Beer Monopoly





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Posted May 2008

Spain – Canadean International Beer Strategy Conference

“Delivering value – profitable growth in a challenging world” was the title of Canadean’s tenth conference, which was held on 24 and 25 April 2008 in Spain’s capital Madrid.     

How times are a-changing. In 1998 when Canadean hosted its first beer industry conference in London, the top ten global brewers controlled far less than half of the world’s beer output. Today they call 55 percent their own. The top five alone brew about 42 percent of total volume, the top 20 more than two thirds. Even Germany, then considered most resilient to the forces of consolidation and globalisation, has witnessed a bout of concentration. While in 1998 the top ten German brewers had a market share of only 37 percent, they have upped it to more than 66 percent ten years later.

Social changes, economic changes – all have left their mark on the brewing industry. Nowhere more so than in Spain, which in the past decade has become a fairly liberal, fun-loving and prosperous country. It is hard to tell why Canadean’s conference in Madrid has attracted more delegates (almost one hundred) than all previous ones.  Perhaps it was the location. Spain is after all, one of the few growing beer markets in Europe with a growth rate of 5 percent per year and a per capita consumption, says Canadean, of about 80 litres. Besides, globalisation has not really caught on in Spain where foreign brewers share less than a third of the market compared with the United Kingdom, where they have 83 percent. What makes Spain stick out even more in the European context is its high share of low-alcohol and alcohol-free beers (10 percent of the market) and the strong growth of own label beers.

Nevertheless, it cannot have been the location alone that brought delegates from all over the world to Madrid. More likely, it was the high demand for a top-level industry get-together now that Rüdiger Ruoss has discontinued organising his four-yearly World Beer and Drinks Forum, which was last held in Munich in 2005. There seems to be a need for a conference which is intimate enough for people to speak their mind and but also well attended by people in the know and with a say in their respective companies to make it worth while being away from the office for two days.

The corollary of all this is that the quality of papers and presentations is high. And I am not saying this because I had been invited by Canadean to moderate one of the sessions on the challenge of prices, which turned into a most instructive university tutorial on “raw material prices 101” (Stephan Barth’s words).

Just take this as a hint that over the coming months you will read a lot about the papers given on this site.

The keynote presentation was Alex Myers’, Senior Vice President Western Europe of Carlsberg, who had to stand in for his boss Jorgen Buhl Rasmussen at the last minute. Carlsberg’s CEO was busy putting the finishing touches to the Scottish & Newcastle deal and therefore unavailable

Alex Myers gave an overview of the strategic changes Carlsberg has undergone over the past decade. As he pointed out in 1999 Carlsberg was a 27 million hl brewer only, thinly spread across the globe. In 2007, Carlsberg produced 115 million hl and ranked fifth largest among the world’s top brewers. Carlsberg has only been international, said Mr Myers, for the past five or six years, after the company decided to a, redefine is geographic strategy, b, turn into a portfolio brewer from an erstwhile mono-brand company and c, refocus on operational excellence (that is get their house in order).

After all these years, Carlsberg still consider themselves a regional not a global brewer. True, they had a head start in Russia and other countries of the CIS. However, they view their engagement in Asia as a seeding strategy only and the Americas plus Africa “non-core”. Mr Myers gave a telling account of why they had moved into Russia rather than the U.S. He recounted how he was given USD 2 million, admittedly very limited resources and was told “to do something with it”. What could he do with it? In the U.S., his partners told him that with that sort of money he could perhaps achieve beer sales in the order of 100,000 hl, whereas his Russian partners promised him 200,000 to 300,000 hl.

Given that the western European markets are forecasted to decline 1 percent per year, Carlsberg have placed their bets on eastern Europe as their growth engine. Volume-wise, eastern Europe and Baltic Beverages Holding (BBH) will account for 50 percent of Carlsberg’s global beer volume. Profit-wise, BBH is to contribute 41 percent, western Europe 52 percent (operating profit, that is). In western Europe, said Mr Myers, the focus will be on improving earnings, in eastern Europe on profitable growth.

More generally, Carlsberg will have to rebalance their brand portfolio and make an effort to develop locally specific portfolios. In order to “build from above”, Carlsberg will also sell partner brands, for example brew Guinness under licence. In order to “defend from below”, Carlsberg is not averse to brewing low margin brands. i.e. economy brands also known as cheap beer.

