Posted June 2012
South Africa - Brandhouse's threesome
Why is Namibia Breweries Limited (NBL) buying
a 15.5 percent stake in the Sedibeng brewery in South Africa,
which is currently owned by Heineken (75 percent) and Diageo (25
percent)? The decision was made public by NBL's majority
shareholder Ohlthaver and List Group of Companies (O&L) in May
2012, without giving details of the purchasing price.
Ever since the EUR 340 million Sedibeng
brewery was opened in 2010, it has produced branded products
under licence from all three shareholders of Brandhouse
(Heineken, Diageo and NBL), namely Diageo's RTDs, Heineken's
Amstel and Heineken, as well as NBL's Windhoek Lager.
Observers have always questioned the efficacy
of the Brandhouse structure, which attempts to implement
marketing and distribution strategies for three different drinks
Netherlands - Publicans rise against
The news that the Royal Dutch Hotel &
Restaurants Association (KHN) has sued Heineken, Grolsch,
Bavaria and AB-InBev for compensation after the four formed a
trust between 1996 and 1999, has made headlines in various Dutch
and Belgian newspapers.
In early June 2012, KHN pressed charges,
trying to enable individual bar owners to file a claim, Belgian
newspaper De Tijd noted. KHN's Lodewijk van der Grinten was
quoted as saying: "Competition in the Dutch beer market is not
sound, bar owners are held 'captive' by the breweries which also
is bad news for consumers, as they are forced to pay more for a
glass of beer."
Switzerland - Publicans up in arms against
The Basle publicans' association has stepped
up its campaign against Carlsberg: miffed that they are charged
what they consider rip-off prices for locally produced Carlsberg
beer and Coca-Cola products, the association decided to
self-import these beverages from neighbouring countries where
they are much cheaper. On 30 May 2012 they held their first
ex-works sale of 100,000 bottles of Carlsberg and Coca-Cola to
local restaurateurs. They sold them at a discount of 51 percent
and 57 percent respectively to locally available produce.
Carlsberg, which owns the local
Feldschlösschen brewery, is Switzerland's major brewer. The
association says Carlsberg is abusing its market position. After
Carlsberg's latest beer price hike, the publicans responded in
kind by lodging a complaint with the Swiss competition
authorities, Weko, against Feldschlösschen. That was in February
United Kingdom - Punch Taverns becomes a new
type of business: the corporate undead
In May 2012, Punch, which is Britain’s
biggest pub operator with some 5,000 pubs, has reportedly
started talks to reduce its GBP 2.5 billion (USD 3.9 billion)
debt pile, which will lead to an acrimonious battle for control
of the company.
According to people familiar with the
situation, Punch Taverns has proposed a complex loans-for-equity
swap that would allow it to walk away from much of its debt but
give creditors a majority stake. The plans are expected to
trigger a fight for control between thousands of bondholders,
who stand to lose billions, and shareholders, who have already
seen the value of their stakes crumble, it was reported.
The company built up the debt in an ambitious
expansion drive but its shares have dropped from nearly GBP 14
five years ago to about GBP 0.08 (!) after it was hit by the
smoking ban and a fall in trade following the financial crisis.
Its market value has shrunk from GBP 3 billion to GBP 53 million
(USD 82 million).
Russia - Carlsberg to brew Holsten in
As we saw in Australia earlier this
year, the alignment of brewers often leads to a re-shuffling of
brand licenses. Following the line-up of SABMiller and Turkey's
Efes, Carlsberg decided to use a clause in the contract with
SABMiller which forces SABMiller to hand the Holsten brand over
to Carlsberg's Baltika.
Holsten in Russia is quite a success
story - at least among German beer brands. In the 1990s, when
Germany's Holsten brewery was still independent, Holsten's
exports to Russia stood at over 600,000 hl annually. That was
before the Russian Ruble Crisis of 1998. After proper imports
had suddenly become too expensive for the Russian consumers,
Holsten gave SABMiller the rights to brew and distribute Holsten
in Russia. SABMiller seems to have done a good job at
brand-building as Carlsberg has refrained from taking over the
Holsten brand until now, although it bought the Holsten Brewery
In 2010 Holsten ranked fifth among
the top 10 international premium and superpremium brands in
Russia, behind Tuborg, Efes, Miller Genuine Draft and Kozel (the
latter two both owned by SABMiller), says Canadean.
