. However, most Swiss breweries would be very small indeed as 99 percent of all beer is produced by 49 breweries with an output in excess of 1,000 hl.

The market is a duopoly by Carlsberg (40 percent) and Heineken (20 percent) with official imports having a market share of over 20 percent, it was reported.

Paradoxically, the number of breweries has gone up even as beer consumption has declined. In 2016 alone, over 120 small breweries set up shop. To be counted, all you need to do is to brew 400 litres (!) beer per year. That’s the cut-off rate for excise. If you produce less you don’t pay any. Read on

Australia – Tasmanian craft distiller Sullivans Cove sold

Call that a business plan? Australia's most decorated whisky brand, Sullivans Cove, was sold in December 2016 for an undisclosed sum with the owners admitting that they had underestimated the demands for capital needed to grow the business and therefore chose an exit.

Who are they fooling? Themselves or consumers? As – nearly – everybody knows, whisky distilling is a case of “if you want to make a small fortune, throw a large one at it.” Before you can even start selling your whisky you need to build up inventory for years. So every budding distiller has to be prepared to spend big money without seeing any returns. And even when the whisky is ready to sell you need more capital to keep up with projected demand. In this respect, investors will see returns on their investment after decades rather than years.

Sullivan’s Cove is Australia’s leading malt whisky. It was founded 14 years ago by an investor group led by distiller Patrick Maguire, who will remain with the distillery under its new ownership. Read on

United Kingdom – Heineken turns the clock back on pub ownership

Why has no one noticed that Heineken’s proposed acquisition of about 1,900 pubs in the Punch Tavern group actually nullifies the Beer Orders, a bill introduced by the Thatcher government in 1989 to force the big brewers to divest their large pub estates? Provided the transaction is not vetoed by shareholders bowing to publicans’ protest, brewer Heineken could become the third-largest pub operator in the UK.

This would herald a return of sorts to the 1980s, when the six biggest UK brewers owned around 33,000 pubs. In an effort to increase competition and give consumers more of a choice, the Beer Orders decreed the big brewers couldn’t own more than 2,000 pubs, implying a divestment of 22,000 pubs.

But instead of selling some pubs and keeping the rest, the big brewers created something new - pub companies or pubcos for short - to which they sold all their pubs. Since pubs were such a profitable business, investors piled into what became known as the pub retail industry. By 2009, 27,000 or 43 percent of all UK pubs were owned by pubcos, with the biggest two - Enterprise Inn and Punch – controlling over 15,000 in total. Read on


United Kingdom – Who is the world’s major drinks company?

Financial markets are buzzing with excitement: Kweichow Moutai could take the crown from Diageo as the most valuable drinks company this year. After a heady share price rally in 2016, when its stock climbed 53 percent, the market capitalisation of Kweichow Moutai stood at USD 63 billion on 11 January 2017, only a few billion behind Diageo’s at USD 66 billion.
Who on earth is Kweichow Moutai you may ask? It’s China’s major producer of baijiu, a sorghum-based spirit which may also contain wheat, rice and corn. Read on


USA – Beer market grew in 2016 but only just

Latest data by Beer Marketer’s Insights suggest that in 2016 beer sales were up just 0.4 percent over 2015. According to estimates, AB-InBev’s beer volumes dropped 1 percent, MillerCoors’ was down 1.7 percent, while Constellation’s beer sales rose a whopping 14.4 percent.

In fact, Constellation’s beer shipments – mostly Modelo and Corona imports from Mexico - increased an estimated 2.7 million hl to over 21 million hl in 2016. Read on


Japan – Asahi gambles big time in Europe

A strong warning. Asahi’s acquisition of SABMiller’s central European brands from AB-InBev is a high-stakes, potentially risky strategy to accelerate the Japanese brewer’s international expansion, analysts say.

Asahi has agreed to pay USD 7.8 billion to buy SABMiller’s businesses in the Czech Republic, Poland, Hungary, Slovakia, and Romania, including the Pilsner Urquell brand. The offer values the assets at about 15 times profits (EBITDA), which stood at EUR 494 million in the year ended March 2016, according to Bloomberg calculations. Analysts had thought the assets would sell for 11 times EBITDA, which implies that Asahi seriously overpaid.
Previously, in April 2016 Asahi had purchased SABMiller’s western European assets in the UK, the Netherlands and Italy for USD 2.55 billion. All in all, Asahi has spent over USD 10 billion for European businesses representing 37 million hl in beer sales (2016).
The acquisition will potentially give Asahi a new stable source of revenue as SABMiller was the market leader in Poland, the Czech Republic and Hungary, while occupying number two positions in Romania, Italy and Slovakia. SABMiller/Grolsch ranked third in the Netherlands, behind Heineken and Bavaria.
But that does not mean the deal is risk-free. Europe’s beer markets are very much mature, with sales volumes either flat or in decline. No doubt, competition for market shares will be fierce. Read on


USA – BrewDog watch out: Columbus, Ohio and AB-InBev unite to reduce problem drinking

Who would have thought that choosing the city of Columbus, Ohio, as the site of their first US brewery, could turn into a bit of a PR challenge for BrewDog?

