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Posted May 2012

Czech Republic - All quiet in the great Budweiser beer war

The dispute over the Budweiser trademark seems to have quieted down as everybody is waiting for the auditors to release their findings on the workings of state-owned Budweiser-Budvar. The report, scheduled for release in June, will ostensibly show if Budvar's management has been following the rules – and a negative result could give some politicians a greater say over the Czech brewery. The brewery is owned by the Czech Ministry of Agriculture.

The audit is conducted by the controversial HZ Consult (see several reports in Brauwelt International). One of the most controversial aspects of the audit, says Czech market observer Richard Hunt, is that it is "led" by a lawyer, Tomas Jindra.

Mr Jindra had been appointed by the Minister for Agriculture, Bendl to Budvar's supervisory board at the end of last year. This constitutes a clear conflict of interest in the audit world. He cannot both lead the audit on behalf of the Ministry, and sit on the supervisory board of the company being audited. When this scandal hit the roof, the Czech Prime Minister took action. He announced that the Budvar issue had become overly politicised, and sought to address this by removing Mr Jindra and several other ODS politico types from the Budvar board.

Since then, the media have gone quiet on Budvar, pending the report.

In the months since AB-InBev acquired Budejovicky Mestansky Pivovary (BMP), spun off from Samson late last year, the three parties in the Budweiser trademark dispute – AB-InBev, Budweiser Budvar, and the Samson Brewery, which is also located in Budweis - have taken different approaches to their PR strategies. Read on
 

Czech Republic – Alain Beyens ousted by StarBev’s new owner

The Belgian Mr Beyens, 50, wanted to be CEO of a company himself. That’s why he left AB-InBev for StarBev when AB-InBev sold its central European unit to private equity firm CVC in 2009.

In so doing, he also forfeited a super bonus of over EUR 24 million in current terms, the Belgian magazine Trends wrote recently. That would have been his share in the big jackpot awaiting AB-InBev’s top executives if they bring down the brewer’s debt load to a certain level. But Mr Beyens’ ambition was cut short after only two years when StarBev’s new owner Molson Coors announced an executive shakeup on 8 May 2012 as part of the StarBev purchase for USD 3.54 billion.

Mr Beyens will leave his post at StarBev once the transaction is completed to ponder his next career move as board member of Belgian brewer Duvel Moortgat.

He will replaced by Molson Coors’ very own Mark Hunter, 48, who has been in the industry for 20 years and since 2007 has headed the brewer’s UK and Ireland business. Formerly, he was Chief Commercial Officer at Molson Coors Canada.

Stewart Glendinning, currently Global Chief Financial Officer for Molson Coors, will replace Mr Hunter in the UK role.

Molson Coors said StarBev had generated 2011 sales of approximately USD 953 million and an EBITDA of USD 322 million. The purchase price represents a multiple of just under 11x EBITDA.

The 13.3 million hl brewer StarBev employs 4,100 people and brews beer at nine plants in the Czech Republic, Serbia, Croatia, Romania, Bulgaria and Montenegro. As Brauwelt International wrote at the time of the acquisition, StarBev’s business and share vary greatly across the region, depending on the country, which will make the integration challenge more daunting for Molson Coors. Read on

 

Russia – Carlsberg’s Russian woes won’t go away …

but hope springs eternal. On 9 May 2012 Carlsberg reported a 4 percent drop in first-quarter group beer volumes as a beer tax hike in Russia hit volumes in the company’s eastern European region, which were down 22 percent. Volumes in northern and western Europe saw growth. They surged 26 percent in Asia. Still, total volume sales were down to 26.7 million hl from 27.4 million hl in the same quarter last year. Read on
 

Brazil – Not a good start for Schincariol

While AmBev, the Brazilian unit of AB-InBev, managed to increase its sales volume of beer by 4 percent in the first quarter (the total market was up too), Schincariol saw volumes decline 5.5 percent.

True, the weather had been a little cooler and rainy in Brazil compared to the same quarter a year ago. But AmBev nevertheless managed to take advantage of industry growth and increase its market share slightly to about 69 percent.

