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Posted June 2016

United Kingdom – Will Brexit turmoil put MegaBrew into jeopardy?

Following the victory of the Brexiteers on 23 June 2016, investors were given their first taste of the turbulence they can expect in the weeks and months to come. On Friday, 24 June 2016, the FTSE 100 index plunged as much as 549.36 points before staging a partial recovery to close down 199.41 points at 6,138.69.

One of the biggest loosers on paper is AB-InBev. As The Sunday Times on 26 June 2016 had the story, AB-InBev, at the end of last year, hedged GBP 45 billion to protect the cash, which it needs to buy SABMiller, against a potential fall in the value of the dollar. While AB-InBev assumed that the dollar might be weakening, it was the pound that fell. In 2015 one pound sterling was worth more than USD 1.50. Now it is worth USD 1.37. AB-InBev’s accounting loss, says The Sunday Times, could run into billions.

Swings in the pound’s value already have been a headache for AB-InBev, but sterling’s plunge to a more-than-30-year low against the dollar on Friday may cause AB-InBev real pain.

Already, there is some investor chatter (they never stop, do they?) that shareholders of SABMiller might vote “no” to the deal. Read on

 

Australia – Lion hands Corona Extra back to CUB

The country’s major brewer Lion will receive as much as AUD 300 million (USD 224 million) in compensation for the early termination of its contract to distribute a portfolio of AB-InBev beers, including Corona, Budweiser, Stella Artois and Becks. The popular brands are handed back to Carlton and United Breweries (CUB), the renamed Foster’s, which is currently owned by SABMiller.

The transfer of the brands out of Lion’s portfolio is a result of the takeover of SABMiller by AB-InBev.

SABMiller bought Foster’s for USD 12 billion in 2011, which resulted in AB-InBev giving its brands to Foster’s competitor Lion. Read on

 

France – What’s “Probably” doing at the UEFA championship?

You may have been wondering, while watching television during the Euro 2016 soccer tournament, what the word “Probably” - posted on the perimeter advertising boards in all nine stadiums in France – refers to. Is it a mistake? And who’s behind it?

It can be revealed that it’s the Danish brewer Carlsberg, the game’s official beer sponsor. Alas, the Danish brewer has had to contend with a small problem in France. In the Grande Nation, there is the “Loi Evin”, a law which prohibits alcohol advertising in football stadiums. Named after the former Health Minister Claude Evin and in effect since 1991, the Loi Evin outlaws the advertising of tobacco and alcohol on TV, cinema and sports arenas to protect the young.

Carlsberg tried to get around this ban creatively by simply using the first word of a slogan, which the brewer employed between 1973 and 2011: “Probably the best beer in the world.” Of course, the word “beer” and the mention of the name Carlsberg are also off-limits. That’s why when the board flips over you will only read “the best in the world.” Read on

 

United Kingdom – SABMiller discloses USD 191 million deal with Meantime

A heady sum. It’s finally been revealed what SABMiller paid for the London craft brewer Meantime last year. According to SABMiller’s annual report 2016, published on 20 June 2016, the company spent USD 191 million on the Meantime business and its assets. When the acquisition was announced in May 2015, both companies declined to disclose financial details. Guesses ranged between GBP 20 and 40 million (USD 61 million) for a 100,000 hl beer business (2015). Read on

 

United Kingdom – Camden Town and Redwell breweries settle over “Hells”

It’s an indication that competition among craft brewers is heating up if they start bickering over words and take each other to court. Redwell Brewery, a microbrewer from Norwich, has agreed to stop producing its Hells Lager in an out-of-court agreement after another craft brewer, Camden Town, which already had a beer with the same name, threatened it with legal action.

Obviously, the term “Hells” in English is a pun. It is a play on “purgatory” and on the German word Helles, a beer style, which has been adopted by many craft brewers. Read on

 

United Kingdom – BrewDog’s founders made MBEs

They seem to have friends in high places (up in Scotland, that is). Probably following recommendations from northern power brokers, the two founders of Scottish craft brewer BrewDog have been awarded MBEs in the Queen's Birthday Honours list.

MBE” stands for “Member of the Order of the British Empire” and is awarded to people in acknowledgement of a significant achievement or outstanding service to the community.

