Posted May 2008
Spain – Canadean International Beer
“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
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
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
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
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
Belgium - Someone has seen the light
Looks like InBev will soon
re-open the Hoegaarden brewery which it closed two years
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
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.
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 www.schlitzgusto.com, 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
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
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
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.
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
United Kingdom - SABMiller says volumes
and revenue rose over full year
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.
Philippines – “Honey, I have shrunk the
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.
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.
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.
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.
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.
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.
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
Australia - Premium beers fight for the
A recent survey of the premium
segment reveals that international brands continue to lead but
domestic beers have improved slightly.
Australia – Concern over binge drinking
Binge drinking is currently a
hot topic in Australia, occupying much media time and
Australia - Some hope for
New technology may help
Australia’s winemakers cope with higher alcohol levels brought
about by the freak weather conditions of the 2008 vintage. Read
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
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
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
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
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
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.
Sweden – Pernod Ricard wins race to buy
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.
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.
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.
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
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
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:
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,
december 08 ·
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