Japan’s brewer Kirin, which has owned Schincariol since last year and hopes to turn the business around this year, cannot have been too pleased when its nearest rival Petropolis – with whom it competes for the number two slot in the market – announced that it plans to build a new brewery on Schincariol’s home turf. Read on
 

United Kingdom – Make mine a tequila

No doubt, Diageo would love to lay its hands on a tequila brand like Jose Cuervo – the world’s leader of the tequila category. The transaction has been gossiped about for a year. In early May 2012, several media reported Diageo could be only weeks away from winning control of Jose Cuervo in a deal valuing the spirits company at about GBP 2 billion to GBP 3 billion. A likely option would be a share swap between the controlling Mexican Beckmann family and Diageo, by which the Beckmanns would sell a majority stake in Cuervo in exchange for shares in Diageo.

Analysts have said that, if the Beckmann family were to sell all, or a large part of the company for shares, they would probably emerge as Diageo’s biggest shareholder.

Diageo’s agreement to distribute Cuervo in many countries outside Mexico expires in June 2013, it was reported. Diageo’s CEO Paul Walsh has already made it clear that a renewal of the current distribution contract is not an option as the group does not make enough profit from the brand. But Nomura analyst Ian Shackleton said he would be surprised if the business is sold while the family head Juan Beckmann, 72, is alive and in control.

Read on

 

Germany – High-end beers on the go go go

Volumes are still small and only a few handful of brewers seem to be keen on dabbling their hands in these super-premium beer specialities, which retail at EUR 15 for a bottle, but as Brauwelt International wrote about a year ago, a market for them is slowly evolving, even in Germany. And about time too. The German beer market, long suffering from volume declines and creative stagnation when it comes to genuine product innovation, is finally witnessing a surge in noble brews and special edition beers, which position themselves decidedly beyond the bland and boring. These beers are produced by small or medium-sized breweries, mostly from Bavaria, but not just there.

As these beers will only sell in urban cosmopolitan surroundings, two drinks industry specialists recently founded a marketing and distribution company, called Gourmetbier-Galerie, to help these small breweries find customers.

The founders – Martin John and Stefan Seidl – have a background in drinks and wine marketing. They met years ago when they both worked for König Ludwig Kaltenberg Brewery in Bavaria. Knowing full well that these high-end beers will go nowhere and only gather dust if condemned to supermarket shelves, they are already touring the country with their beer portfolio to convince bar and restaurant owners in Germany’s big cities that serving these beers to their discerning clientele can be a worthy and profitable undertaking.

Usually, trade shows and festivals serve as launch pads for these products. However, Germany did not have a fine beer and drinks show that is open to the public. That’s why they jumped at the opportunity to feature their beers at the recent „1. Braukunst Live! Festival“ (20 -22 April 2012) which was held – of all places – in Munich. This was not a beer guerilla event. The organizer Frank-Michael Böer had managed to recruit a group of likeminded brewers around him - 40 exhibitors and several sponsors, Munich’s Hofbräu brewery, the glass firm Rastal and brewhouse manufacturer BrauKon among them – who were pleased to be ambushed by over 2,500 people, all wanting to know the nitty-gritty of these beers. Many Bavarian brewers came to look and see, which should persuade Mr Böer to re-stage the show in a year’s time.

When it comes to fine beer events, Germany may be light-years behind the Stockholm Beer & Whisky Festival, but as the saying goes: where there is life, there is hope and where there is hope, there will be fine beers.


 

USA – Is AB-InBev acting irresponsibly?

The New York Times newspaper has been on the warpath against AB-InBev ever since February 2012 when the Oglala Sioux filed a USD 500 million federal lawsuit against several large brewers, including Anheuser-Busch (A-B) and Miller Brewing; local beer distributors; and the four Whiteclay beer shops, which sold the equivalent of 4.3 million cans of beer last year. The suit accuses the alcohol businesses of encouraging the illegal possession, transport and consumption of alcohol on the Indian reservation, where alcohol is banned.

