Beer Monopoly




    International Reports







Posted March 2015

USA – Craft beer volumes grew double digit in 2014

That calls for a celebratory beer: For the first time ever, in 2014, American craft brewers reached double digit (11 percent, no less) volume share of the U.S. beer market, the Brewers Association reported on 16 March 2015.

Last year, craft brewers produced a total of 22.2 million barrels (26 million hl) beer, and saw an 18 percent rise in volumes and a 22 percent increase in retail dollar value. Retail dollar value was estimated at USD 19.6 billion, representing a 19.3 percent market share.

With the total beer market up only 0.5 percent in 2014, craft brewers are key in keeping the overall industry innovative and growing. This steady growth shows that craft brewing is part of a profound shift in American beer culture—a shift that will help craft brewers achieve their ambitious goal of 20 percent market share by 2020,” said Bart Watson, Chief Economist of the Brewers Association.

Additionally, the number of operating breweries in the U.S. in 2014 grew 19 percent, totaling 3,464 breweries, with 3,418 considered craft. The number consists of: 1,871 microbreweries, 1,412 brewpubs and 135 regional craft breweries. Throughout the year, there were 615 new brewery openings and only 46 closings.


United Kingdom – Girlie beers “a mistake”

It was an interesting admission made by SABMiller. At their recent Quarterly Seminar on Africa (9 March 2015), they acknowledged that they did a less effective job when they “overfocused” on women as the primary target group for their flavoured alcoholic beverages. The apple-flavoured beer mix Redd’s is a case in point.

Because they aimed at women in their marketing, this created a rejection by male consumers and drove Redd’s into a niche. The lesson learnt, they said, is that “you need to position a product as sufficiently masculine to ensure that women are interested as well.”

Thank heavens, the penny dropped in the end.


Germany – Munich’s craft beer festival pulls the crowds again

Craft beer is coming to Germany. Slowly, but surely if the recent trade fair BrauKunst Live is anything to go by. The three-day event (6 – 8 March 2015) drew over 8.600 visitors, who did not mind paying EUR 20 for a day pass for the chance to taste a few of the several hundred beers available.

The 90 or so exhibitors were mostly German brewers, although Austrian and U.S. brewers (represented by the Brewers Association) also flew the flag. As in previous years, the Czech brewer Pilsner Urquell (owned by SABMiller) was one of the main sponsors and served an unfiltered and unpasteurized beer.

There was much ado about Copenhagen’s Mikkeller being present with several beers thanks to a recently signed partnership with Germany’s craft brewer Braufactum (owned by Germany’s major brewer Radeberger). Read on


USA – Oregon’s Full Sail Brewing Company sold to private equity firm

Isn’t that strange? U.S. craft brewer Full Sail is sold to private equity and no outcry ensues? Is it because the buyer was not AB-InBev?

In early March 2015, the iconic brewery from Oregon was sold to the private equity firm Encore Consumer Capital from San Francisco. The deal cashes out 78 employee shareholders. But investors said all of those workers have the option to stay on.

Full Sail was founded in 1987 and reportedly produced 115,000 barrels (135,000 hl) beer in 2014.

Media say that two things make this a particularly interesting acquisition. One, Full Sail was owned by the employees by virtue of an ESOP (Employee Stock Ownership Programme). So this was the employees’ decision. Two, it wasn’t AB-InBev or another brewery seeking to acquire Full Sail: it was an investor group with no relationship to the brewing industry. Read on


United Kingdom - Diageo relents on supplier payment terms

The world’s number one drinks group Diageo has given up on its plans to extend its supplier payment terms, media reported on 13 March 2015. It had wanted to lengthen the time it takes to pay its suppliers to 90 days, but faced strenuous objections from business groups. Read on


Australia – Thirst for locally brewed international beer brands waning?

In March 2015, Australian media speculated that the drop in sales of the Heineken brand in Australia could have been caused by trendy inner-city types spurning the locally brewed version because it is made by Lion under licence, and not imported like many other premium beer rivals.

Heineken's joint venture with Lion squeezed out a tiny increase in profit last year, even though sales declined by 9.2 percent to AUD 65.8 million (USD 50.1 million), it was reported. Read on


USA - Kentucky bill could strip distributorships from Anheuser-Busch

Is this some sort of backlash against AB-InBev’s market clout? After the state of Illinois, Kentucky is now the second U.S. state in recent years to pass legislation that bans brewers from distributing their own products.