The Queen’s Birthday Honours list was published on 10 June 2016 on the occasion of Her Majesty’s official 90th birthday. In total 1,149 people received an award. Remarkably, in the official send-out James Watt and Martin Dickie got a mention as “strong entrepreneurs”.

Friends James Watt and Martin Dickie set up the sometimes controversial firm in 2007 when they were both only 24 years old. Since then BrewDog has grown from a two-man operation to a globe spanning business with 580 staff, 30 bars in the UK and 15 more abroad. It saw revenue climb 51 percent to GBP 44.7 million (USD 68 million) in 2015, it was reported.

Mr Watt commented: “It's amazing to have been awarded something so prestigious.” And just in time too, before Scotland has another referendum on independence from the UK, which could mean no more royal honours for Scots.

As an aside: Would Her Majesty have been amused had she known that BrewDog’s founders once rolled into London in a tank?

 

United Kingdom – Diageo: a turncoat?

Whose side is Diageo on: Britain’s or Scotland’s? Well, that’s the question which had the Sunday Times newspaper spewing bile on 5 June 2016. With the vote on Brexit coming up on 23 June 2016 and the campaign turning more and more unsavoury, both sides in the debate are lining up their supporters.

Diageo’s CEO Ivan Menezes has vocally endorsed the Remain (in the EU) camp. Now he is being accused of “intellectual gymnastics” by the Sunday Times because, when Scotland had its independence referendum two years ago, he wanted Scotland to remain part of the union. This time, he may support another Scottish independence referendum in case Britain decides to leave the EU. Read on

 

Brazil – Kirin repositions its Devassa brand

As the economy is sinking into recession, Brazil Kirin – the renamed brewer Schincariol - has decided to reposition its popular Devassa brand, while discontinuing the most popular version “Bem Loura”, betting only on the premium variety, made with malt and without the addition of other cereals such as corn and rice, Brazilian media reported on 8 June 2016.

In spite of Devassa’s premium appeal, the retail price will only be upper-mainstream. Kirin justifies this anomaly by saying that it hopes to attract an audience which aspires to premium beers, but now faces a time of lower disposable incomes. Read on

 

Europe – Gadgets to sneak booze almost everywhere

The festival season is upon us. This means overflowing porta-loos, four people in a small tent, and queuing for hours to buy a soggy burger. Music festivals in northern Europe are only for the hardy and the dedicated who don’t mind paying the equivalent of USD 10 for a deodorant stick. That’s why organisers advise punters to take with them reusable water bottles, sunscreen, toilet paper, wet wipes and condoms.

What organisers don’t really want you to bring to the festival compound is nourishments, so that they can charge you a fortune for grub and booze. In fact, Glastonbury in the UK is probably the only major festival that allows you to take your own alcohol and drink it in all of the main arenas.

No wonder, captive audiences have gone to some lengths to avoid having to splash out on drinks.

Reader, I had no idea how savvy punters have become to smuggle drink into festivals. Australians seem to be the most unperturbed rule-breakers, arguing they will not pay AUD 8 (USD 6) for a can of beer at a festival, which is more expensive than at a bar. Also, they seem to possess the most nous where to find alcohol carrying kit on the internet. Well, it has to be the internet, will it not?

On a recent visit to Australia, some younger friends immediately pointed me towards a site selling stuff I never even knew existed. Containers range from various types of plastic pouches, which can be strapped around your middle or hidden in your bra (best bought only if you happen to be flat-chested woman) to all kinds of pseudo gadgets like binoculars, mobile phones, cameras, shampoo bottles, skin lotions and tampons. These all look like the real thing but, in actual fact, serve as booze containers. The point is, these utensils will pass muster should there be a body check at the entrance.

If you don’t believe me, check out this site for wares: http://coolpile.com/gadgets-magazine/43-cool-gadgets-to-help-you-sneak-booze-almost-everywhere

What I also did not know is that you can buy most of these contraptions at amazon.com. Amazing.

Mind you, fooling the security guys does not come cheap. A two-pack of faux tampons (10 empty containers) will cost you USD 19.99 plus postage. In that case you might as well treat yourself to a cold one or two at the festival.

If you are unsure whether to smuggle or to buy, bear in mind the following: how much beer you plan on imbibing at the festival depends on how much you want to remember of the festival.

