Posted May 2011
Ethiopia – Heady days, heady prices
Readers, hold on to your seats. Diageo is said to have offered
USD 200 million for Ethiopia’s state-owned Meta Abo brewery
which in its last financial year made a profit of USD 2.6
million on beer sales of perhaps 600,000 hl. That’s a multiple
of …. sheer madness.
Ethiopian media reported on 10 May 2011 that Diageo outbid four
rivals in the government auction. Heineken is said to have
offered close to USD 100 million, while BGI (Castel) and
SABMiller offered USD 90 million and USD 70 million
Diageo reportedly will pay the sum in two instalments of USD 95
million and USD 105 million.
Brazil – Schincariol for sale after all?
They may deny the rumour till Judgement Day but Schincariol’s
refutations are beginning to sound a bit hollow. Relations seem
to have turned from terse to sour between Schincariol’s thirty
something owners, the brothers Adriano and Alexandre Schincariol
and their cousin Gilberto over the past few weeks ever since the
London Sunday Times reported in April 2011 that SABMiller was
interested in buying Brazil’s number two brewer.
Apparently the two family groups are in dispute
over whether to sell the company or take it to the stock
exchange through an IPO. The company, in fact, has been seeking
to improve its governance and formalise its processes in
preparation for a stock market listing.
Brazilian media reported that Adriano and his
brother Alexandre are the major shareholders of the
privately-owned company, with a 51 percent stake, while the
other branch of the family, headed by their cousin Gilberto
Schincariol holds the remaining 49 percent.
Guess who has more of a motive to sell their stake? Brazilian
media think it’s the brothers Adriano and Alexandre.
Will they all chew gum now?
Does salvation lie with the brewingly non-adjusted?
Anheuser-Busch obviously thinks so. On 10 May 2011the U.S. unit
of AB-InBev named chewing gum executive Paul D. Chibe, 45, to
become its marketing executive as of 1 June 2011, filling the
post vacated by Keith Levy’s sudden departure in January. Mr
Chibe has been Vice President and General Manager of U.S. Gum
and Mints at Wm. Wrigley Jr. Co. in Chicago, where he worked for
more than eleven years.
He also worked in marketing and new products at Quaker Oats in
their ready-to-eat cereal and convenience foods businesses. And
he worked for six years at Leaf Inc., maker of Whoppers, Milk
Duds, PayDay and Jolly Rancher candies, it was reported.
St Louis media wondered why Mr Chibe, who seems to be an
experienced marketer of consumer goods – from gum and cereals to
confectionaries - was chosen to now try his hand at beer.
However, Mr Chibe’s non-adjustment to beer may be part of the
attraction for the brewer. AB-InBev’s CEO Carlos Brito has
frequently talked about the need for new ideas and innovation in
SABMiller CFO Malcolm Wyman calls it a day
It may be the dawn of a new era at SABMiller with SABMiller’s
Chief Financial Officer Malcolm Wyman retiring at the end of
August to be replaced by internal candidate James Wilson, 51,
who currently works as finance director at SABMiller Europe. Not
only does the personnel change announced on 4 May 2011 throw the
spotlight on when Chief Executive Graham Mackay decides to
retire. The London Financial Times says that that Mr Mackay, 61,
is widely expected to retire in the next year or two.
It also underlines a broader shift at the world’s
number two brewer.
Mr Wyman leaves after 25 years at SABMiller,
becoming CFO in 2001 some two years after the group's listing in
While Mr Wyman has shown he is a dab hand at Merger &
Acquisition financing, Mr Wilson seems to be more operationally
focused. Mr Wilson, 51, has worked in the global drinks industry
for 23 years in a range of roles from finance director of Famous
Grouse Scotch whisky group Highland Distillers, then moving to
brewer Scottish and Newcastle, before joining SABMiller in 2005.
The big initiative for SABMiller now is to get its business
capability programme up and running, which is more a story of
getting efficiencies right.
