Beer Monopoly




    International Reports







Posted March 2014

Belgium - Europe’s Brewers call for level playing field in EU-US trade talks

The secrecy surrounding the EU-US trade talks – the Transatlantic Trade and Investment Partnership (TTIP) - has already stoked widespread fears among European environmental and consumer groups that the pact will lower standards for everything from apples to automobiles. Opposition to TTIP is rife. But the angst over the potential impact of an EU trade agreement is also coming from mainstream European groups who don’t have a knee-jerk approach to trade agreements.

On 7 March 2014, Europe’s brewers joined in the debate and called for a level playing field on tax relief for small brewers to be included in TTIP. Currently small U.S. brewers exporting to the EU are eligible for the reduced tax rate both in the U.S. and the EU, whilst a European brewer exporting to the U.S. gets no such break.

In their statement, the Brewers of Europe argue: “Just as small brewers from the U.S. can receive significant discounts when exporting to the EU, the ambition is that small brewers from the EU benefit from the same discount in the U.S. as the domestic brewers. In the U.S., whilst the larger breweries pay a federal excise tax of USD 18 per barrel, small brewers pay just USD 7 per barrel on the first 60,000 barrels they brew.”

Research from Ernst & Young and Regioplan published in February 2014 shows that the USD 100 billion U.S. market is the largest export market for Europe’s brewers, with 26 out of 28 EU countries exporting there.

The Brewers of Europe argue further that the discriminatory excise duty system in the U.S., whereby only domestic breweries can benefit, currently disadvantages the 250 or so small European breweries that already export to the United States. And it also discourages hundreds more European beer brands from entering the market, the higher excise duty for imported beers damaging European brands’ export potential.

The call has received strong backing from brewers across Europe, especially in Belgium, the Czech Republic, Italy and the United Kingdom.

Germany – Beer cartel: Radeberger could be fined EUR 190 million

The beer division of German food and beverage company Oetker Group faces a fine of EUR 190 million (USD 263.3 million) for its involvement in fixing beer prices, the German news magazine Focus reported on 9 March 2014.

According to Focus, Germany's Federal Cartel Office is determined to deliver on its threat, issued in January 2014, that it will announce the fine before the end of March. At the time, that was widely interpreted as a sign that Radeberger was unwilling to settle with the Cartel Office out of court. Read on

USA – Revised definition of craft beer

Perhaps the controversy around the Brewers’ Association (BA) and its attack on “crafty beers” has had some good. In early March 2014 the BA revised its definition of a craft brewer. The revised definition states: “An American craft brewer is small, independent and traditional.”

What they mean by this is:

Small: Annual production of 6 million barrels (7 million hl) of beer or less.

• Independent: Less than 25 percent of the craft brewery is owned or controlled (or equivalent economic interest) by a beverage alcohol industry member that is not itself a craft brewer.

Traditional: A brewer that has a majority of its total beverage alcohol volume in beers whose flavour derives from traditional or innovative brewing ingredients and their fermentation. Flavoured malt beverages (FMBs) are not considered beers.

Suddenly some familiar names previously called “crafty” by the BA find themselves on the list of craft brewers. Why? Because the word “traditional” serves as the door opener to the club of craft brewers. Read on

Turkey – Coca Cola İçecek saves Anadolu Efes’ profit in 2013

Thanks to the consolidation of its Coke unit Coca Cola İçecek (CCI) within the group, Turkish brewer and Coke bottler Anadolu Efes saw net profit surge to TRY 2.61 billion (USD 1.2 billion/EUR 846 million) in 2013 from 609.8 million in 2012.

The company reported on 10 March 2014 that sales rose 113 percent to TRY 9.2 billion in 2013, although beer sales volumes declined.

Consolidated beverage sales by volume (including beer and soft drinks) increased 3.8 percent to 85.6 million hl last year. For the full year 2013, Turkey beer operations' total sales volume was down 14.8 percent to 7.3 million hl year-on-year. Efes Breweries International's (EBI) consolidated beer sales volume declined 12 percent to 18.2 million hl. Read on


Czech Republic – No beer for Czech legislators while session in progress

Who would have thought that MPs could be in a state of advanced inebriation when voting in parliament? Apparently, some must have proven very tired and emotional indeed or the speaker of the lower house of the Czech parliament would not have banned the sale of alcohol at restaurants and cafes on the premises of the country’s legislature during plenary meetings in early March 2014.