 

United Kingdom – Meantime to partner with craftsmen for pop-up bar

Clever marketing. London’s craft brewer Meantime has partnered with various designers and craftsmen in six UK cities over a six-month period in a bid to grow its presence outside the UK’s capital. Accompanied by a social media campaign, the craftsmen are to produce various objects and decorations that would be found in a pub – with all six being exhibited in a pop-up bar in London in October. Read on

 

USA – Anti-GMO Vermont forces Big Food to rewrite labels

Who would have thought that Americans are finally becoming concerned about GMO foods and that it’s the tiny state of Vermont - with only 600,000 residents – that is setting a precedent?

As of 1 July 2016 Vermont requires all products sold in the state, which contain genetically modified organisms (GMO), to be labelled as such. Labelling, opponents of GMOs say, isn’t so much a health warning as a matter of letting consumers choose whether they want to support the production system such foods represent.

The law has prompted some major food producers such as Kellogg, General Mills and Mars to re-label all of their products, not just those going to Vermont, to save costs.

It should not come as a surprise that the law was hotly debated and criticised by a host of pressure groups, not least the agricultural lobby. That’s why the Vermont law comes with lots of exemptions.

Revealingly, alcohol products, such as beer and spirits, need not state if they contain genetically engineered material. Perhaps, the exemption was granted on the basis that no one knows as yet when “genetically modified” (GM) becomes non-GM. If you think that in brewing the corn added is mainly in the form of sugars (after mashing) and then these sugars are transformed by yeast ... how many degrees of separation do you need to clarify? Nevertheless, rumour has it that the grain/corn bourbon whiskey lobby and the farmers intervened successfully, as currently up to 92 percent of U.S. corn is genetically engineered (GE), as are 94 percent of soybeans , says the Center for Food Safety, a pressure group. Read on

 

United Kingdom – MegaBrew one step closer to completion

The billion dollar question: will AB-InBev pass all regulatory hurdles before 12 August 2016 when SABMiller is scheduled to pay out its final dividend of GBP 0.65 a share totalling roughly USD 1.5 billion? That is on top of the GBP 44 a share AB-InBev is paying SABMiller’s shareholders. If the deal is completed earlier, AB-InBev will pocket the dividend. If not, SABMiller’s present shareholders will.

The South African Competition Commission’s conditional approval of AB-InBev’s acquisition of SABMiller on 31 May 2016 is one important step in this regard. It is expected that the South African Competition Tribunal, which will have the last word on this matter, could have its hearing by mid-June and might be over within a day or two.

If the transaction also receives the go-ahead from China and U.S. authorities (The EU has already conditionally approved of the deal) that might leave AB-InBev and SABMiller with just enough time for the necessary documentation and shareholder meetings to be finalised before 12 August 2016.

In addition to a host of conditions related to the public interest, the South African Competition Commission has obliged AB-InBev to sell SABMiller’s 27 percent stake in South Africa’s wine, cider and spirits producer Distell within three years of the merger’s completion. This stake is currently worth some USD 560 million. Insiders say that AB-InBev had already signalled its willingness to dispose of the stake.

The commission further required that the merged entity provide 10 percent of its refrigeration space in retail outlets and taverns to the beer products of smaller competitors. Read on

 

USA – Justice Department may approve of MegaBrew this month.

A potential approval for the USD 100 billion-plus deal between AB-InBev and SABMiller may include measures to keep the merged entity from edging craft brewers out of the market, Bloomberg reported on 1 June 2016. These steps could include limiting the company's ownership of distributors.

Craft beer makers have expressed concerns that the deal will hurt the fast-growing U.S. craft beer industry, as they use the same network of distributors as AB-InBev and MillerCoors.

However, the smaller brewers do not appear to be getting much traction in meetings with Justice Department officials about their complaints, Bloomberg reported.

To alleviate regulator’s concerns, AB-InBev has already offered an upfront divestiture to a specific purchaser. Under the proposal, Molson Coors would acquire SABMiller's stake in the MillerCoors joint venture, which Molson Coors already co-owns.

 

USA – Starbucks and AB-InBev to launch RTD tea in U.S. in 2017

Beer, tea or me? The old chat-up line comes to mind when commenting on AB-InBev’s latest venture: a tie-up with Starbucks, which will see the major brewer in the U.S. produce, bottle and distribute a ready-to-drink (RTD) line of Starbucks’ Teavana brand tea in the United States. This was announced on 2 June 2016.