SABMiller’s business capability programme, launched in 2009,
centralises a number of functions that had been devolved to the
various regional heads, and standardises other functions.
Some analysts think that Mr Wilson’s appointment signals that
SABMiller will be more focused on organic growth than on M&A on
the near future, although that does not necessarily rule out
some acquisitions – as announced by Mr Mackay at the end of
Investors are waiting to see how the subsequent succession
develops, and whether the brewer will appoint an external
candidate as CEO – possibly from a fast-moving consumer goods
background as is all the rage among brewers these days – when Mr
Mackay stands down.
In the past the company preferred to promote its regional heads
to the top spots to keep it all in the family, so to speak.
Mr Mackay has been at the group's helm since the brewer moved to
London. Judging from the interviews he has given in recent
months he shows no sign of wanting to step down.
Australia – Should you invest in wine?
Foster’s former wine unit, Treasury Wine Estates, which still
happens to be the world’s number two wine company with vineyards
from Hunter Valley near Sydney to California's Napa Valley,
ended its first day on the stock exchange (9 May 2011) with a
market value of AUD 2.18 billion (USD 2.32 billion), near the
top end of brokers’ valuations.
But if the record of the wine industry is anything to go by,
investors should proceed with some scepticism.
Both Foster's and Constellation, which is the largest wine
company worldwide, have suffered massive losses in their wine
Family-owned wine companies, on the other hand, have fared
better and have maintained profitability and sales, which seems
to suggest that wine is too unusual a business for publicly
owned companies; that it cannot compete on the stock market.
Germany – How much could Carlsberg get for Holsten
Now that Carlsberg’s exit from the German market seems imminent
– the Danes are rumoured to be in finishing talks with
Radeberger Group over the sale of their Holsten unit - it’s time
to ponder Carlsberg’s motives for entering and leaving.
Many think that Carlsberg’s strategy to go south into Germany
“went south”, metaphorically speaking, because the Danes did not
properly take into account the many problems associated with
being an “also-ran” in Germany’s perennially declining and still
highly fragmented beer market.
That would mean that Carlsberg failed in its original plan to
become a big time mover in Germany, but eventually saw sense and
sold out to the highest bidder.
Consider for a second that Carlsberg never intended to
consolidate the German beer market by continuing the Holsten
strategy of buying up market share. What if the Danes just
wanted to milk the Holsten assets dry? What does this make
Carlsberg? Think! The answer is that this would make Carlsberg a
private equity outfit by another name.
Remember that when Carlsberg bought Germany’s then number two
brewing group Holsten AG in 2004 , they paid EUR 38 each for
13.75 million shares. That’s EUR 522.5 million. Add to that the
expenses for the subsequent squeeze-out plus a few extra costs,
and the total purchase price came to perhaps EUR 550 million. At
However, the immediate sale of the Licher and
König breweries and the non-alcoholic beverages unit flushed at
least EUR 400 million into Carlsberg’s coffers.
All in all, we are probably right in assuming that the Holsten
purchase paid for itself.
The draw-back was that what remained of the original Holsten
only warranted the group’s rank as fifth largest brewer in
Since then Carlsberg’s rank has dropped further as over the past
few years Carlsberg has sold off or, rather, got rid of three
more breweries, which all went to private label producers for a
Carlsberg’s policy of scaling down its discount label business
(read “offloading of underperforming units”) has left Holsten
with two breweries: one in Hamburg and one in north-eastern
Though small, these are profitable businesses with a turnover of
perhaps slightly under EUR 300 million.
So far private equity would not have done things
To what extent Carlsberg has been extracting cash from Holsten
(another thing private equity does) we will probably never find
out – unless Radeberger does a “kiss & tell” once Germany’s
number one brewing group runs the show at Holsten.
Unfortunately, the final exit – the sale of the remaining two
breweries – does not seem to be running as smoothly as the Danes
may have hoped. We heard on the grapevine that Carlsberg has
been offering Holsten to everybody like sour beer and that
Radeberger Group is the only one to have shown any interest.