Interestingly, each bill was introduced after Anheuser-Busch, the U.S. unit of brewer AB-InBev, had moved either to increase its existing stake in a distributor (Illinois) or acquire one outright (Kentucky).

Although the U.S. Three Tier System for alcohol clearly separates those who produce beer from those who distribute it and those who sell it, about half of U.S. states allow brewers to own distributors.

Kentucky was one of them. Anheuser-Busch has owned a distributorship there since 1978. Last year it bought another one. It was that purchase which prompted the new bill which prohibits brewers from owning/operating a distributorship.

The bill produced sharp disagreements on the Senate floor, with Republicans opposing Republicans. In the end, on a vote of 23-13, the Kentucky Senate on 4 March 2015 sent the heavily-lobbied House Bill 168 to the Governor, who reportedly said he will be “pleased” to sign it into law. When this will be is far from clear.

The Senate vote was a defeat for Anheuser-Busch. If the bill is approved by the Governor, the law could force Anheuser-Busch to give up not only its new distributorship but also its old one. The procedure to take the licence away from Anheuser-Busch remains a bit of a mystery. Will that license be revoked or will it simply not be reissued when it comes up for renewal?

Anheuser-Busch has not announced yet if it will pursue a legal challenge. Ultimately, though, the bill could wind up in court because it violates Anheuser-Busch’s private property rights and unfairly forces it to sell its businesses.

Smaller brewers had supported the proposal, saying they were worried that Anheuser-Busch would make it harder for competitors to get their products to market.


Russia – Pepsi and Coke shut two plants

Foreign brewers have been hit hardest, but beverage manufacturers have been bruised too by Russia’s economic woes. On 2 March 2015 it was reported that both PepsiCo and Coca-Cola Hellenic Bottling are closing one plant each in Russia, citing a plunge in the value of the Russian ruble and the country’s slide into recession.

The two have shown greater resilience than the brewers – it’s easier to find a cheaper substitute for beer than for juices and dairy – but recent events have forced them to also cut production in Russia by closing plants. In January this year, Danish brewer Carlsberg said it would be shutting two breweries in Russia, and Danone Russia said it would consider closing some of its dairy plants should the economic situation worsen. Read on


Brazil – AmBev and Whirlpool to develop beer capsule machine

All the things you can squeeze out of a capsule: coffee, soft drinks … so why not beer? On 4 March 2015 Brazil’s regulator approved a joint venture between the country’s top brewer AmBev and Whirlpool Corp., one of the world’s leading manufacturers of household appliances.

The venture will develop and produce a machine that will dispense beer and a variety of soft-drinks from capsules. By my guess, it will be the ultimate toy for big boys.

Financial details of the deal were not disclosed. This much is known: AmBev and Whirlpool will each have 50 percent ownership stakes in the new company, which will launch the appliance in Central America, except Mexico, the Caribbean and South America. Brazil is the second-largest market for Whirlpool Corp. after the United States. Read on


USA - Anheuser-Busch settles claim over Kirin beer’s origin

Always read the fine print first before buying your beer. Early this year, Anheuser-Busch settled a class suit filed against it by two Miami residents who had alleged that the company was deceptively advertising Kirin beer as imported from Japan, when in fact it is brewed in the U.S. using domestic ingredients.

The National Law Review wrote on 3 March 2015 that the two plaintiffs claimed they had each been buying about one six-pack of Kirin every month while under the mistaken impression the beer was made in Japan.

They alleged Anheuser-Busch’s marketing and advertising misrepresented the beer’s origin and caused confusion among consumers. Although Kirin was initially made in Japan, it has been brewed in the U.S. since 1996.

The customers’ misunderstanding rose from the fact that, while the individual bottles clearly stated (although in fine print) that the beer was “Brewed under Kirin’s strict supervision by Anheuser-Busch, in Los Angeles, CA and Williamsburg, VA.”, the six-pack case did not. Read on


United Kingdom – Are “dry bars” the latest fad in pub retailing?

If “vegan” is the new organic, are “alcohol-free bars” the new speakeasies? People’s relationship with alcohol has changed and the pub operators of the future will need to adapt their businesses to cater for it, said Catherine Salway, founder of the dry “gastro-bar” concept Redemption, at the Future Pub conference in London on 24 February 2015.