The Pulitzer Prize winner and New York Times columnist Nicholas D. Kristof,

who has been following the story, launched another fierce attack on A-B when he wrote on 5 May 2012 that, after seeing “Anheuser-Busch’s devastating exploitation of American Indians”, he was done with its beer. He called upon his readers to also stop drinking A-B’s beers.

When a major media outlet like the New York Times, which is often seen as a supporter of Big Business, publishes a call to action like this one, you can expect the blogosphere to run away with it. Try googling “Anheuser-Busch+Indians+reservation” and you will end up with over 500,000 hits.

Whiteclay, a town in the state of Nebraska, wouldn’t be in the news if it had not become the metaphor for all that ails American Indians. The town has a population of about 10 people, but it sells more than four million cans of beer and malt liquor annually, because it is the main channel through which alcohol illegally enters the Pine Ridge Indian Reservation just 200 metres north — across the state line in South Dakota.

The drink of choice in Whiteclay seems to be Hurricane High Gravity Lager, a malt liquor (8.1 percent ABV) which is brewed by Anheuser-Busch. Hence the blame on Anheuser-Busch. A 16-ounce can costs USD 1.50 – an efficient way to get drunk without having to rob a bank. Read on
 

Ethiopia – Heineken to invest in a new brewery

It was to be expected that Heineken would not be content with owning two breweries in Africa’s second most populous country behind Nigeria. Early last year Heineken entered the Ethiopian beer market when the Dutch brewer acquired the Bedele and Harar breweries — both of which were publicly owned — for USD 78.1 million and USD 85.2 million, respectively.

Although both breweries have a stake in the country’s major market – the capital of Addis Ababa – they are hampered by high transportation costs. Harar brewery, located on the outskirts of Harar, is 526 km to the east of the capital.

At the end of April 2012 African media reported that Heineken is currently in the process of acquiring 25 hectares of land near the capital for the construction of a new brewery. Not enough, Heineken is supposed to invest a total of around USD 40 million in modernising and upgrading Bedele and Harar breweries by the end of 2013. Read on
 

Australia – No changes to cider taxation - yet

Traditional cider makers have been worried about rumours that, following the Federal Budget on 8 May 2012, their products will be taxed at a rate similar to that applied to RTDs - pre-mixed spirit and cider-based products.

At present, traditional cider carries about AUD 0.23 (EUR 0.18) tax per standard drink compared with AUD 0.95 (EUR 0.74) for RTDs. Cider makers had estimated that the cost of production could double if traditional cider is taxed at the higher rate.

Their worries were dispersed, however, when the budget was released without making any changes to the cider tax. Read on

 

Dominican Republic – AB-InBev’s purchase of Cerveceria Nacional Dominicana “pricey”

The deal is done, and the reviews are coming in on AB-InBev’s takeover of the Dominican Republic's national brewer CND. Market observers agree on two things: the deal is clever but it comes with a high price tag.

According to U.S. media the USD 1.2 billion (EUR 925 million) deal for a 51 percent stake in Presidente parent Cerveceria Nacional Dominicana translates into 24 times CND’s EBITDA. In the past beer industry deals were done on a 12 to 14 times EBITDA basis. Read on
 

Australia - Coopers wins the Carlsberg licence

Although it had been rumoured for months, it was only announced in early May 2012 that as of 1 July 2012 Coopers Brewery and its distribution arm, Premium Beverages, will brew and distribute Carlsberg beer in Australia.

The brand had previously been with Foster’s.

Coopers will produce bottled and draught Carlsberg beer at its Regency Park brewery in Adelaide, with sales and distribution to be undertaken by Coopers’ subsidiary, Premium Beverages. Currently, around 500,000 cartons and 6,500 kegs of Carlsberg are sold in Australia annually, the companies said in a joint statement.

Apart from the Carlsberg brand, the French brand Kronenbourg 1664 will also be distributed by Coopers and Premium Beverages. Part of Carlsberg’s portfolio since 2008, Kronenbourg 1664 is a premium lager which is relatively unknown in Australia. Read on

 

United Kingdom - Alan Clark to become CEO of SABMiller in 2013

Proven right again. As early as 2007 in a Brauwelt article called "The candidate" I predicted that Alan Clark, currently Managing Director of SABMiller Europe, would be the most likely person to succeed Graham Mackay as CEO of SABMiller, once Mr Mackay chooses to take on a non-executive role with the brewer.

