Beer Monopoly




    International Reports







Posted March 2016

India – Tribunal halted Diageo’s settlement with liquor baron Mallya

What a juicy scandal. An Indian tribunal, heeding a call from a group of creditor banks, has blocked the USD 75 million settlement between Diageo and Vijay Mallya, 60, after he agreed to step down as chairman from the spirits giant's local unit United Spirits in February 2016.

As was reported last week, several of Mr Mallya’s creditors were unhappy with the settlement. Now banks, which are owed money by Mr Mallya's defunct Kingfisher Airlines, demand a "first right" to the Diageo cash, arguing they had been left with hefty unpaid debts – reportedly USD 1.4 billion as of September 2013 - when the airline collapsed in 2012.

Alas, the injunction came too late. Diageo has since confirmed that Mr Mallya already received USD 40 million of the settlement. Moreover, Mr Mallya left India on 2 March 2016 and is currently believed to be in London. Read on


China – China Resources Beer at the crossroads

Never mind the low price, analysts on the whole welcomed the termination of the SABMiller and China Resources Beer joint venture, announced on 2 March 2016. China Resources Beer (CR Beer) agreed to buy SABMiller's 49 percent stake in the Beijing-based CR Snow brewing company for USD 1.6 billion. The sale clears the way for the completion of AB-InBev's takeover of SABMiller.

The deal not only removes a major regulatory obstacle to the takeover, it will also allow AB-InBev to focus its operations in China on its own brands like Budweiser. Read on


New Zealand – Craft brewers raise market share to 13 percent

Craft brewers seem to pose a serious challenge to the country’s two Big Brewers, Kirin-owned Lion and Heineken-owned DB. New Zealand's largest brewer Lion, with a market share of 46 percent, had to post a 21 percent decline in full-year earnings for the year ending 30 September 2015, as the industry adjusts to a rise in craft beers and people choose to drink less.

Pre-tax earnings fell to NZD 55.6 million (USD 37 million) from NZD 71.2 million, media reported on 9 March 2016. Sales fell 5.2 percent to NZD 535 million (USD 358 million), while earnings rose 5 percent excluding one-time costs. Read on


Australia – A blue beer to celebrate International Women’s Day

Men, in case you did not know: International Women’s Collaboration Brew Day (WCBD) took place on 8 March 2016 and ladies from all over the world got together to create unique and challenging recipes.

In Adelaide, at the Wheaty Brewing Corp, the publican and brewer Jade Flavell mashed a brew designed to produce a blue beer.

Called “Bluestocking” in reference to the educated, intellectual women who were the members of the 18th century Blue Stockings Society in England, the beer at 4.5% ABV was to have the same colour as the IWCBD logo. In other words, it was to be a visually striking, lean, aromatic and sessionable Blue Ale. As says Ms Flavell: “a beer that looks outrageous but drinks easy.”

In terms of style, the beer is a Blue Ale (ie a hoppy American Wheat infused with dried Butterfly Pea Flowers).

To give it the blue hue, Ms Flavell added 1kg dried Butterfly Pea Flowers (Clitoria ternatea) in the hopback and 1 litre Blue “Tea” in secondary conditioning. Native to Thailand, the flowers have long been used to colour some foods and beverages in Thailand and elsewhere in southeast Asia.

The beer will be released on 7 May 2016 for the Adelaide Roller Derby after-bout party (Salty Dolls Vs Road Train Rollers) and proceeds will go to a charity.

In case you have never heard of Roller Derby (like me), it’s an all-female contact sport played by two teams of five members roller skating in the same direction around a track. It originated in the U.S., but today there are leagues in many parts of the world.

Jade Flavell behind her bar at the Wheatsheaf Hotel in Adelaide. Photo: R. Harvey


USA – Beer and politics

You have to give it to craft brewers, they would not let an opportunity pass to market themselves. On the occasion of the Republican National Convention in Cleveland (18 to 21 July 2016), the local craft brewer Platform Beer Co., in conjunction with retailer Heinen's, will launch a special beer, local media reported on 7 March 2016. Read on


China – AB-InBev agrees to fire sale of SABMiller’s stake in CR Snow

That’s a blow to AB-InBev. The Chinese government not only prevented them from obtaining SABMiller’s 49 percent stake in CR Snow, the country’s major brewer. It also forced AB-InBev to accept a price which is far below analysts’ original valuation.

AB-InBev announced on 2 March 2016 that it has entered into an agreement to sell SABMiller’s stake in China Resources Snow Breweries Ltd. (“CR Snow”) to China Resources Beer (Holdings) (“CRB”), which currently owns 51 percent of CR Snow. China Resources and SABMiller have been partners in the joint venture since 1994. Together they grew Snow into the world’s number one beer brand in terms of volume (about 100 million hl) as the Chinese have increased their beer consumption to an average of 45 litres from 7 litres over the past 25 years.

