Posted June 2011
Belgium - AB-InBev and the unions: a victory of sorts
After a headline-grabbing strike and 18 months of
hard-bargaining, the Belgian unions scored a victory. Instead of
the 300 jobs, which had been identified for the axe in early
2010, only 167 are to go.
An agreement was reached on 9 June 2011 between AB-InBev's
management and the unions on the restructuring plan. It entails
167 job losses (out of about 3,000 in Belgium), but there will
be no involuntary redundancies. The scheme settled on early
retirements and voluntary departures, said union
Antigua - Government moves to prevent shutdown of brewery
Doing business in the Caribbean is no walk in the park. The
announcement from Antigua Brewery in early June 2011 that it
plans to close operations in Antigua and move to St Vincent and
the Grenadines with the loss of 42 jobs has invited all kinds of
sneers and shrugs from local bloggers who blame their government
for this decision.
They say that doing business in Antigua has been turned into a
nightmare by the ridiculous bureaucracy introduced by its
current government into what was an already inefficient system.
Not mincing their words they claim that Antigua Brewery has not
been immune from the same brainless and restrictive tax
collection methods that are succeeding on a daily basis to put a
stop to the flow of cargo and commerce which creates vital
Outraged locals think that no investor, foreign
or local, wants to pour finances into a country that has made
itself totally non- investor-friendly out of desperation.
The long and short of it is, operational costs in Antigua are
way too high. Everything the country needs has to be imported.
Same for the brewery, whose energy and water bills alone must
have been a nightmare. The brewery has to desalinate its water
because Antigua, an island of 67,000 inhabitants, has no fresh
water source of its own.
High costs compounded by big brewers' inability to tackle tiny
island markets may have been the reason why Antigua Brewery has
changed hands several times over the past few years. Formerly
locally owned it was bought by Denmark's Royal Unibrew in 2007,
when the Danish thought it a good idea to become a major beer
player in the Caribbean, only to be sold to Cerverceria National
Dominicana (CND) from the Dominican Republic in 2009.
Antigua isn't a bad market for beer if you consider that
Heineken exports about 10,000 hl annually to the island .
Antiguans and tourists take to beer like elephants to water,
locals like to joke.
So why has Antiguan Brewery been hit by hard times? In 2005 the
brewery produced 63,000 hl of beer and non-alcoholic beverages
(28,000 hl of which were beer) and was running at a profit. In
2010 it is believed to have seen its beer volume drop to 18,000
hl and its total output to 41,000 hl.
If I were to make an educated guess I'd say that both Royal
Unibrew and CND did not get their priorities right. Putting up
advertising billboards all over the islands is not enough to
drive up sales, while your operational costs skyrocket. That's
why you are bound to hit the proverbial wall sooner than later.
The brewery, which has been underinvested in since 2005,
probably needs a couple of million USD to repair leaking pipes
and bring down utility costs - plus the Government's commitment
to provide energy at net cost prices.
The Antiguan Government has asked Empresas Leon Jimenez SA, the
company from the Dominican Republic that owns Antigua Brewery,
to tell them under which conditions they might keep the brewery
From what Brauwelt has heard, CND is not interested in a sale of
the brewery, which was in the red to the order of USD 7 million
last year. Instead CND wants to sell the brewery's production
Hopefully this isn't the end and the final chapter on Antigua
Brewery is yet to be written.
S&N pensioners angry with Heineken
Heineken is front row and centre of a PR disaster. Thousands of
pensioners from the former Scottish & Newcastle (S&N) brewery,
represented by the S&N Pensioners Group think that the company's
new owner, Heineken, has not honoured pension promises. On 6
June 2011 the S&N Pensions Group (SNPG) made big headlines.
Following Heineken's announcement that they would not provide a
discretionary pension increase in 2010, SNPG screamed murder
because they think Heineken's decision was in defiance of an
assurance given by Heineken when they bought S&N in 2008.
UK newspapers report that SNPG has even called for Heineken CEO
Jean-François van Boxmeer to be summoned before a parliamentary
committee in the UK.
Australia - 100 lose jobs at Foster's
Foster's has sacked 100 workers from its
Melbourne corporate headquarters. The staff -- from the
company's back office, including the marketing and finance teams
-- were told of the redundancies on 6 June 2011. They join 50
workers from the Foster's company's Abbotsford brewery outside
Melbourne who were made redundant last month.
Foster's chief executive John Pollaers was quoted
as saying that the spin-off of the group's loss-making wine
business allowed the company to focus on finding savings.
