Beer Monopoly





  International Reports








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 representatives. Read on


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 spending.

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 open.

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 assets piecemeal.

Hopefully this isn't the end and the final chapter on Antigua Brewery is yet to be written.


UK - 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. Read on


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. Read on


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 buyback programme. Read on


USA - August Busch offers settlement to the son of his deceased girlfriend

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. Read on


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 funds.

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 Metropoulos.

The Metropoulos family declined to comment about the reasons behind the move or how many local jobs it might create in California.

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 and more than two dozen other executives. Read on


United Kingdom - Put women on boards, or we will

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 for Foster’s

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. Read on


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. Read on


China - 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. Read on


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. Read on


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.       Read on


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. Read on


Mexico – Diageo in talks with Cuervo on options

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. Read on


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 imminent.

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 2009.

Diageo’s harsh jobs announcement brings the immediate economic realities facing Ireland firmly into focus.

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 equipment. Read on


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. Read on



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