The agreement values SABMiller’s 49 percent stake in CR Snow at USD 1.6 billion, says AB-InBev. This must have come as a surprise to many analysts. Last year, Nomura, a bank, had put a price tag of USD 5 billion (or 15 times EBITDA on SABMiller’s estimated profit share of USD 300 million), but later revised it down to USD 3.6 billion. Read on


India – Diageo pays good money to see the last of Mr Mallya

What a mess. British drinks group Diageo has agreed to pay USD 75 million and provide other incentives to replace the chairman of its India business, Vijay Mallya, in exchange for his resignation from United Spirits, media reported at the end of February 2016.

The deal between one of India’s most colourful businessmen and the world’s major drinks group tries to close the book on a protracted and highly publicized spat over allegedly improper payments the India unit made to other businesses run by Mr Mallya. Read on


Germany – Greenies use beer bazooka against weed killer glyphosate

You cannot fault them for their perfect timing. On 25 February 2016, when the German parliament was to cast a vote on whether to extend approval for the use of glyphosate, the world’s most widely used weed killer, media screamed that a Munich environmental institute had found traces of the pesticide in 14 of Germany’s most popular beers. All the same, parliament voted in favour of the extension.

Obviously, thanks to its long use, glyphosate is so ubiquitous in the environment that traces of it can be found even in people’s urine. You just have to use some high-tech laboratory equipment and go look for it. Still, few people in Germany would have known or cared. This, the environmentalists hoped to change by detecting glyphosate in beer – seemingly the only foodstuff that Germans really believe to be pure.

As could be expected, German brewers, who celebrate the 500th anniversary of the purity law for beer this year, were up in arms. They issued a flaming defence of their beers, saying that the findings were not credible. TheRead ony cited Germany’s Federal Institute for Risk Assessment which had said the levels did not pose a risk to consumers’ health. Read on

Beer sells:The Munich tabloid tz headlined on 26 February 2016: “Our beer – good or dangerous?”


Australia – Lion tinkers with the alcohol content of its beers

It’s so blatantly obvious. How to raise your profits? Answer: lower the excise. In late February 2016 and only a few days after announcing a 3 percent decline in volume sales for fiscal 2015, Australia’s major brewer Lion advised reductions in alcohol content for three of its major beers: XXXX Bitter, Tooheys Extra Dry and James Boag’s Premium Light.

XXXX will drop from 4.6 percent to 4.4 percent ABV in March, Tooheys Extra Dry will be subject to a similar reduction in April and the Premium Light will fall to 2.5 percent from 2.7 percent ABV in May.

The company explained its decision by saying: “We have tested our brands extensively to make sure they still deliver the same great flavour and quality they always have.”

What Lion did not say is that it will lower the retail prices of these beers too. After all, by reducing the alcohol content it will benefit from a lower excise load. If it does not pass this saving on to consumers, this means potentially more money in Lion’s coffers. That’s provided consumers will go along with it.

However many will remember that, in the relatively recent past, beer drinkers have resisted reductions in alcohol content. In 2009, CUB (then part of Foster’s) reduced the alcohol content of one of its major labels VB to “improve its profitability”, declaring that the beer tasted exactly the same in comments rather similar to those now made by Lion.

In 2009, drinkers clearly thought otherwise and CUB eventually listened. After SABMiller had taken over CUB in 2011, one of the first strategic revisions it did was to restore VB to its original 4.9 percent ABV.


Belgium – European brewing sector returns to growth with new breweries created

With over 900 new breweries opening since 2013, the European beer industry has bounced back from the financial crisis. This is one of the key findings of a study released on 23 February 2016 by the Brewers of Europe, a lobby group.

The EU remains the second largest beer producer in the world after China, brewing 384 million hl beer in 2014, though down from 393 million hl in 2009.

More importantly, the number of European breweries has significantly increased in recent years to over 6,500 from 3,473 in 2009.
Read on


USA - A-B InBev to buy Goose Island brewpub in Chicago

Are we right in detecting a new strategy here? When in 2011 AB-InBev began its craft shopping spree, it bought out Chicago’s Goose Island brewery except for one thing: the brewpub where it all started in 1988.

On 19 February 2016 Chicago media reported that now AB-InBev has purchased that from the brewery’s founder John Hall, 73, too. Terms of the deal, which is expected to close in 60 days, were not disclosed.

The funny thing about the purchase is that in 2011 AB-InBev did not have much interest in the brewpub. “They didn’t understand the value, which they do now,” Mr Hall commented. They couldn't buy it under the state of Illinois law at the time, anyway.

Apparently, they have changed their mind. According to the trade publication Beer Marketers Insights, AB-InBev is already pushing hard into the retail tier of the Three Tier System. AB-InBev is believed to own 15 brewpubs in the U.S. following its acquisitions of several craft brewers over the past two years. Media reported that AB-InBev plans to open 10 Barrel brewpubs (the original one it bought in Portland, Oregon in 2014) in both Denver and San Diego.