The decree ends a long tradition of allowing politicians to enjoy cheap beer, wine or spirits during working hours. However, Czech lawmakers will still be allowed to bring their own alcohol supplies to the legislature premises. Read on


Denmark – The Ukraine crisis, Russia and brewer Carlsberg

Has Carlsberg become a risky investment? Shares in Carlsberg dropped 4.3 percent on 3 March 2014 after investors deserted the Danish brewer due to its exposure to the Russian market as the Ukraine crisis escalated, media reported.

In Russia, Carlsberg is the number one brewer with a market share of 38 percent. In the Ukraine it ranks number two with an alleged market share of 27 percent. In 2013 beer consumption in both countries declined by about 8 percent.

That’s why Carlsberg has been looking to Asia for growth of late, after depending heavily for years on Russian beer drinkers for a substantial portion of its profit. But due to tough regulatory changes and deteriorating economic conditions, sales in Russia have been weak for some time now.

Carlsberg bought the 50 percent it didn’t already own in Baltika Breweries, the market leader in Russia, as part of a deal with Heineken of the Netherlands to take over and split up Scottish & Newcastle in 2008.

Immediately, eastern Europe became Carlsberg’s major profit spinner. In 2009 the market zone contributed 52 percent to Carlsberg’s profits (EBIT). However, by 2013 it was down to only 36 percent.

That seems to have got analysts worried. In late February 2014 bankers at J.P. Morgan Cazenove downgraded their investment stance on Carlsberg to “Underweight”, the equivalent of a sell rating, from “Neutral”.

We would remind investors of the significant profit volatility Carlsberg has experienced previously in Russia. Moreover, we believe acquisition risk, at the expense of existing shareholders, in Asia remains,” J.P. Morgan Cazenove analysts were quoted as saying.

Investors have been warned.


USA – Pabst Blue Ribbon for sale – again?

It’s still a rumour but the food industry investor C. Dean Metropoulos has offered the Pabst Brewing Company for sale. Pabst Blue Ribbon is a retro-chic “blue-collar beer” enjoyed by hipsters and budget drinkers alike.

Investors and analysts estimate the company could fetch between USD 500 million and USD 1 billion, it was reported in early March 2014.

Pabst is one of the oldest breweries in the United States. It was founded in Milwaukee in 1844. The company’s portfolio of beer brands also includes Schlitz and Old Milwaukee. It was bought by the beer and property tycoon Paul Kalmanovitz in the 1980s. The company was later left in a charitable foundation after Mr Kalmanovitz's death until a judge declared that it had to be sold as a charity was principally not for profit (which Pabst turned). By 2001 Pabst had become a virtual brewery and production was contracted out to the Miller Brewing Company.

Mr Metropoulos bought Pabst from the Kalmanovitz Charitable Foundation in 2010 for USD 250 million. Read on

USA – MillerCoors tries to woo spirits drinkers with alcoholorific cider and beer

As brewers struggled in the U.S., drinks companies were on a roll. This got MillerCoors thinking – and the result is the launch of two high-alcoholic tipples, aimed at men who tend to drink spirits.

The roll-out of Smith & Forge hard cider in early March 2014 followed the February debut of Miller Fortune, a higher-alcohol lager beer. Already, pundits have sneered that Miller Fortune has to prove a hit if it wants to live up to its name and do better than AB-InBev’s similarly recipeed and much hyped Bud Light Platinum. Platinum was only launched in 2012 to great fanfare and already was down in the double digit figures last year according to estimates. Read on


USA – Pressure on PepsiCo to split into two increases

It’s a cruel world. Because PepsiCo, the company that unites a snacks and a soft drinks business under its roof, has for the past five years underperformed in stock price, operating margins and earnings growth compared with its peers, an “activist” investor in PepsiCo, Nelson Peltz on 20 February 2014 sent a letter to its board that once again put pressure on the company to consider a spinoff of its beverage business.

Mr Peltz’s firm, Trian Fund Management, said it owns about USD 1.2 billion worth of PepsiCo’s stock. Trian, in true “activist” style (also termed rabble-rousing) only began to amass a stake in PepsiCo last year with a view to initiate a split of the company into two. Trian is convinced that the snacks business would be better off on its own as the performance of the soft drinks side of PepsiCo has proven lacklustre. Read on


Belgium – Belgian Brewers launch national campaign for beer

They did not wait for the Brewers of Europe’s generic beer campaign to get off the ground. Instead, they decided to go alone with their own to boost domestic beer consumption. And not too soon. While beer exports from Belgium are up, consumers back home are drinking less and less local beer.