Russia - Carlsberg makes offer to minority
shareholders of Baltika
Shareholders of Baltika Breweries, which is
majority-owned by Carlsberg, have until 9 August 2012 to accept
a voluntary offer for their shares. The voluntary offer is
conditional upon the Carlsberg Group increasing its ownership to
more than 95 percent.
Australia - Founders of Yellow Tail wine
branch out into beer
The Casella family, famous for producing
Australia's best known wine brand Yellow Tail, finally confirmed
in April 2012 that they plan to become a player in the
Australian beer market. Tara Tara! But why has it taken them so
long to declare their intention? For almost a year, the Casellas
have had their newly-built 300,000 hl brewery sitting idle. From
what we have heard, the family spent AUD 130 million (USD 128
million) on this brewery, which is located right next to their 3
million hl winery in Griffith, a town 600 km to the west of
Sydney. They had even recruited staff: brewers Andy Mitchell,
formerly with South African Breweries and Anthony Clem, a
veteran of Lion Nathan plus Fiona Seath, a marketer, who used to
work for Heineken in the UK.
They were all ready ... but not rearing to
go. In recent months, whenever the Casella brewery project was
broached, industry observers in Australia would tap their noses
saying that apparently the Casellas did not know what kind of
beer to brew.
Australia - Craft brewers commit to work
By forming an industry association in May
2012, many of Australia's craft brewers have committed to work
together, aiming at 5 percent market share in the next five
Twelve months after the working group first
met to discuss forming an industry association for craft beer,
the Craft Beer Industry Association (CBIA) has held its
inaugural annual general meeting.
Nigeria - Rise or fall - it's all a matter
Is Nigeria really the promised land
that international brewers Heineken, Diageo and SABMiller make
it out to be? Or is the country a house that has fallen - whose
roof may still be intact but shows many gaping holes, as risk
consultancy Menas Associates, London, argues in a recent report?
At least from the point of view of
international oil companies, the risks of major oil and gas
investments in Nigeria have now begun to outweigh the rewards
Jonathan Bearman for Menas concluded at briefing on 5 May 2012
Faced with worsening political and social
instability and on-going oil theft - there are big investments
made in illegal pipelines, storage and even mini topping
facilities - the larger international oil companies are in an
orderly retreat from Nigeria, only prevented from an outright
exit because the country is too big a reserve base to do
without, says Mr Bearman.
Belgium - AB-InBev not out on the prowl,
says chief strategist
Who would have thunk - AB-InBev officially
rules out certain takeover scenarios? Jo Van Biesbroeck, 55, the
Chief Strategy Officer of AB-InBev, has defied rumours that the
world's number one brewer is keen on taking over SABMiller or
PepsiCo. Although experience shows that a strategist who comes
clean on the truth is actually a contradiction in terms, Mr Van
Biesbroeck, in an interview with the Belgian newspaper De Tijd
on 29 May 2012, said that "while we always look for
opportunities [for deals], our focus is now on internal growth."
So organic growth is it for AB-InBev. Hark his words.
Brazil - Cocktail hour for Diageo
So will all of us be slurping
Caipirinhas from now on?
British drinks group Diageo announced at the
end of May 2012 that it is buying a maker of Brazil's most
popular spirit, cachaça, for USD 470 million, thus boosting its
expansion in fast-growing emerging markets while biding its time
on a tequila deal.
Australia - CCA's Pacific push underlines its
In terms of volumes, the beer markets of
Fiji, Papua New Guinea, Samoa, New Zealand and Guam don't spell
"BIG". But having secured multi-year agreements to distribute
brews such as Modelo’s Corona Extra, Carlsberg’s eponymous brand
and Molson Coors’ Coors Light, Carling and Cobra brands in these
countries, Coca-Cola Amatil (CCA) will be able to prove itself a
worthy distribution partner for these global brewers ahead of
its return to the Australian beer market in 2014.