Which raises an interesting question: how much could Holsten be
worth to a buyer? In situations like this where there is only
one buyer...and the seller is desperate to get out … there is
ample downward pressure on multiples. We would not be surprised
if Carlsberg’s German unit went for less than 5 times EBIT or
about EUR 100 million, give or take a few million.
Rest assured that the Danes are not going to make a killing. But
since they have never put any dosh behind Holsten, whatever they
realise through a sale will be an extra bonus.
Who’s to say that Carlsberg does not know how to act like
South Africa – Africa’s tax men investigate SABMiller
ActionAid’s campaign against SABMiller struck target. After
having been accused of tax dodging by the London charity
ActionAid in November last year, the authorities in five African
states have decided to work together to examine the brewer’s tax
affairs. On 6 May 2011 SABMiller again rejected any claims of
tax avoidance in Africa after officials from South Africa,
Ghana, Zambia, Tanzania and Mauritius had come together in a
South African-led African Tax Administrative Forum to look at
the group's tax payments.
The world’s number two brewer reiterated that it had not done
anything wrong. Instead, it was a major direct investor,
employer and taxpayer in Africa and in its financial year to
end-March 2010 had invested more than USD 500 million in Africa
on new breweries and acquisitions.
Getting corporations to cough up on tax
Each time us lesser mortals receive our annual tax statements
and can see for ourselves how many of our hard-earned dollars or
euros end up in the taxman’s grubby hands, who does not feel
like going over to the taxman’s office and turning Viking? You
know: burn, ransack and pillage.
In Britain “doing a Viking” has become a popular form of protest
for campaigners out to name & shame companies for tax dodging.
On 26 March 2011, during broader protests against government
cuts, a group called UK Uncut made headlines when about 1,000
people rushed into the Fortnum & Mason store in London, famous
for its picnic hampers, because its owners are at the centre of
a GBP 40 million tax avoidance row.
Australia – caffeine-laced alcopops could be banned
Do they quicken your pulse? Or get you into a state? Pre-mixed
energy drinks with alcohol like “Pulse” have been quite the rage
in recent years. Many people have been asking themselves: what's
the point of selling pre-mixed alcoholic energy drinks? Why mix
stimulants (guarana, caffeine) and depressants (alcohol)? As
these drinks send mixed messages to the nervous system, they
could soon be banned. These fizzy drinks are popular with young
people and contain alcohol and high levels of caffeine, allowing
consumers to drink longer and harder.
Australian media reported in early May 2011 that pressure is
mounting on the Australia New Zealand Food Regulation
Ministerial Council to prohibit the sale of these drinks and
follow similar moves made by some U.S. states.
USA - The Budweiser-InBev culture clash
The world's number one brewer AB-InBev on 4 May
2011posted a sharply higher net profit for the first quarter,
but the results were skewed by a 0.4 percent drop in volume to
91.45 million hl compared to the year-earlier quarter.
Price increases and a push to get consumers to trade up to more
expensive beer brands helped the maker of beers such as Stella
Artois and Budweiser to compensate for sluggish beer sales in
the United States, where high unemployment continues to rattle
Germany – Polishing the figures
Many raised an eyebrow when AB-InBev reported its first quarter
2011 figures. While in the U.S. the world’s number one brewer
lost about one million hl in beer output compared to the same
quarter last year, beer sales in Western Europe were up 0.4
percent. In Germany, sales rose almost one percent.
Is this the proverbial silver lining that things
are turning to the better in Germany?
Hardly. What AB-InBev failed to tell the analysts was that
towards the end of 2009 their German unit had artificially
raised sales figures by forcing wholesalers to stock up on their
brands. This meant that executives met their bonus targets in
2009. However, sales in January 2010 dropped massively as
wholesalers tried to empty their warehouses stocked to the roof.
It’s because of this low 2010 base that the first quarter
comparison for Germany looks so favourable.