In view of the evidence, last year Belgian brewers decided that something needed to be done. In February 2014 the Belgian Brewers association presented its campaign slogan – “Fier op ons bier” (“Proud of our beer”) – and three TV ads, in which foreigners profess their love of Belgian beer. Read on


Germany – Braukunst Live! beer festival with record number of visitors

More than 100 exhibitors and over 7,800 visitors (+45 percent over 2013) attended the Munich beer festival Braukunst Live! which was held at the weekend of 21 to 23 February 2014. Beer lovers, who on average had splashed out EUR 50 for a ticket and beer samples, were enthusiastic about this year's wealth of innovations, special brews, lectures and master classes offered at the fair. From microbreweries such as Ale Mania or Kehrwieder to traditional breweries such as Hofbräuhaus Munich or Schneider Weisse, from the well-known craft brewer Braufactum to Czech brewer Pilsner Urquell: all drew a crowd. Read on


Belgium – AB-InBev marginalised their rivals in 2013

These are interesting figures: Sales of Budweiser in the U.S. declined 29 percent between 2007 and 2012, says Beer Marketers’ Insights. Budweiser Select was down 61 percent over the same period, Michelob Light a staggering 70 percent. AB-InBev cannot be too pleased. However, rival MillerCoors was not spared either: sales of Miller Genuine Draft dropped 56 percent and Milwaukee’s Best Light 40 percent.

Despite the rise in craft beer sales, total U.S. beer sales fell 2.3 percent or more than 5.6 million hl between 2007 and 2012. In 2013 they barely moved: only +0.3 percent over 2012 according to the Beer Institute. The big brewers like to blame those losses on the recession. But as Beer Marketers’ Insights argues, this is only one of the causes. Most of the above brands have been losing ground for much longer. Which is why, once they start their descent it’s very difficult to reverse this trend. Tell that to AB-InBev. When they “inherited” the brand from the Busches, it had already been going south for ages. Fortunately for them, the overall consequences were not really dicey as the trend towards light beers benefited the rise of their other brand, Bud Light. What may give AB-InBev reason to pause is that there seems to be a shift away from light beers too, says beer Marketers’ Insights. For example, sales of Heineken Premium Light fell 37 percent between 2007 and 2012.

Budweiser’s U.S. troubles do not seem to worry AB-InBev all that much. It may hurt their pride that they have failed to best August Busch IV and his team, who had been already been battling with Budweiser’s lacklustre sales. But for as long as the rise of Budweiser’s global sales makes their rival envious, they are on a jolly ride.

AB-InBev reported on 26 February 2014 that their global beer sales in 2013 declined 2.0 percent. Still, they managed to increase sales of their global brands by 4.7 percent. More importantly, they boosted revenues by 3.3 percent to USD 43.2 billion (EUR 31.3 billion) and EBITDA by 8.1 percent to USD 18.2 billion. EBIT growth was 9.3 percent to USD 14.2 billion. Read on


Denmark – Carlsberg’s overall beer sales down in 2013

Is flat the new high? Reporting full year 2013 results, brewer Carlsberg said that net sales were flat at DKK 66.55 billion (USD 12.3 billion), while operating profits also came in flat at DKK 9.85 billion (USD 1.8 billion). However, Carlsberg on 19 February 2014 posted a drop in full-year profits as volumes and sales declines in Eastern Europe outpaced growth in Asia.

Net profits in calendar 2013 were down 2.5 percent to DKK 5.47 billion (USD 1.0 billion), the Danish brewer said. Read on


Russia – Setting up a vodka empire

That’s Russian hubris for you. In three years’ time, Russian Standard vodka's owner, the billionaire Roustam Tariko, hopes to sell more vodka than Diageo.

In recent years, Mr Tariko, who made his fortune from vodka and banking (his bank is called, not surprisingly Russian Standard Bank) has branched out in all segments of the vodka market in an effort to compete with drinks groups Diageo (Smirnoff, Ketel One, Ciroc) and Pernod Ricard (Absolut, Wyborowa).

So since 2011 he has reportedly spent USD 1.1 billion in cash and assumed debt to gain control of Polish spirits maker Central European Distribution (CEDC), buying it out of bankruptcy last year. The deal gave Mr Tariko’s company the Zubrówka brand, a Polish vodka flavoured with bison grass, as well as the cheaper Green Mark vodka, a Russian brand that sells for about USD 15 a bottle in the United States.

The expanded portfolio catapulted Mr Tariko’s operation into second rank, with total vodka sales exceeding 34 million 9 litre cases sold, ahead of France’s Pernod Ricard but still behind the UK’s Diageo in terms of volumes sold, it was reported. Russian Standard sells more than 2.9 million 9 litre cases annually, compared with Smirnoff’s 25.8 million cases (2012). Read on


Kenya - East African Breweries’ growth to slow this year

East African Breweries (EABL), in which Diageo has a stake, took a surprise decision in February 2014 to end daily operations at its Nairobi plant after the brewer posted the slowest first-half sales growth in four years.