Kingdom – SABMiller’s boardroom reshuffle rouses criticism
SABMiller’s minority investors are a tad concerned. Some worry
that it’s all getting a bit too cosy on the brewer’s board. The
recent boardroom reshuffle, announced on 23 April 2012, failed
to bring new faces on to the board. Moreover, the elevation of
Graham Mackay, SABMiller’s long-standing CEO to Chairman stands
to defy UK corporate governance practices, which do not permit a
chief executive to become chairperson unless there is a good
explanation from the company. The corporate governance codes are
also not keen on the chairperson being a full-time executive, as
Mr Mackay will be for a year.
As was reported, Mr Mackay will serve as executive chair for a
year, after which his replacement as CEO, Alan Clark, will take
day-to-day control of the world’s number two brewer.
The criticism does not extend to Alan Clark, the soon-to-be CEO,
who has also been with the brewer for decades. Research by
strategy consultants Booz & Company has consistently shown that
insiders recruited to CEO do better than outsiders, because they
have a feel for how the firm actually works. A big firm is a
complicated organisation. It has a culture that cannot be
understood simply by reading the accounts. That is why a typical
insider CEO produces better returns for shareholders than an
The appointment which flies in the face of the corporate
governance code is Mr Mackay’s promotion to executive chairman
which, in the lingo of the financial world, is called “kicking a
CEO upstairs” as The Sunday Times wrote on 20 May 2012. The ST’s
commentator argued that investors have the right to worry about
empire-builder-CEOs “who stay around for so long that they think
the company is theirs. Bringing in new directors from the
outside is a good way to stop that from happening.”
Kingdom – Where would SABMiller be without Africa?
SABMiller, the last of the big four global brewers to report
full year results, said on 24 May 2012 that revenue jumped 11
percent to USD 31.4 billion for the twelve months to 31 March
2012. Pre-tax profit was up 55 percent but that was flattered by
more than USD 1 billion in one-off items, including the sale of
its Russian and Ukrainian businesses to Anadolu Efes, in
exchange for a stake in the business.
Australia – A hard landing for SABMiller
Australian media report that Foster's has had a rough start
under new owner SABMiller, losing contracts that accounted for
almost 10 percent of sales by volume, while seeing its flagship
VB beer brand continuing to decline.
In annual accounts submitted to the London Stock Exchange in May
2012, SABMiller revealed that the loss of contracts to brew or
distribute imported brands such as Corona, Asahi, Stella Artois,
Carlsberg and Kronenbourg had wiped 915,000 hl from its annual
volume sales, which in 2010/2011 were 9.71 million hl.
The owners of the brands - SABMiller's international rivals -
were able to terminate their contracts with Foster's under
change-of-control provisions triggered by the USD 12.3 billion
takeover, completed in December 2011.
As if the loss of these high-profit brands was not bad enough
for Foster’s earnings, the defection of these brands will
culminate in Foster's relinquishing its position as Australia's
largest brewer to Kirin-owned competitor Lion sometime this
year. Lion is the maker of the Toohey's, Hahn and XXXX brands
and the new local distributor of market-leading import Corona.
Australia – Who wants to pick up the dregs?
While the Corona contract has been moved from Foster’s to Lion,
its sister brands Negra Modelo and Pacifico are still stuck in
limbo. No one seems to want them. Australia’s largest
privately-owned brewer Coopers has recently ruled itself out of
contention for Corona's sister brands, rightly feeling miffed
that it was not given the big Corona contract (600,000 hl sales
in 2011), despite having been invited to its auction by Grupo
Modelo. This has led to speculation that Lion could end up with
the Mexican beers after all.
We heard on the grapevine that Coopers was offered Negra Modelo
and Pacifico after the brands were “overlooked” by Corona's new
Australian distributor, Lion, meaning Lion did not want them.