The immediate task at hand, of course, is the integration of the parts of Scottish & Newcastle that Carlsberg acquired in that joint takeover deal with Heineken. As one commentator pointed out: “It’s a tough beer market in the UK but France (where Carlsberg takes on Kronenbourg) is not going to be any easier.”


USA – Blame it on the economy

How is Grupo Modelo’s U.S. importer Crown going to explain a whopping 13 percent decline in export sales in the first quarter? Well, they are not. All they do is blame it on the economy and a price hike that took place in the first half of 2007. Who are they fooling?          Read on


Belgium - Someone has seen the light

Looks like InBev will soon re-open the Hoegaarden brewery which it closed two years ago.         Read on


Azerbaijan – Read his lips …

… and pay close attention to the maps that he shows. Alejandro Jimenez, the CEO of Efes International, announced at the Canadean Beer Strategy Conference held in Madrid in April that Efes would continue its acquisition policies with a focus on Russia and the former member states of the Soviet Union. He may have to rush things up a bit.                  Read on


USA – Schlitz your wrists

My oh my, they either bank on the Baby Boomers’ early senility or on their laid back sense of humour that comes with age. In any case, Pabst Brewing has re-launched Schlitz beer, the erstwhile largest-selling beer in the U.S. which infamously went under in the 1970s.                    

If there’s been a beer brand that was killed off by its makers it was Schlitz. In the 1950s and 1960s, Schlitz from Milwaukee was the largest-selling beer in America. It was, company literature notes, “the archetypal working man's beer.” Many Americans who are now in their sixties and belong to the Baby Boomer generation that became political through the Vietnam War or anti-political through Hippie Culture - they all would have grown up with Schlitz beer. That’s true. In those days 18 was still the legal age for drinking beer.

However, for some reason or other Schlitz decided to change its brewing formula in 1976. According to Philip van Munching (see his Beer Blast), Schlitz made a change in the foam stabiliser it was using. However, the new stabiliser actually sped up the breaking down of the beer by bonding with proteins to create haze almost immediately. Suddenly Schlitz found itself shipping out beer that looked “snot-ridden”. Yuk. To make matters worse, the brewer declined to recall its beer for months. Sales began to plummet and Schlitz began a long steady decline from the top three U.S. brewers.

A strike at the company in 1981 ended with the brand being purchased by Stroh Brewery in Detroit, which itself sold out in 1999. The label passed to Pabst Brewing and survived only in cans. Now Pabst is bringing back the “classic 1960s formula”, and marketing it to “guys who remember the 1960s, when the cars were cooler, the athletes didn't cheat, and the beer was better.”

Pabst Brewing, itself an anomaly as it does not own a brewery any longer but has all its beers brewed by SABMiller, has embarked on a course of gradual self-elimination. Putting no advertising money behind its brands, the company which counts Old Style, Old Milwaukee and Pabst Blue Ribbon among its line-up of inexpensive beer brands, has seen sales volume erode for several years. Last year, Pabst Brewing sold 6.1 million barrels, down 6.2 percent from 6.5 million barrels in 2006, according to Beer Marketer's Insights. In 2000, Pabst sold 10.8 million barrels of beer.

With Pabst it is only a matter of time before its beer sales zero out. But before that happens the brewer is going to give the world a revived Schlitz. Since April Schlitz has been available in Chicago. Last year Pabst began selling it in Minneapolis and Tampa, Florida. Commentators in the U.S. have already remarked on the unusualness of marketing the beer — other than denture adhesive or long-term-care insurance — to anyone over 50.

A series of web-based ads, which can be viewed at, feature a man in his 50s. One of the ads takes place in a bar. A twentysomething is looking at his cell phone. An off-camera voice says that the “gusto” of new Schlitz is “instant messaging — face to face.” The camera then moves to two Baby Boomers, one fiftysomething, the other a little older, laughing together over a couple of beers.

Nostalgia often works quite well in marketing. But in this case? Others have complained that Pabst has overpriced the new old Schlitz. But come on, Baby Boomers can afford to pay good money to have their memories of “yuf “revived.