Whether AB-InBev hopes to turn Goose Island into another chain of brewpubs and thus become a restaurateur on an even larger scale, only time will tell. But one should bear in mind that there is a precedent: Since 2010 one of AB-InBev’s Brazilian investors, Jorge Lemann, through his private equity fund 3G Capital, has also been pulling the strings at the global fast food chain Burger King.

The even funnier aspect to the Goose Island transaction is that AB-InBev too benefits from a change in Illinois law which originally was meant to serve the craft brewers. It has since become legal for brewers to operate taprooms. Therefore, AB-InBev can reclassify the Goose Island brewpub as a taproom subsidiary of the company's Fulton Street production brewery and even serve food. But – and here it gets really bizarre – it will no longer be able to sell wine or spirits.

To underline how loony the Three Tier System, which regulates alcohol in the U.S., has become: in Illinois AB-InBev can become a retailer/taproom operator. However, it cannot own distributors. After a protracted legal case, in 2013, AB-InBev was forced to sell its minority interest in an Illinois beer distributor, which it had held for years. Nonetheless, in plenty of other U.S. states it’s legal for AB-InBev to own distributors, which is why it already ranks as the biggest beer distributor in the U.S., ahead of the privately-owned Reyes Beverage Group.


South Africa – Unions may prove road block to MegaBrew

They may not like this. AB-InBev’s takeover of SABMiller could well take up to 18 months to be cleared as South African unions gear up to fight deal, The Wall Street Journal speculated on 25 February 2016.

Although AB-InBev’s CEO Carlos Brito assured analysts and media that the takeover of SABMiller was well on track, it’s unions and South African suppliers worrying about job losses that has led the Congress of South African Trade Unions, which represents employees across the country, to oppose the deal. Because of AB-InBev’s reputation for cutting costs and shedding jobs, it is gearing up to fight the transaction.

That has sown doubts whether AB-InBev will be able to secure South African regulatory approval and close the deal during the second half of the year, as announced. Read on


Belgium – AB-InBev continues to struggle in the U.S.

Looks like the global beer party is over. AB-InBev on 25 February 2016 issued a warning that a slowdown in markets such as Brazil and China will weigh on the brewer this year.

Releasing its full year results, AB-InBev admitted that in the U.S., things did not look all that rosy too. Its sales to U.S. retailers fell 1.7 percent in 2015. Global beer volume declined by 0.1 percent in 2015. Read on


Russia – Local brewers benefit from foreign brewers’ troubles

Why do Russians prefer local beer brands? Because some of them are cheaper than the foreign owned ones. Over the past five years, the share of local brands in the Russian beer market has increased from 15 percent to 25 percent, the Turkish brewer Efes reported in January 2016.

While some of these local brands may be better tasting than the foreign-owned ones, the main reason for their appeal seems to be their lower price points, Russian media followed up in February 2015. Read on


UK – BrewDog to launch crowdfunder in the United States

Let’s see how it goes. The maker of Punk IPA is planning to run an “Equity for Punks” crowdfunding campaign in the U.S. in May this year, although admitting that its latest crowdfunder in the UK is still a few million bob short of target it set for April.

BrewDog said on 18 February 2016 that it aimed to increase its brewing capacity almost tenfold (to 1.5 million hl) by the end of 2016, compared with the beginning of last year, on the back of a “craft beer revolution” and a planned entry in to the U.S. market.

The Scottish brewer and bar operator, which was founded in 2007 and exports to 55 countries, said that annual turnover in 2015 had risen 52 percent to GBP 45 million, with profits believed to have reached nearly GBP 8 million. Read on


Belgium – AB-InBev invests EUR 110 million in its Belgian breweries

Acknowledging that some brands still require local ties, AB-InBev’s CEO Carlos Brito symbolically broke ground in Leuven on 22 February 2016. At its Artois brewery AB-InBev will expand brewing capacity to 12 million hl by 2017. That’s an increase of 30 percent over today and represents an investment of EUR 55 million.

The capacity expansion is to benefit the brand Stella Artois, whose popularity abroad has been growing. One out of two bottles of beer which AB-InBev produces in Belgium is exported. Read on


UK - MPs deliver a ‘Message in a Barrel’ to the Chancellor

Will there be another cut in beer duty when the Chancellor of the Exchequer releases his budget on 16 March 2016? It is to be hoped.

Nearly 50 MPs joined with the British Beer & Pub Association (BBPA), the Campaign for Real Ale (CAMRA) and the Society of Independent Brewers (SIBA) on 24 February 2016, by sending a ‘Message in a Barrel’. MPs posted their messages in the handcrafted barrel, specially made by Yorkshire brewer Theakston’s, to add their voices to the beer duty campaign. The cuts in beer duty in the past three budgets have proved a massive boost for brewing and pubs in the UK, resulting in more affordable beer and hundreds of millions of pounds of investment in pubs, says the BBPA in a statement. Read on




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