Those supposedly in the know muttered then, no, Mr Mackay would be replaced by whoever happens to head the brewer's South African business, since SABMiller's income from South Africa is much bigger than that from Europe.

But here you go: SABMiller on 23 April 2012 announced a series of directorate and senior management changes, which again underline how well the brewer manages its succession by promoting its own, yet without falling prey to the "youth cult" afflicting other companies.

In its statement SABMiller said that Meyer Kahn,72, who first joined the group in 1966, and who has been Chairman of SABMiller since its primary listing on the London Stock Exchange in 1999, will retire as Chairman after 46 years of service with the Group

Graham Mackay, 62, who joined the group in 1978 and who has been Group Managing Director since 1997 and Chief Executive since 1999, will become Executive Chairman, with the intention that he will continue in that role for one year, before becoming Non-Executive Chairman at the annual general meeting in 2013.

Alan Clark, 52, will be appointed as Chief Operating Officer of the Group and as an Executive Director, with the intention that he will succeed Graham Mackay as CEO at the Annual General Meeting in 2013.

Sue Clark, 47, who joined the Group in 2003 and is currently SABMiller's Director of Corporate Affairs, will replace Mr Clark as Managing Director of SABMiller Europe. Her successor will be announced in due course.

This makes Ms Clark the first woman among global brewers to hold such a position.

All these changes will become effective from this year's Annual General Meeting on 26 July 2012.

 

USA - What will AB-InBev buy next? Pepsi? Or more U.S. distributors?

Contrary to many pundits, Germain Hansmaennel and I have always maintained that AB-InBev will struggle to buy SABMiller. In our humble opinion AB-InBev would be better off acquiring PepsiCo's beverage business or more U.S. distributors. To our delight this was confirmed by Harry Schuhmacher, one of the most astute U.S. beverage market observers. Here's what he wrote on 27 April 2012:

"Look, they [AB-InBev] would have to write a very big cheque indeed [for SABMiller], something north of USD 100 billion and that's a lot of money in anybody's language", SABMiller's CEO Graham Mackay reportedly told U.S. distributors at a recent meeting.

If AB-InBev went after SABMiller, price would be one obstacle, says Mr Schuhmacher. But there are more to contend with.

1. SABMiller's purchase of Foster's and Efes has made the deal less bankable.

2. SABMiller is already lean and there are few synergies in such a deal.

3. SABMiller's continued building of breweries in emerging markets seems to indicate that its management is in it for the long haul.

4. Major SABMiller shareholders would likely want stock for tax reasons, and the AmBev/AB-InBev controlling families are loathe to give up control.

5. SABMiller is a major Coke bottler and AB-InBev is a major Pepsi bottler.

That's why, with U.S. volumes improving, Mr Schuhmacher thinks that AB-InBev may be looking to the U.S. beer and beverage profit pools for growth.

"If there is one thing that AB-InBev has learned over the last three years, it's how much money can be made in the United States. I think it has even surprised them, as their synergy targets here have been consistently surpassed and ahead of schedule. And if SABMiller is indeed taken off the table, and Modelo continues to insist that it wants to remain independent, where else is AB-InBev to turn to grow margins and profits?"

Mr Schuhmacher suspects that AB-InBev could look in two places in the U.S.: its distribution network, and PepsiCo's Americas soft drink business. Read on

 

United Kingdom - SABMiller met MPs on tax in developing countries

The UK parliament's International Development Committee (IDC) is seeking transparency from oil, gas and mining firms over the amount of tax paid in developing countries. A parliamentary inquiry is likely to press the UK government into signing an international agreement to force these companies to report on how much tax they pay to developing countries.