Germany – Gaffel Kölsch not to be sold

After years of family feuding, which almost put the famous Kölsch brewery Gaffel on the block, the family members announced on 29 April 2008 that the brewery was not for sale – for the time being, at least.          

Cologne is famous for lots of things: eau de cologne, the dome, floods in spring, carnival and the feuds between the two brothers Becker, Heinrich (61) and Johannes (57), who own of the Gaffel brewery. Gaffel brewery is one of the few Kölsch breweries which also enjoys a cult following outside of Cologne. It is currently fourth-generation owned by Philipp Becker and his father Heinrich Becker. The two control the majority of the shares. But there are also Johannes Becker and Heinrich Philipp Becker to contend with. Last year Johannes Becker left the business – or was forced out of management by court order. However, his departure did nothing to solve the issue as to who is to run the brewery as Johannes controls a 38 percent stake in Gaffel.   

Although a decision was taken not to sell the brewery, this did not end the dispute between the brothers, moreover as Johannes does not seem willing to sell his stake to his brother, which would help clear up the mess.

Over the past few weeks, those interested in buying Gaffel, the number two Kölsch brand, were invited to submit their offer. However, the offers received fell short of what the Beckers had expected.

Despite the public spat and low morale among 140 of staff, Gaffel brewery has continued to do well. While the market for Kölsch beers declined 2.5 percent during the first quarter 2008, Gaffel increased its sales 2.4 percent. Gaffel is a very profitable 500,000 hl brewery which sells most of its beer as draught beer.


Switzerland - Eichhof brewery to be sold to Heineken

Sixteen years after the fall of the Swiss beer cartel and eight years after the sale of Feldschlösschen to Carlsberg, the last of the large Swiss breweries is to change hands. If you need any more proof that cartels ill prepare their members for the rough winds of the free market, look no further than Switzerland. One by one they have fallen into the hands of foreign brewers. It’s not that they needed pushing very hard. In many cases the major shareholders were advanced in years and had to worry about succession. Then they were highly diversified, out of coincidence rather than design. They also owned large chunks of real estate – as one does in Switzerland – and had interests in industries which had nothing to do with brewing. In this respect the Lucerne-based Eichhof group is typical of Swiss brewers before the fall of the cartel. Although the announcement of the sale on 10 April 2008 was met with a huge outcry by nationalist Swiss politicians, trade unionists and some consumers, the real surprise is not the sale in itself but the fact that Eichhof has lasted out for so long.     Read on


India – SABMiller needs to double capacity over the next five years

India currently has 18.5 million hl brewing capacity. Even assuming modest deregulation, capacity will need to double every four to five years, says SABMiller.             Read on


United Kingdom - SABMiller says volumes and revenue rose over full year
In its preliminary full year results for the year ended 31 March 2008, SABMiller said price increases helped it to offset rising costs, post higher volumes and revenues.             Read on


Philippines – “Honey, I have shrunk the IPO”

For the third time since the announcement of the IPO of its domestic beer unit, San Miguel Corp. has shrunk the expected proceeds. What has once been touted as a major listing is to fetch USD 147 million only.   Read on


USA – Contradiction in terms

SABMiller is to launch a craft-style Miller Lite. You read correctly: a craft-style Lite by Miller. All marketing...little sense. Craft is flavour and intensity. Lite is Miller. Many craft brewers hope the launch will fall flat.           Read on


USA – Chicago’s Goose Island brewpub will close at the end of 2008

You thought that with running a brewery you were in the beer business? Apparently not. Goose Island’s brewpub closure proves that you are in the retail business. Because should your neighbourhood suddenly become hip you can fall victim to rising rents.           Read on


United Kingdom – Probably the best-selling lager in Britain

While InBev has launched an integrated ad campaign to promote its Stella Artois brand ahead of the lucrative summer months, recent Nielsen figures claim that the Carlsberg family of brands has overtaken Stella Artois as the best-selling lager brand in Britain.                      Read on


Vietnam – The delights of doing business in a communist country

What can you expect of a country that considers beer with snakes’ blood a cocktail of choice? Certainly not the bursting of a stock market bubble. But that’s what happened in Vietnam earlier this year. Carlsberg considers itself lucky. Only after most of the shares in brewer Habeco remained unsubscribed to in its IPO was Carlsberg allowed to buy more shares than initially planned.           Read on


USA – Trumer Pils wins Gold – again

No, it’s not called a hattrick but the Trumer Brauerei is certainly aiming for it. At the World Beer Cup 2008 Trumer Pils was awarded a gold medal for Best German-Style Pilsner. This is an extraordinary accomplishment for Trumer Pils following the Gold medal win at the World Beer Cup competition in 2006.                          Read on


 Posted April 2008:

Czech Republic - Heineken buying their way into the Czech beer market

While everybody has been talking about a possible sale of Budweiser-Budvar, Heineken announced in March that they are buying Drinks Union, a Czech brewing group based in the northern Bohemian city of Usti nad Labem.  