"Unfortunately, this has involved a number of roles being
identified for redundancy,'' Mr Pollaers said.
USA - Constellation Brands would eye deals
Is it just idle talk? Or does Constellation really have the
financial umph to buy Foster's former wine division, now listed
on the Australian stock market under Treasury Wine Estates? In
May 2011 Constellation Brands said they would evaluate an
acquisition of Australia's Treasury Wine Estates if the newly
independent Treasury was up for sale.
Constellation, the world's largest wine maker,
has grown through acquisitions, such as by buying Ravenswood in
2001, Robert Mondavi in 2004 and the wine portfolio of Fortune
Brands in 2007.
More recently, the USD 3.3 billion turnover company has been
paying down debt, which peaked at almost USD 5.3 billion in
2008. As of the end of February 2011, Constellation had USD 3.2
billion of debt (3.6 times EBITDA) and just announced a share
August Busch offers settlement to the son of his deceased
Just as well the former A-B CEO August Busch IV did not seek
re-election as Director of AB-InBev. His legal woes, which have
dogged him for the past six months following the death of his
girl-friend at his home on 19 December 2010, aren't going to be
over any time soon. On 7 June 2011 St. Louis media reported that
a judge had postponed indefinitely a USD 1.5 million
wrongful-death lawsuit settlement offered by Mr Busch to the
young son of his deceased girlfriend.
USA – Headquarters – here today, gone tomorrow
Funny the new owners of the Pabst Brewing Company should want to
relocate headquarters to Los Angeles. Only a few years ago
Pabst's headquarters had been lured to Chicago from San Antonio,
Texas with the help of a big wad of tax dollars and training
The company, which owns Pabst Blue Ribbon, Schlitz and Old Style
beer brands, was purchased last year for about USD 250 million
by billionaire investor C. Dean Metropoulos, who then granted
control of Pabst to his Los Angeles-based sons Daren and Evan
The Metropoulos family declined to comment about the reasons
behind the move or how many local jobs it might create in
It was to be expected that the Metropoulos family would shake up
the company. Perhaps the changes were implemented a bit too
aggressively because they led to the departures of Pabst's CEO
more than two dozen other executives.
Kingdom - Put women on boards, or we
At SABMiller they heard the message and appointed two female new
non-executive directors. That's probably in response to Lord
Davies of Abersoch’s independent report to the UK Government
published in February 2011, in which he said that listed
companies in the UK should aim for a minimum of 25 percent
female representation by 2015. He gave chairmen six months -
until September 2011 - to announce their aspirational goals.
Deutsche Bank boss Josef Ackermann's recent
comment that a woman's presence on a company board might make
meetings "prettier and more colorful" probably did not go down
well with Lord Davies.
Lord Davies argued that “over the past 25 years the number of
women in full-time employment has increased by more than a third
and there have been many steps towards gender equality in the
workplace, with flexible working hours and the Equal Pay Act,
however, there is still a long way to go. Currently 18 FTSE 100
companies have no female directors at all and nearly half of all
FTSE 250 companies do not have a woman in the boardroom. Radical
change is needed in the mindset of the business community if we
are to implement the scale of change that is needed."
Was Lord Davies playing to the gallery of loony feminists? No.
He was adamant that getting more women involved in corporate
decision-making was not just about promoting equal opportunities
but about improving business performance.
"There is growing evidence to show that diverse boards are
better boards, delivering financial out-performance and stock
market growth," he claimed.
SABMiller is a constituent of the FTSE 100 Index
and therefore one of the 100 most highly capitalised UK
companies listed on the London Stock Exchange.
Prior to May 2011, there had been only two women on SABMiller's
board. As of now there will be three (out of 13) after the
appointment of Lesley Knox, 57, and Helen Weir, 48, who agreed
to join the SABMiller board as independent non-executive
directors for an initial period of three years. Both new
directors, with a background in finance and retailing, have been
appointed to the audit committee, and Lesley Knox will also join
the remuneration committee.
Mr Meyer Kahn, Chairman of SABMiller, said: "I am
delighted to welcome Lesley Knox and Helen Weir to our board. We
are extremely fortunate to have secured the services of two such
excellent and well-qualified candidates, with such a wealth of
strategic, financial and international experience. Their
appointments reflect our continued commitment to the process of
progressive renewal of the board, and to the benefits of
diversity of background, gender and experience at board level.
With these appointments, one-third of our independent
non-executive directors will be women, and we will be well
positioned in terms of the future balance of the board."