Ms Salway, who set up Redemption in 2013 and is about to open a permanent outlet in London, following a number of successful pop-ups and residencies, claims that people will always want somewhere to meet face to face, but “that doesn’t always have to happen around alcohol”.

Speaking at the Future Pub conference in London, she defended her concept by saying that “I don’t just see Redemption as a dry bar — it’s a bigger idea than that. It’s about recognition that when you socialise it doesn’t always have to be at the expense of your health. […] We are not saying everyone should give up booze but if we can make it cool not to drink then we have done society a favour.”

Redemption offers a range of alcohol-free cocktails (mocktails), plus a menu designed by a nutritional therapist, which allows customers to “spoil yourself without spoiling yourself”. The bar also sells an alcohol-free beer.

Good grief! Is this the beginning of a new Temperance movement? Or why is her bar called “Redemption” as in “deliverance from sin”? Are we missing out on irony here? Read on


Belgium – AB-InBev’s push into craft beer not limited to United States

Because of the deafening outcry among craft beer lovers in the U.S. over AB-InBev’s recent purchases of U.S. craft brewers, AmBev’s purchase of Brazilian craft brewer Wäls barely registered on the takeover “excitetometer”.

When AmBev, a subsidiary of AB-InBev, acquired control of Wäls in early February 2015 for an undisclosed sum, it was reported that the Brazilian beer and soft drink behemoth was setting its sights on a growing segment of the industry that has already generated over USD 700 million a year in sales and expanded by double-digit percentages each year. AmBev’s stake in Brazil’s beer market is about 70 percent.

Founded in 1999 in the city of Belo Horizonte, Wäls had revenues of USD 3.16 million last year on sales of about 6,000 hl beer. However, the company has managed to become one of the top players in Brazil’s craft beer market, which consists of more than 300 small breweries whose products sell for as much as three times the price of industrial beer brands.

The deal works both ways, as AB-InBev’s CEO Carlos Brito explained at the brewer’s 2014 results presentation on 26 February. While AB-InBev can expand its portfolio to better appeal to a diverse range of consumers, thereby making them stay within AB-InBev’s fold, the acquired craft brewers get a chance to make their brands better known outside their regional core markets. Read on


South Africa – SABMiller’s CFO Jamie Wilson quits “for personal reasons”

News-wise, it was not a good month for SABMiller. In February 2015 the world’s number two brewer had to report the departure of two top executives. The first to resign was MillerCoors’ CEO Tom Long, following the announcement of a 12 percent fall in MillerCoors’ fourth quarter underlying net income. MillerCoors, the number two brewer in the U.S., is a joint venture between SABMiller and Molson Coors. Mr Long, 56, intends to retire on 30 June 2015. He has served as CEO since 2011.

Two weeks later, on 19 February 2015, SABMiller, which was the topic of heated takeover speculation last year, announced that it is searching for a new Chief Financial Officer after Jamie Wilson resigned with immediate effect, citing personal reasons.

Domenic De Lorenzo, currently Director of Group Strategy, will replace Mr Wilson while the company looks for a permanent replacement.

The Scotsman Wilson, 55, who has held the post since 2011, will step down from the board with immediate effect and be placed on “gardening leave” before officially leaving the group on 31 March 2015, the company said in a statement.

What raised quite a few eyebrows was SABMiller’s decision to include in the statement about Mr Wilson’s resignation the details of his “departure package”: Mr Wilson will receive a year’s salary of GBP 762,200 (USD 1.18 million) and a car allowance worth GBP 17,150, as well as a bonus and pension contribution. This may seem much but, in fact, he is foregoing a massive amount of unvested share options and share awards.

South African media commentators sneered that “SABMiller may have set a new standard for disclosing details about departing executives” and offered the guess that because “the market, and journalists, hate an information vacuum and are inclined to fill it with all sorts of stuff, SABMiller’s bland announcement … was accompanied with details of Wilson’s departure package.” Read on


Belgium – Alken Maes’ dilemma

On 19 February 2015 Dutch brewer Heineken pumped EUR 131.5 million into its Belgian subsidiary Alken-Maes. That is the result of an internal liquidation of some inactive distribution companies, and is not the result of operational developments, Belgian media reported.