These two brands have sales volumes way, way, way below Corona
and will require quite some marketing effort.
Having secured the Carlsberg brewing and distribution deal last
month, Coopers must now feel even less inclined to take on these
Which could mean that Lion’s “no, but thanks” position on Negra
Modelo and Pacifico, meanwhile, could have changed to a
“perhaps” – if the terms are right.
USA – Corporate profiteers circle PepsiCo
Is this the writing on the wall? In mid May 2012 the activist
investor Ralph Whitworth disclosed that his hedge fund
Relational Investors has bought a USD 600 million position in
PepsiCo Inc, amid talk that the company should separate its
beverage business from its faster-growing snacks assets.
Whitworth's Relational Investors LLC in a regulatory filing
disclosed ownership of 8.98 million shares, or less than 1
percent, of PepsiCo. The investor gave no explanation for the
stake and did not call for change, but according to reports,
Whitworth and PepsiCo’s management have met and agreed that,
should the company's stock performance not improve, changes will
Don’t hold your breath wondering what these “changes” might be.
If we read Mr Whitworth’s actions correctly, he will push
Pepsi’s management towards “doing a Kraft”: in August 2011 Kraft
announced its intention to split its grocery business from its
snack food unit.
Relational has been a shareholder of PepsiCo
since last year, buying 3.25 million shares in the third quarter
of 2011, it was reported.
Having lost market share in the U.S. to Coke in
recent years, PepsiCo announced in February this year that it
would cut 8,700 jobs and boost its marketing spending by as much
as USD 600 million in hopes of jump-starting its carbonated
Although PepsiCo CEO Indra Nooyi has argued for some time that a
spin-off would be too expensive and would cost both units the
benefits they enjoy from their large size and scale, she also
said in February that, should the increased marketing push not
generate results in the next 18 to 24 months, PepsiCo would
Kraft shareholders approve of name change to “Mondelez”
Altria, Diageo, Mondelez – seems like companies these days are
given weird, strange, suggestive or just plain bad names. In
preparation for the eventual split, scheduled some time later
this year, the shareholders of Kraft Foods on 23 May 2012 voted
to change the name of the company to Mondelez International.
What can Mondelez possibly mean? Irene Rosenfeld, Chairman and
CEO of Kraft Foods, said: “Mondelez has an appealing
international sound that perfectly evokes the idea of a
‘delicious world.’ That’s the essence of our global snacks
company.” Oh yeah?
Ireland - SABMiller and Carlsberg may bid for C&C
It’s probably the same people who can hear the grass grow that
have launched the recent rumour that some industry bigwigs are
considering a bid for Irish drinks group C&C, the maker of
Bulmers and Magners cider and Tennent’s lager. Actually, they
have just rehashed speculation that has been flying around for
over two years. In May 2012 the story that SABMiller, Carlsberg
and Molson Coors (why not Heineken, too?) may have been nosing
around C&C made some ripples in the Irish media. Still, none of
the companies has been in direct contact with the board of C&C
or made a final – and public - decision on whether to pursue a
bid or not.
Heaven knows what has triggered the gossip now. The departure of
C&C CEO John Dunsmore, which could have been interpreted as an
indication that the company was a takeover target, occurred way
back in December 2011.
Obviously, C&C has no interest in a sale, which could value the
group at EUR 1 billion. Several sober-headed analysts also
refuted the gossip, saying that C&C is "not likely" to be a
takeover target in the short term.
Kingdom – The Scots clamp down on heavy drinking
The Scottish government announced in May 2012 that its preferred
minimum price for alcohol will be GBP 0.50 per unit (EUR 0.63).
Health Secretary Nicola Sturgeon was quoted as saying that, at
this level, the price was equivalent to the GBP 0.45 per unit
price set in 2010 after taking account of inflation. Setting the
price at this level would have significant health and social
benefits, she added. Under the new legislation, a bottle of wine
would cost at least GBP 4.69 (EUR 5.87) and a four-pack of lager
at least GBP 3.52 (EUR 4.40).
2009 december ·