Which turns the spotlight on SABMiller's competitors. When we
lasted counted AB-InBev‘s Board of Directors had 12 members, no
women. Same with Carlsberg. Its Supervisory Board has 12
members, no women. Heineken's Board of Directors has four
members, of whom one is a woman and she is major shareholder
Charlene Lucille de Carvalho-Heineken.
Just as well these companies don't have their
primary stock market listing in the UK.
When it comes to women on its board, Diageo has been the best in
class for some time. Of its 12 board members, four are women.
Incidentally, Lord Davies also sits on Diageo's Board of
Directors (since 2010). Apparently he did not think that the
women's presence made the meetings merely "prettier
and more colorful".
Australia - Modelo and Molson rumoured to consider joint bid
So much for stock market hype. As soon as the rumour broke that
the most unlikely of buyers had set their eyes on Foster's,
shares in the brewer went up more than 7 percent early on 3 June
2011, raising its market capitalisation to USD 9.5 billion. It
seems that investors must be getting so desperate for a deal
that, if only for a second, they could believe a bid by Molson
Coors and Mexico’s Grupo Modelo was in the offing.
Kenya - SABMiller Africa sells stake in Kenyan brewer
East African Breweries (EABL) has agreed to buy a 20 percent
stake in its Kenyan unit from SABMiller's African unit for 19.53
billion shillings (USD 225 million), EABL said on 6 June 2011.
As part of a wider deal to undo their reciprocal financial ties
EABL will sell its own 20 percent stake in neighbouring Tanzania
Breweries (controlled by SABMiller) through a public offer.
Britain's Diageo, which majority-owns EABL, announced in 2009
its intention of ending a brewing and distribution deal with
SABMiller. SABMiller huffed and puffed and dragged Diageo to a
London court. In the end they reached an agreement which led to
the disentangling of ties as announced in June 2011.
- AB-InBev and CR Snow to expand into southwestern China market
AB-InBev and China Resources Snow Breweries
(the SABMiller joint venture) are gearing up for expansion in
southwestern China’s Guangxi region, a market that has long been
dominated by Yanjing and Tsingtao breweries.
For the past decade, both Yanjing Brewery,
which reportedly enjoys an 85 percent market share, and Tsingtao
Brewery have been competing in the Guangxi market.
That might change with the arrival of two
other leading players.
Canada - Molson Coors Canada launches
speciality beer company
They too have had to learn the hard way that you cannot seed,
nurture and grow specialty and craft beer brands in an FMCG
company. Like MillerCoors in the U.S., which outsourced its
craft and import brand business to Denver under the name Tenth
and Blake Beer Company in August 2010, Molson Coors decided to
create a new stand-alone division to better promote these
brands. The launch of the Six Pints Specialty Beer Company was
announced at the end of May 2011.
Belgium – Duvel to appoint ex-AB-InBev
executive to its board
In a highly unusual move, the leading
speciality beer producer Duvel Moortgat plans to appoint Alain
Beyens, 49, to its board. Mr Beyens is currently CEO of StarBev,
which is the central European beer unit AB-InBev sold to private
equity outfit CVC in 2009 for close to USD 3 billion. Before
that Mr Beyens served in various roles for AB-InBev. He was
General Manager for Belgium and Germany and later Zone President
for Central Europe and Zone President for Western Europe. As a
matter of fact, Mr Beyens was one of Duvel Moortgat’s major
competitors in a number of markets.
Belgium – Europe’s brewers spend EUR 1
billion per year to support community events
Brewers know only too well that governments
like to bite the hand that feeds them. Skyrocketing taxes on
beer in some European countries is a case in point. The Brewers
of Europe, fortunately, never tire of telling politicians that
by providing over EUR 57 billion in taxes to European
governments and directly and indirectly employing over 2.5
million people, the brewing sector is a large contributor to the
European economy and that any tinkering with taxation will put
lots of companies and jobs at risk.
In a recent research note (published in May
2011), the Brewers of Europe argue that thousands of public
events across Europe depend heavily on sponsorships by European
brewers and could be in danger amid ongoing scrutiny of such
financial support that totals nearly EUR 1 billion annually.
Mexico – Diageo in talks with Cuervo on
In the spirits industry, where brands rule
supreme, takeover frenzy seems to have caught on now that
Fortune Brands (Jim Beam, Sauza, Maker’s Mark, Courvoisier) is
about to be split up. At the end of May 2011 it was reported
that Diageo is in talks with the Mexican Beckmann family and
owner of Cuervo on whether to continue distributing the Cuervo
tequila brand or to buy it outright. Bankers value Cuervo
tequila at USD 3.4 billion.