In book-keeping terms this is merely a transfer of funds from one pocket to another. It is no cash injection.

Nevertheless, it has made some market observers ponder Alken-Maes’ role within the Heineken system. From what we have heard, Belgium’s number two brewer still suffers from overcapacity. From an erstwhile high of 2 million hl beer sales, the brewer is down to an estimated 1.1 million hl.

What is more, Heineken’s Belgian unit has failed to establish the Heineken brand in any significant way. Only an alleged 7,000 hl of Heineken beer are sold in Belgium each year - a far cry from the 20 percent target of total volume sales that Heineken likes to achieve in each of its markets. Read on


Netherlands – Dutch brewer Oranjeboom changes hands

A “brewer without a brewery” was taken over: The Belgian investment company Gimv has acquired United Dutch Breweries (UDB), together with UDB's management, from the Dutch investment company Egeria, it was reported on 27 February 2015.

This investment is Gimv's largest in the Netherlands to date. No financial details of the transaction were released, but media speculated that Gimv paid between EUR 25 million and EUR 50 million for UDB.

UDB, based in Breda (NL), is an independent beer group, owning brands like Oranjeboom, 3 Horses, Royal Dutch, and Atlas. These are all heritage brands, going back to the company's origins. In addition, UDB sells specialty beers, such as non-alcoholic beers, stout beers and dark malt beverages.

UDB was created in 1968 by Allied Breweries through the merger of two of the oldest breweries in Holland: 'De Drie Hoefijzers' in Breda, which dates back to 1538 and 'De Oranjeboom' in Rotterdam, which was founded in 1671.

In 2008, UDB was carved out from AB-InBev and became an independent company again.

UDB operates on a “brewer without a brewery” model. Production is outsourced to other breweries, like Martens in Bocholt (Belgium) amongst others. It focuses on the exports of affordable premium branded beers, it says, bringing European quality to consumers worldwide.

The company reportedly has clients in over 100 countries, with Asia-Pacific, the Middle-East, Africa and the rest of the world, each accounting for roughly 25 percent of sales.

Annual turnover amounts to EUR 77 million, equalling about 1.2 million hl.

Gimv plans to support UDB's further growth in Asia and Africa.

According to its website, Gimv is a European investment company with over three decades experience in private equity and venture capital. It is listed on NYSE Euronext Brussels and currently manages around EUR 1.8 billion (including investment partnerships) of investments in 60 portfolio companies, which jointly realise a turnover of more than EUR 6 billion and employ over 26,000 professionals.


Sweden – Small brewers discuss staggered beer tax

The alcohol escalator is causing grief. As of 1 January 2015 the Swedish government hiked the excise on beer to SEK 1.94 per litre for each degree of alcohol. That’s an increase of SEK 0.16. The tax applies to beer in excess of 2.8% ABV.

The reason for the annual tax hike is the usual: the government is looking for extra dosh while reducing the harmful effects of alcohol. Currently, the government reaps about EUR 370 million in beer excise, according to figures by the Brewers of Europe.

The Swedish Association of Small Brewers thinks these are fundamentally two good motives. Unfortunately, the Government seems to forget one important aspect: the rapidly growing number of microbreweries popping up all over the country. At the moment there are an estimated 200 microbreweries in Sweden. They serve a market of 9.5 million people where beer consumption has been more or less flat at 4.7 million hl. Read on


USA – Copenhagen’s Mikkeller brewery ties up with San Diego’s AleSmith

Craft brewers going international: Mikkel Borg Bjergsø, the Danish brewer who roams the globe making beer under the Mikkeller label, is forming a partnership with San Diego’s craft brewer AleSmith to produce his beers locally, U.S. media report.

The as-yet-unnamed brewery will open in June this year in the old AleSmith plant, which will be vacated when AleSmith moves to larger facilities nearby.

Both Mikkeller and AleSmith will hold equity in the brewery, which will make Beer Geek Breakfast and other Mikkeller mainstays, while experimenting with new beers.

Mikkeller and Alesmith enjoy quite some cult following among craft beer lovers. AleSmith was founded in 1995 and produces about 17,000 hl beer annually. Beers from the brewery have been rated on website as #1 Top Brewer in the World 2006 and again in 2013. Mikkeller was founded in 2006 and produces an estimated 8,000 hl beer.



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