The recommendation is expected to follow the conclusion of a series of select committee hearings in front of the International Development Committee, including a session on 24 April 2012 when two of the largest multinationals listed on the London Stock Exchange - brewer SABMiller and commodity trading group Glencore - insisted it would be difficult and costly for them to make wider disclosures on taxation. Read on

 

United Kingdom - Minimum pricing to hit 8% of non promoted supermarket alcohol

More than one in 12 alcoholic drinks sold in supermarkets, outside of promotions, would clash with UK government plans to ban sales of items priced below 40 pence (USD 0.65/EUR 0.50) per unit of alcohol, and cider would be hit the hardest.

In March 2012 the UK government unveiled plans for minimum alcohol pricing in England. The proposal suggests a minimum price of 40 pence per alcohol unit as part of a wider alcohol strategy to curb health problems and crime associated with binge drinking.

A survey by research company Brand View found that of 12 April 2012, 8 percent of products in the alcohol category had a base price (non-promoted) below 40 pence per unit. More than one-third of these were supermarket own-label brands. Read on
 

Europe - Brewers get a boost from emerging markets

The first quarter reporting season is upon us. AB-InBev said on 30 April 2012 that it shipped 1.8 percent more beer and other drinks overall in the first quarter of 2012. The world's biggest brewer reported its net profit jumped 75 percent, thanks to lower financing costs and taxes as well as higher beer sales. Its core profit (EBITDA) rose 7.4 percent to USD 3.55 billion. That was slightly below the average analyst expectation of USD 3.58 billion.

AB-InBev's Chief Financial Officer, Filipe Dutra, said the company was benefiting from growing profits in countries like Brazil, where the tax rate is lower than in Europe and the United States.

Revenue meanwhile increased 3.7 percent to USD 9.33 billion, as strong sales in Latin America and Asia offset falling sales in Europe.

After years of decline, U.S. beer shipments grew 1.0 percent in the quarter, aided by mild winter weather, an extra shipping day, restocking after inventories were cut at the end of 2011 and deliveries ahead of an earlier Easter.

However, AB-InBev warned that U.S. sales may fall in the second quarter as it squeezed more shipments into the first quarter to avoid higher transport costs in the summer. Read on

 

Australia - Coopers Brewery is celebrating its 150th anniversary this month

... and is already setting its sights on the future. In April 2012 Australia's biggest independent brewer bought America's largest home-brew brand, consolidating its position as leader of the global home-brew market.

Coopers revealed on 25 April 2012 that it has acquired Mr Beer, a company based in the U.S. state of Arizona.

Coopers is already the world's largest producer of home-brew concentrates and distributes do-it-yourself beer kits and accessories to more than 20 countries.

Scott Harris, Coopers' Marketing Manager of brewing products, said Mr Beer sold brewing kits, concentrates and accessories to more than 14,000 U.S. stores and directly to consumers online.

Coopers has not disclosed how much it paid for Mr Beer, but Mr Harris said it was a multi-million-dollar deal.

He described it as the first major international acquisition by the Adelaide-based brewer in nearly 30 years.

Coopers will retain the Mr Beer brand, but U.S. customers would notice some subtle changes aimed at improving the quality of the beer, such as replacing the malt extracts.

The company says that Mr Beer sold more than 200,000 home brewing kits last year and there are no signs of that demand waning. Mr Beer's sales have been increasing by 10 percent per year for the past decade.

Coopers became Australia's biggest independent brewer late last year after global beverage giant SABMiller acquired Foster's. It has been securely in family hands since its founder, Thomas Cooper, a former stonemason and shoemaker, produced his first commercial brew in May 1862.  Read on

 

Australia - Modelo's beer brands Negra Modelo and Pacifico are looking for a new home

Foster's lost the low volume brands along with Corona Extra when owner Grupo Modelo cut ties with the SABMiller-owned company in March 2012.

However, they were not taken up by Corona's new Australian distributor, Lion.

Negra Modelo is Mexico's top-selling dark beer, while Pacifico is a pilsner-style brew.

Like Danish beer brand Carlsberg, the Mexican brands are seeking a new distributor and have been heavily linked with the Coopers-owned distribution business, Premium Beverages, but neither party would comment at this stage.

 

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