Read on


Australia - Premium beers fight for the top

A recent survey of the premium segment reveals that international brands continue to lead but domestic beers have improved slightly.    Read on


Australia – Concern over binge drinking

Binge drinking is currently a hot topic in Australia, occupying much media time and space.      Read on


Australia - Some hope for “alcoholorific” vintages

New technology may help Australia’s winemakers cope with higher alcohol levels brought about by the freak weather conditions of the 2008 vintage.      Read on


Australia - Booming RTD sales

According to recent research by Diageo, about 20 percent of all off-premise liquor sales in Australia are RTDs with the pre-mixed segment generating more profit per square metre than any other category in liquor stores. Read on


Australia - Fluoridated water push 

Fluoride could be added to bottled water within a year, following a review by Food Standards Australia, prompted by a request from the Australian Beverages Council.      Read on


Australia - Foster’s new “green” beer

Cashing in on the environmentally-friendly image of Tasmania, Foster’s Group has launched Cascade Green, a beer which is 100 percent carbon neutral from the picking of hops to the eventual deposit in the recycling bin.       

It must be the onset of old age why this news makes me so grumpy. I, for one, can still remember a time when green beer was something that brewers worth their mettle were not supposed to serve their customers. If they did, you were allowed to pour it down their throats.

Now “green” beers seem to be all the rage. Especially if they come from Tasmania, an island south of Australia renowned for its lush green wilderness. In March Foster’s launched Cascade Green, by all accounts a low-carbohydrate premium beer that is “green”. Excuse my pettiness of putting it in inverted commas, but what’s really “green” about a “green beer”? Although Foster’s isn’t claiming the ingredients are organic or vegan or suchlike, it suggests all are locally sourced from Tasmania. To add to its “green appeal”, Cascade Brewery which is a pretty old-time brewery near the city of Hobart, has already reduced its energy usage by 16 percent and water usage by 30 percent per unit of production over the past six years.

Cascade Green will travel to drinker’s lips courtesy of what is said to be the lightest weight, highest recycled content glass bottle currently available in Australia. Cartons of the beer will cross the country in 100 percent recycled cardboard printed with two-colour biodegradable vegetable inks.

Ok, but what’s new about that? Many breweries the world over are engaged in that sort of thing.

What is to make Cascade Green greener than green is that all the greenhouse gases produced through the life of Cascade Green are being offset. This is achieved by buying certified carbon offsets from the Hobart Landfill Flare Facility (a government-accredited operation) which captures and recycles gases. All activities from growing the hops to recycling the empty bottles after consumption of the beer are covered by the scheme, the cost of which will not be passed onto the consumer.

To me this means that Cascade Green is not “green” at all. It is not a zero-emissions beer, which would warrant a green labelling. Cascade Green only does what has become a major marketing ploy by many electricity providers, which have begun selling “green” electricity. The electricity that comes out of the socket in your house is still produced by the environment-polluting coal-fired power plant. But thanks to a lively trade in certified carbon offsets it has miraculously been turned “green”.

Does the consumer like to be fooled?   

Or are we witnessing the return of the medieval letter of indulgence in its contemporary form as carbon offset? If memory serves me right, it was in the 15th century that people bought letters of indulgence so that after their death they did not to have to roast in purgatory for their sins.

I must be getting old indeed.