There were at least two reasons why the Scottish punk brewers went for Columbus as the site of their 300,000 hl brewery, which will open soon: one, Ohio is not really overcrowded with craft breweries yet, and two, it’s ideally located for serving both the Chicago and east coast markets.
That AB-InBev has a brewery in Columbus too would have been an extra boon. Because if there is a company the Scots love to hate, it’s the world’s number one brewer.
BrewDog’s frequent PR broadsides would have irked AB-InBev’s top brass no end, so much so that in December 2016 they retaliated in kind. They teamed up with the city of Ohio to reduce the harmful use of alcohol in central Ohio.
The nation’s first such citywide programme will involve studying dangerous behaviours and community needs, and it will create initiatives to reduce harmful drinking.
The Ohio programme is part of AB-InBev’s Global Smart Drinking Goals initiative. The larger initiative is to spend USD 1.0 billion on worldwide efforts by 2025. Similar programmes are being implemented in cities in Belgium, Bolivia, Brazil, China and Mexico. The goal is to reduce the harmful use of alcohol by at least 10 percent by the end of 2020, it was reported.
Why AB-InBev selected Columbus for this initiative did not become clear to observers. After all, AB-InBev operates 12 large plants across the country. And to all appearances, Ohio is no exceptional social hotspot for alcohol abuse.
But the irony was not lost on us at Brauwelt International. Which beer is BrewDog best known for? The answer is: BrewDog brews world’s strongest beer. At the end of November 2016 it had just launched its 2016 edition of its The End of History beer, which is a 55 percent ABV blonde Belgian ale infused with Scottish nettles and juniper berries. Only 10 or so bottles were made and they came wrapped inside taxidermy road kill of squirrels.
Even in the lofty spheres of communication, BrewDog’s marketing appears gross, while AB-InBev’s initiative is laudable.

Australia – Craft brewers association to redefine membership rules

Who is a craft brewer? Only one that is truly independent, Australia’s craft brewers have decided. That’s why the Craft Beer Industry Association (CBIA) has begun the arduous process of deleting the Big Brewers from its membership base.

This came in response to pressure from its smaller independent members, 75 percent of whom, in a recent survey, called for the membership structure to be revised.
The proposed new structure would exclude members such as Asahi’s Mountain Goat, Lion’s Little Creatures and Malt Shovel, as well as Coca-Cola Amatil’s joint venture, Australian Beer Company. Read on


Germany - Leinenkugel to brew anniversary beer with Hofbräu München

This must be a first: a collaboration brew between a US corporate brewer and a Bavarian state-owned one, although few beer lovers will know about the ownership situation.

The Wisconsin-based Leinenkugel likes to tout its family heritage dating back to 1867. But while the brewer may be run by fifth-generation “Leinies”, it has been corporate-owned for nearly 30 years: first by Miller, then by SABMiller and now by Coors.
With a production volume of an estimated 1.2 million hl beer, Leinenkugel is three times as big as Munich’s Hofbräu, but Hofbräu is three times older. It was founded in 1589 to serve Munich courtiers a decent brew. It was only in the 19th century that ordinary Munich citizens could buy the beer too. Read on


USA –Beer investors worry that Trump imposes tariff on Mexican imports

It’s not just car makers that worry over President Trump’s border tax threat, beer importers are concerned too. Although Republicans haven’t yet drafted legislation, Constellation Brands, the number three brewer in the US, is already pro-actively looking at ways to avoid raising prices.