The brewer said its Ruaraka plant is now running for five days a week —Monday through to Friday— as opposed to a seven-day operation because of the downturn in one of its top-selling products, the budget beer Senator Keg.

The 30 percent cut in operation days is aimed at reducing costs. EABL said the duty imposed on Senator Keg had slashed sales volumes of the brand, warning that slump would curb profit growth this year. Read on


Switzerland – More breweries but declining beer production

Where do they take their courage from? At the end of 2014 there will be between 430 and 440 breweries in Switzerland, an increase of 6 percent over 2013. There were 409 breweries in 2013, up from 32 in 1990 when the Swiss beer cartel was dismantled. However, 96 percent of all breweries produce less than 15,000 hl beer annually, Swiss authorities say.

Therefore, beer excise revenues have been flat since 2010 at CHF 113 million (USD 128 million), as small brewers enjoy a tax break and homebrewers, who brew 400 litres per year, go tax-free.

Many market observers wonder how many of the start-up breweries will manage to survive in the long run. There are two trends to contend with: overall beer consumption has been flat for several years, despite population figures going up, while beer imports have been on the rise. In 2000 only 14 percent of all beer drunk was imported. By 2013 it had risen to 26 percent. In 2013 all Swiss brewers produced 3.4 million hl beer (2012: 3.5 million hl). Total consumptions stood at 4.6 million hl, which translates into a per capita consumption of 57 litres.

Still, what makes the Swiss inordinately proud is the fact that they have one brewery per 19,000 inhabitants, whereas in the U.S. there is only one per 125,000 people.

In view of the recent controversial plebiscite to curb the influx of foreigners, perhaps the Swiss should introduce a Norman Tebbit-type test to choose the right kind of beer-loving immigrant?

Mr Tebbit’s was the infamous “cricket test”. If you have forgotten what it was or are too young to remember, here is a quick reminder. In 1990 the conservative politician suggested that Britons of South Asian origin should be asked which cricket team they supported.

If they did not follow England and were fans of India or Pakistan, he felt that it showed that they had failed to integrate into British society.

How about Switzerland doing a “beer test” instead?


UK – Rock band Status Quo releases a beer

Would you buy a beer from a band of wrinklies? Or a greasy burger from Mick Jagger? Rock stars are not exactly the types to endorse the, um, more folksy delights, are they? Yet, the British rock band Status Quo, led by sixtysomethings Rick Parfitt and Francis Rossi, have rolled out their own ale brand in February 2014 into the UK pub chain JD Wetherspoon.

The stars, who are probably better known for their love of other tipples - teamed up with the Wychwood Brewery to create their beer, Piledriver, named after their 1972 album, which has become available in Wetherspoon’s over 800 pubs.

Reportedly, Status Quo wanted to create something special for their fans. The result is Piledriver, a 4.3 percent ABV amber ale which is available in bottles and on draught. Wouldn’t you have expected something with a bit more buzz than just 4.3 percent ABV from a rock band whose loud music can make your ears buzz? Read on


Australia - Turmoil at Treasury

The world’s largest listed wine company, Treasury Wine Estates (TWE), which is fighting challenges on several fronts, announced on 20 February 2014 that Michael Clarke, 49, will take over the helm on 31 March 2014.

Having sacked its CEO David Dearie last year, after announcing an AUD 160 million (USD 143 million) provision against the company's struggling US division, TWE has been shopping around for a new CEO. The global search turned into a bit of a PR fiasco, when earlier in February Coca-Cola Amatil’s outgoing boss man Terry Davis, who had previously worked at Foster’s wine division which later became TWE, denied widespread industry speculation that he was to re-join TWE.

Fortunately, by then TWE’s embattled board had managed to recruit Mr Clarke – a dual Irish and South African citizen – who was CEO of UK’s Premier Foods until last year. His achievements at Premier Foods were mixed at best. Bloomberg reported that shares of Premier Foods fell 17 percent between August 2011, when he started in that company’s top job, and the announcement of his departure in January 2013. The maker of OXO-brand stock cubes made GBP 275 million (USD 459 million) of divestments in 2012 that failed to reduce debt ratios. Mr Clarke’s previous experiences include similar roles with Kraft Foods and The Coca Cola Co in European and South Pacific regions.

TWE may finally have found a new CEO but its woes don’t end here. Read on




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