Beer Monopoly




    International Reports







Posted June 2012

South Africa - Brandhouse's threesome problems

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 companies. Read on

Netherlands - Publicans rise against brewers

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." Read on


Switzerland - Publicans up in arms against Carlsberg

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 2012. Read on


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). Read on


Russia - Carlsberg to brew Holsten in Russia

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 2004.

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. Read on

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. Read on

Australia - Craft brewers commit to work together

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 years.

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. Read on

Nigeria - Rise or fall - it's all a matter of perspective

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 in London.

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. Read on


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. Read on

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. Read on

Australia - CCA's Pacific push underlines its beer ambitions
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.
Read on

United 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 outsider.

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.” Read on

United 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. Read on


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. Read on


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 Mexican brands.

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 be considered.

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 beverage business.

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 consider alternatives.

USA - 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? Read on


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. Read on

United 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). Read on



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