Constellation has seen its share price falling to under USD 150 per share in early January 2017 on fears that President Trump may impose a border adjustment tax which would affect Constellation’s beer imports from Mexico – the Modelo and Corona brands.
The border adjustment tax essentially serves as a tariff on imports where the cost of imported supplies would no longer be deductible from taxable income.
Media say Constellation’s management did a decent job of assuaging fears. Management has been in discussions with US lawmakers about the potential rule change and is well prepared if it does go into effect. The company repeatedly stressed that no law has been written yet and it is no sure thing.
However, 60 percent of the company’s cost of goods sold stem from Mexico. Constellation said they could shift some of those costs within the supply chain to the US so they would remain tax deductible, like the natural gas needed to make the glass bottles.
Bullishly downplaying risks, Constellation said on 5 January 2017 they expect their beer business to grow sales by 16-17 percent for the full fiscal year ending February 2017, helped by last year’s acquisition of craft brewer Ballast Point.


Vietnam – Reports say Carlsberg is not raising its stake in Habeco

What’s going on at Carlsberg? After years of trying to hike its minority stake in Habeco, Vietnam's third largest brewer is allegedly seeking another investor after Carlsberg dropped its plan at the end of December 2016.

Carlsberg, a shareholder since 2008, was reportedly in talks with the Vietnamese company, which is majority-owned by the state, to increase its stake from 17.23 percent to 30.23 percent, but negotiations fell through. The government, which currently owns an 81.79 percent stake in the Hanoi-based company, announced last year that it would cut that down to less than 50 percent.
Along with Sabeco, the country's biggest brewer, which is also state-controlled, Habeco has caught the interest of foreign investors. However, state-media report that both brewers now seem to have second thoughts.Read on


USA – The sign of the New Times in craft brewing: redundancies

Craft breweries are facing slowing growth in the US. After years of two digit growth rates, long-established craft brewers are facing stiff competition from an explosion of small breweries to over 5000 and behemoth brands that have refreshed their offerings to compete.

2015 seemed to be the first year that growth may be reaching a plateau,” said Nick Petrillo, senior analyst at IBISWorld. During the first half of 2016, craft beer sales rose by 8 percent only, according to the Brewers Association.
Market research company Nielsen’s so-called “off-trade” data, which cover about two-thirds of the overall US beer market, showed that craft beer sales rose 4.2 percent in 2016.
Californian craft brewer Stone, which ranked 10th among US craft brewers and raked in more than USD 200 million in sales in 2016, has responded to market pressures by laying off about 60 employees in October. That’s roughly 5 percent of its 1,200-employee workforce, it was reported. Read on


USA - New Belgium revamps its portfolio in one broad stroke

New Belgium Brewing, the country’s number four craft brewer, has scrapped its entire line-up of India Pale Ales and will replace them with new varieties and different hop profiles in 2017.

It has been an interesting year for New Belgium. The Fort Collins, Colorado-based brewery just opened another location in Asheville, North Carolina. It is also building a barrel-fermentation facility at a hotel in Denver and a party deck at Colorado State University’s football stadium. Beyond that, its CEO Christine Perich departed the brewer in October 2016 after a little more than a year on the job which took everybody by surprise and left people wondering if there were plans to sell. Read on


United Kingdom - Beam Suntory takes stake in London gin maker Sipsmith

As in beer so in spirits: big corporate drinks companies are buying up craft distilleries. Spirits giant Beam Suntory, which was formed after the purchase of Jim Beam by Japan’s Suntory for USD 16 billion in 2014, has bought a controlling stake in Sipsmith to drive the global expansion of the pioneering London gin distillery. Read on


South Africa – AB-InBev sells SABMiller’s stake in Distell

The business must be solid if a pension fund buys into it. In June 2016 the South African Competition Commission would only approve AB-InBev’s acquisition of SABMiller if AB-InBev sold SABMiller’s 26 percent stake in local wine and drinks group Distell, the manufacturer of the Savannah cider brand.
The competition watchdog gave AB-InBev three years to dispose of the stake valued at USD 640 million based on its closing price in mid-December 2016, when the sale was announced. Read on


USA – AB-InBev divests SABMiller’s Coke businesses

On 21 December 2016, Coke and
AB-InBev reached an agreement regarding the transition of AB-InBev’s 54.5 percent stake in Coca-Cola Beverages Africa (CCBA) for USD 3.15 billion, thus solving potentially conflicting interests. AB-InBev is a Pepsi bottler in Latin America and had inherited the stake in CCBA when it took over SABMiller. CCBA includes the countries of South Africa, Namibia, Kenya, Uganda, Tanzania, Ethiopia, Mozambique, Ghana, Mayotte and Comoros.
In addition, the companies have reached an agreement in principle for The Coca-Cola Company to acquire AB-InBev’s interest in bottling operations in Zambia, Zimbabwe, Botswana, Swaziland, Lesotho, El Salvador and Honduras for an undisclosed amount. Read on



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