Diageo, which is the world’s leading drinks
company but does not own a tequila brand itself, only
distributes Cuervo in most big export markets outside Mexico.
According to media reports, Diageo is in
discussion with the Beckmanns about what happens when this
long-term contract ends in June 2013.
Although the Beckmann family does not appear
to be hard pressed for money, which makes a sale unlikely - at
least at the moment-, Diageo is seen as the clear favourite to
buy Cuervo due to its long-time relationship.
Ireland – Diageo to cut jobs
The Irish are feeling bitter. Only hours
after U.S. president Barak Obama did a publicity stunt for
Guinness when he ordered a pint of the black stuff in a
Moneygall pub on 23 May 2011, the drinks group was telling 400
of its 1,700 Irish staff to brace themselves for job losses. The
Irish are not alone. The brunt of the job cuts is expected to be
borne by workers in countries that have underperformed in recent
years, including Spain.
The world's biggest drinks firm employs
20,000 people world-wide, 5,000 of whom are in the UK. Following
the February 2011 release of Diageo’s half-year results (six
months to 31 December 2010), which saw sales in Europe down 3
percent but up 17 percent and 10 percent in Latin America and
Africa respectively, employees had been aware that changes were
The group needs to divert more resources into
growth markets while slashing costs in stagnant developed
countries. This year emerging markets will be about 35 percent
of Diageo’s total business while in the next three years they
could easily climb to 50 percent according to CEO Paul Walsh.
Still, Irish media thought the timing of the
announcement of the radical restructuring plans most
unfortunate. The shake-up is the most dramatic since Diageo cut
headcount as part of a GBP 120 million cost-cutting drive in
Diageo’s harsh jobs announcement
brings the immediate economic realities facing Ireland firmly
Ireland is important for Diageo but the
market is declining. The Guinness business in Ireland suffered
an 8 percent fall in sales in the six months to December 2010.
By initiating a consultation process with
staff now, Diageo hopes to be in a position to finalise the
redundancies within a few months.
To recognise the importance of Latin America
and Africa, which were previously lumped together as part of
Diageo's international region, Diageo’s CEO Paul Walsh said he
was breaking them down into two distinct regions.
The two new regions Latin America & Caribbean
and Africa will continue to be run by their existing presidents
Randy Millian and Nick Blazquez, while the president of the
international region Stuart Fletcher, who has been with Diageo
for 25 years, will leave the company, it was reported.
USA - Fila Korea buys Fortune’s golf
company for USD 1.2 billion
Guess the Koreans are into golf as much as
the Japanese. Titleist, one of world's best-known golf equipment
names, is getting a new owner after alcoholic drinks maker
Fortune Brands clinched a deal to sell the brand to Fila Korea
Ltd for USD 1.23 billion at the end of May 2011.
Fortune Brands, a hugely diversified company
with products ranging from faucets to drinks and golf equipment,
is preparing for a break-up. Shareholder activists think that
the individual parts are more valuable than the whole.
The first unit to go is the golf subsidiary
Acushnet, which makes Titleist golf balls, clubs and other
United Kingdom – How much alcohol in Cider?
You have to give it to AB-InBev: they are
reassuringly predictable. If they spot a category that’s
growing, they will have a product for it in no time. Viz Stella
Artois Cidre. Not a cider, but a cidre. Already in February 2011
the brewer of Stella Artois beer unveiled Cidre, a “premium,
crisp and refreshing” attempt to cash in on booming sales of the
drink. Supported by a “double-digit” million-pound marketing
spend Cidre hit the supermarket shelves at Easter. A premium
Belgian cider allegedly made from apples fresh from the orchard,
fermented in Belgium and imported to the UK, Stella Artois Cidre
has a crisp and refreshing taste at 4.5 percent ABV. The cidre
is available in 568 ml bottles and 440 ml cans and since May it
is sold in the on-trade too, although not in draught form.
Ciders have gone through a
renaissance in recent years with the launch of
Magners (owned by Irish drinks group C&C),
which is poured over ice, and the re-launch of Bulmers, which
has led to significant volume gains.
The category seems to be carving out a niche
within the alcoholic segment and continued growth is forecast
over the next few years, says market research company Canadean.
Consumer research experts Mintel say cider
sales have soared to 840,000 hl in 2010. The UK market,
dominated by Strongbow (owned by Heineken), is estimated to be
worth GBP 2.2 billion in sales.
may11 · april 11
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