South Africa – Heineken has chosen a site for a brewery

Apparently, Heineken does not want to take on SABMiller on its own. That’s why it has partnered with Diageo to build a brewery south of Johannesburg.   Read on


Sweden – Pernod Ricard wins race to buy Absolut

At the end of March Pernod Ricard, the world's second-largest drinks company, agreed to buy Vin & Sprit from Sweden's government for EUR 5.28 billion to gain the Absolut vodka brand and take on Diageo's Smirnoff vodka in the U.S.          Read on


Turkey – Carlsberg to sell Turk Tuborg

Carlsberg has confirmed that it is in discussion to sell its 95.65 percent stake in Turkish unit Turk Tuborg to Central Bottling Company Group.   Read on


Philippines – San Miguel postpones IPO of its beer unit

The much-awaited initial public offering (IPO) of stock of the beverage and food group San Miguel Corporation’s beer unit has been postponed by almost three weeks, according to a new schedule released by the Philippine Stock Exchange.            Read on


USA – Someone is going to go ballistic

Anheuser-Busch is launching Bud Light Lime on Cinco de Mayo, a top selling day for Corona Extra. How much more confrontational can matters become between Anheuser-Busch and Grupo Modelo?   

You could argue, giving August Busch IV and his team the benefit of doubt,  that with the U.S. economy in a tizz more and more consumers are going to trade their expensive cocktails, imports and craft brews for more affordable domestic beers. Given that sales of imported beer increased just 1.4 percent in 2007, compared to about 15 percent in 2006, according Beer Marketer's Insights, Anheuser-Busch is right in putting more of its marketing muscle behind its mainstay brands such as Budweiser, Bud and Michelob by increasing its total media spending by an estimated 10 percent this year.

According to media reports, the brewer is expected to fork out about USD 70 million more than it did last year on television advertisements for its top-selling beers, Bud Light and Budweiser, while its other two core brands, Michelob and Michelob Ultra, will receive an extra USD 30 million in ads.

What leaves us rubbing our eyes in wonder is the following: Anheuser-Busch plans to roll out Bud Light Lime on 5 May -- Cinco de Mayo -- with a reported USD 35 million marketing budget behind it.

Cinco de Mayo is a fixture in the U.S. holiday calendar. Originally it was a regional Mexican holiday commemorating the victory of Mexican forces over French forces in the Battle of Puebla on 5 May 1862.

However, in the U.S., Cinco de Mayo has taken on a significance beyond that in Mexico. On this day millions of people celebrate their Mexican heritage. To Mexicans Cinco de May is what St. Patrick's Day is to the Irish, the Oktoberfest to the Germans and the Chinese New Year to the Chinese.

Now why would Anheuser-Busch use a date as charged with Mexican cultural significance to launch an all-American beer flavoured with a bit of lime? Clearly, the brewer must have an ulterior motive. Because it’s as clear as beer that the date of the launch is to antagonise a competitor: Grupo Modelo, the brewer of Corona Extra.

The last time matters between the two companies came to a head was a few years ago when Anheuser-Busch used a rather tasteless xenophobic advertising campaign for its American beer brands, whose main victim was: Corona Extra.

Needless to say that Grupo Modelo’s CEO, Carlos Fernandez in Mexico City went ballistic when he was informed of Anheuser-Busch’s plans.

So come Cinco de Mayo 2008 and Anheuser-Busch will launch another confrontational challenge for Corona. It cannot be interpreted any other way. That sort of advertising budget for a brand extension which is probably not going to live for long can only mean one thing: warfare. Or how much volume does Anheuser-Busch expect to sell of Bud Light Lime before it has earned every single dollar the St Louis brewer has spent on it? 

What adds a bit of piquancy to this is the fact that Anheuser-Busch is Grupo Modelo’s major shareholder. It’s like shooting yourself in the foot, isn’t it? Unless Anheuser-Busch has been bearing grudges against Grupo Modelo. Last year Modelo set up a U.S. joint distribution venture for Corona Extra with Constellation Brands, Crown Imports, thus rendering a big disservice to Anheuser-Busch’s distributors. Read: Modelo cut them out.  

Anheuser-Busch may have been holding grudges, but this is not to say it is not a shrewd operator. If there is one thing on Anheuser-Busch’s mind, it’s bringing Grupo Modelo firmly into its fold. Perhaps Bud Light Lime is one way to try and force the issue.


Belgium – A glitch in the system

InBev’s information policy leaves a lot to be desired. This year’s financial results press conference was “attendance only”. No live webcast. And you thought we live in the Information Age. Not in Leuven, apparently. Read on                                


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