Australia - Foster's shareholders back
beer and wine split
Foster’s is no more. Shareholders of
Australia's Foster's Group unanimously voted on 29 April 2011 in
support of splitting the firm's beer and wine operations, a
decision that marks an historic event. The move will create
Treasury Wine Estates, with AUD 1.9 billion (USD 2.1 billion) in
revenues, while the new Foster's will remain Australia's largest
brewer with revenues of AUD 2.6 billion (USD 2.8 billion).
Perhaps shareholders were so glad to see the
demerger finally go ahead that they did not complain about the
high costs of executing the split – reportedly AUD 151 million/USD
164 million – or the payout to CEO Ian Johnston, who stands to
take home up to AUD 10 million in cash and shares when he leaves
the company in July.
Argentina – Warsteiner says bye-bye to all
There’s only a thin line between high hopes
and heartbreak. Having already sold its brewery to SABMiller in
November 2010 for an estimated USD 45 million (EUR 30 million),
Germany’s brewer Warsteiner has now disposed of its wine company
in Mendoza. In April 2011 Warsteiner clinched a deal with the
local beverage company Cepas Argentinas SA for an undisclosed
The deal marks the completion of Warsteiner’s
exit from Argentina – a market it entered in the mid 1990s with
the construction of a one-million-hl-brewery near Buenos Aires
and the purchase of the wine brand “Suc. Abel Michel Torino“ in
Russia - Russia may ban sales of beer in
Huhu, so Russia’s legislators are thinking of
banning the sale of beer in plastic bottles from January 2013.
Could this ban hurt brewers’ sales? You bet it will. Russian
brewers sell nearly half their beer – over 45 million hl - in
plastic bottles, it was reported. Should brewers have seen this
coming? Of course. Selling beer in multi-litre plastic bottles
has always been risky, if not to say insidiously obscene. Beer
is not a soft drink. Hence it should not be packaged like one.
Australia – Foster’s wedding gift
The royal wedding – arentyousickofit? But it
ain’t over yet. Now the world has been put into the know that
Foster’s has sent a bottle (number 2904) of Foster’s 2011 Crown
Ambassador Reserve Lager as a wedding gift to Prince William and
Kate Middleton … the number marks their marriage date (29
Head brewer John Cozens was quoted as saying
that the high alcohol beer “will develop more complex flavours
in the royal cellars in the next three or four years.”
Czech Republic – The price isn’t right
On the beer front, the Czech Republic seems
to be in a stalemate. No news in public about Budvar and any
eventual privatisation. Or about Staropramen and how it is
faring under the private equity regime of StarBev. Instead,
there are worrying signs that the Czech beer export boom is
In 2010 beer production of those breweries
associated in the Czech Beer and Malt Association (CSPS) dropped
by 7.9 percent over 2009. Draught beer volumes took a major hit.
They declined over 12 percent year-on-year.
USA - Fortune Brands to go by the name of
Beam Inc after separation
Conglomerates, daaahlings, are so
yesterday’s fashion. Which is what Fortune Brands found out to
its detriment when the activist investor Bill Ackman told the
board that the aggregate value locked up in its three divisions
(golf/home products/drinks) was higher than the company’s total.
He may be right: after all, bourbon, shower
heads and golf clubs are not exactly synergistic businesses.
Fortune’s board, ever so obedient,
immediately responded by announcing in December last year that
it would split the company into three.
Scotland – Whisky exports up 10 percent in
How to drag the UK economy out of the
doldrums? Easy. Export more whisky. 2010 was a record year for
Scotch whisky exports with global shipments rising by 10 percent
to reach a value of GBP 3.45 billion (EUR 3.8 billion),
according to figures published by The Scotch Whisky Association
(SWA). The performance confirmed Scotch whisky as one of the
UK’s top exporting industries. Scotch whisky exports have
increased by 60 percent since the turn of the century, adding an
extra GBP 1.29 billion in value (EUR 1.4 billion).
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