The move will help Starbucks broaden its reach beyond coffee, while it will allow AB-InBev to fill capacity at breweries and give its network of more than 500 distributors a non-alcoholic beverage to sell.

RTD tea is one of the fastest-growing beverage categories in the U.S., with consumption rising by 6.1 percent in 2015, according to data service firm Beverage Marketing Corp. Read on

 

Venezuela – Polar’s beer will be back on shelves

Good news for thirsty Venezuelans. The country’s major brewer Polar will resume beer production in the first week of July 2016, having secured a loan that will enable it to purchase the necessary raw materials.

While Polar’s smaller rival brewer – Regional - managed to obtain forex and has continued its beer production, Polar had to shut down its four plants in late April, laying off 10,000 workers, because of a barley shortage. It said it was unable to import the key ingredient as it could not access dollars under socialist President Nicolas Maduro's tight currency controls.

As bars and shops ran dry, Polar negotiated a USD 35 million loan from the Spanish bank BBVA, putting up its shares in an investment fund as collateral. The cash will enable the company to buy barley, hops and steel sheets for cans - enough to resume production next month and get through the rest of 2016, Polar said on 2 June 2016. Read on

 

Korea – Brooklyn Brewery goes Asia

After Stockholm and Trondheim, Brooklyn Brewery will tap into South Korea’s booming craft beer market by building a brewery in Jeju, a tropical island off the country’s southern coast, which serves as a popular tourist destination.

Steve Hindy, the co-founder of Brooklyn Brewery, said in a press conference in Itaewon, central Seoul, on 24 May 2016 that craft beer has been gaining popularity among local drinkers since 2010 but the market is still very small, compared with other regions like the U.S., western Europe, and Japan.

According to a report by the Australian government (February 2016), beer imports increased over 300 percent between 2009 and 2014 with Korean consumers shifting their preference from local beers to premium brands, ales and wheat beers. One reason for this change was the implementation of free trade agreements between European countries and the United States. Read on

 

South Africa – Craft Brewers’ Powwow in Cape Town

Is it plain northern hemisphere ignorance or something altogether more sinister why news coming out of Africa gets ignored unless it fits the cliché of Africa as a place of misery and warfare? Or how could it be that the business magazine Forbes in November 2015 published an infographic on the global craft beer boom which left South Africa a white spot – as if no craft breweries could be found there?
See for yourself at: Forbes

In South Africa, craft brewers currently number around 180, which is a lot considering that in the rest of sub-Saharan Africa (Uganda, Kenya, Ethiopia) there are only about eight craft breweries operating.

The boom in craft beer is a fairly recent phenomenon but has taken the Cape Town beer market by storm. Considered a bit of hip place and an incubator for all kinds of fancy food trends, it’s no wonder that today the Cape area (Western Cape, to be precise) has the most craft breweries (80), according to industry personality Lucy Corne and was chosen as the location of the first industry get-together, the Craft Brewers’ Powwow, a beer expo and conference. Read on

 

USA – Sour is the new bitter

It’s hard to imagine that the corporate fat cats, aka members of the global business elite, who read Bloomberg Businessweek, regularly go for a sour beer. I mean, can you envisage the Coke-swilling super-investor Warren Buffett ever allowing a Rodenbach Grand Cru to touch his lips?

Yet, Bloomberg Businessweek magazine on 9 May 2016 published a two-page spread on sour beers with the teaser saying that craft beer cognoscenti should “move on from IPAs and imperial stouts and try a sour beer” as “previously little known European styles and modern American ones have soared in popularity to the point where the once obscure genre is becoming mainstream.”

Sour beers mainstream? My foot! But if Bloomberg Businessweek says so it must be true. Read on

 

Namibia – Windhoek brewery installs biomass boiler

The country's major brewer, Namibia Breweries (NBL), has invested NAD 53 million (USD 3.3 million) in a biomass boiler at its Windhoek plant.

The boiler, which was imported from Austria where wood-fuelled heating systems are fairly common, will allow the brewery to replace 80 percent of the 3600 tonnes of heavy fuel currently being used per year with wood chips available in abundance in Namibia.

NBL’s Windhoek brewery has a capacity of 3 million hl. The plan is to use 7500 tonnes of wood chips per year to replace 3100 tonnes of oil.

When the plant was commissioned it was with a view to reduce costs, as then the price of oil was fairly high. Since then the price has plummeted which will extend NBL’s return on investment. However, the investment in biomass technology was primarily driven by NBL’s commitment to reducing its carbon footprint, as the new boiler will deliver about 8000 tonnes reduction in carbon emissions per year, it was reported. Read on

 

Philippines – Heineken and Asia Brewery sign joint venture agreement

It’s all very hush-hush. Asia Brewery, a subsidiary of Philippine conglomerate LT Group, said on 27 May 2016 that it had struck a deal with Heineken that will allow it to brew the popular Dutch beer brand later this year.

The press release did not say how big Heineken’s stake in the joint venture will be, only that the new venture will be called AB Heineken Philippines and that it aims at tapping the country's growing demand for international premium beer, which according to Heineken stood at 0.3 percent of total beer consumption in 2013.

The Philippine beer market was about 16 million hl in 2015, which puts per capita beer consumption at 16 litres in a country of about 100 million people.

San Miguel, in which Japan’s Kirin has a 48 percent stake, currently controls 90 percent of the overall Philippine beer market, which leaves Asia Brewery with a market share of under 10 percent. Read on

 

Belgium – EU gives green light to AB-InBev’s takeover of SABMiller

The European Union is the first major regulator to approve of AB-InBev’s USD 100 billion plus acquisition of rival SABMiller, on the condition that the brewer shed nearly all of SABMiller’s European assets.

The European Commission, the EU’s competition agency, said that despite initial antitrust concerns AB-InBev’s concessions assuaged those worries. The deal is still awaiting approval in the U.S., China and South Africa. The regulatory review process in those markets is ongoing. Read on

 

United Kingdom – The cost of fending off AB-InBev

The ongoing USD 100 billion plus takeover of SABMiller by rival AB-InBev has so far cost the London-listed beer giant GBP 111 million (USD 160 million) in banking and legal fees, as well as pay-outs to retain important members of staff. This was disclosed on 18 May 2016, when SABMiller reported full year results. Read on

 

United Kingdom – Aldi lures shoppers with craft beer special

Will hipsters be taking their Audis to Aldi to buy craft beer? As of 30 May 2016, the discount chain Aldi has been selling a range of 18 UK-brewed craft beers in its stores. Aldi said it was tapping into the booming craft beer market, which is currently worth an estimated GBP 420 million USD 607 million).

Tony Baines, Joint Managing Director of Corporate Buying at Aldi, was quoted as saying: “Our buying team has scoured every corner of the UK to source an eclectic collection of fantastic ales, and we're delighted to be able to bring this exceptional collection to shoppers across the country at an affordable price.”

Reportedly, the German discounter has spent GBP 600,000 (USD 870,000) on launching the craft beers in its English and Welsh shops. Only a limited number of bottles have been produced by the 13 breweries which signed up for the scheme. Read on

 

USA – Craft brewer spoofs Budweiser's renamed “America”

The response came within days. In early May 2016 AB-InBev announced it is replacing the Budweiser logo with “America” on its 12-oz. cans and bottles this summer. The cans of patriotic beer will be available from 23 May through the November election and aim “to inspire drinkers to celebrate America and Budweiser's shared values of freedom and authenticity,” the brewer said.

This led the small Michigan-based craft brewer Saugatuck Brewing Company, which produces about 15,000 barrels beer per year according to press reports, to launch its own version called “Murica”. Read on

 

USA – San Diego’s Ballast Point to build brewery in Virginia

Constellation’s deep pockets. Not only did the beer-to-wine group Constellation splash out a record-breaking USD 1 billion for the San Diego-based craft brewer Ballast Point in November 2015, it has now agreed to invest nearly USD 50 million to establish an East Coast brewing operation in Roanoke, Virginia, a city of 100,000 people that is located 380 km southwest of Washington DC. This was announced on 24 May 2016.

Ballast Point began in 1996 as a back room brewery behind founder Jack White’s home brewing shop, Home Brew Mart. The company's main production facility is in Miramar, San Diego, but it also has brewery locations in San Diego's Little Italy and Scripps Ranch neighbourhoods.

The company has developed a wide portfolio of award-winning beers, including its signature Sculpin IPA. Last year, Ballast Point sold nearly 330,000 hl beer, up from 45,000 hl in 2013. Read on

 

 

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