Beer Monopoly




    International Reports







Posted May 2016


Belgium – Brussels bomb attacks are a shock to the economy

Brussels’ hotels and restaurants had barely recovered from the November 2015 attacks in Paris, which killed 130 people, and made Belgian authorities put the entire city on a lockdown for weeks, when Brussels itself saw two bomb attacks on 22 March 2016, killing 31 people and injuring 270.

The consequences are dire: shops closed; people are staying at home avoiding pubs and restaurants. Worse still, tourists are cancelling their trips to Brussels. The airport, badly hit by an explosion, is a quiet affair these days.

Travel agencies are already feeling the pinch. Hotel bookings declined sharply during the following Easter holidays. Yvan Roque, President of the Brussels Horeca Association, said in April 2016 that restaurants and cafes ran at half speed. Between January and March 2016 around 600 on-trade outlets filed for bankruptcy. Usually, in such a volatile sector, it’s 40 closures per month.

Brussels’ restaurateurs are also unhappy with the new pedestrian zone in the city’s centre, introduced last summer. It is not only an ugly affair (trust my words, I saw it), but it is keeping punters away who don't feel safe there in the evenings.

In protest, the mayor of Brussels, Yvan Mayeur, in April 2016 was refused a meal at a restaurant because the chef is unhappy about the impact the pedestrian zone is having on takings. Melanie Englebin, the chef of the Cécila restaurant, said that she noticed a spectacular fall in turnover after the introduction of the pedestrian zone.

I asked him to leave in a friendly way. I provided him with an explanation: the pedestrian zone means my turnover has fallen by 40 percent. I'm nearly bankrupt,” Ms Englebin told media.

No doubt, the attacks and the terrorist threat are a major blow to tourism, which represents about 8 percent of all Brussels jobs and nearly 4 percent of regional GDP. To make matters worse, the shock waves have hit the economy hard and the consequences will be felt for months.

Beer sales are an obvious indicator. During the first quarter this year, Belgium’s beer sales dropped 5.2 percent year-on-year. In the on-trade, draught beer sales declined over 9 percent, a sure marker that people are not going out much these days, especially in Brussels, where draught beer sales are down almost twice the national average.

Without mentioning the attacks, AB-InBev, when reporting its First Quarter 2016 results on 4 May 2016, merely said that its own beer volumes in Belgium “were down mid-single digits, due to a soft industry and some estimated market share losses.”

A “soft industry”? What an unsuitable euphemism.


Germany – Retailers fined EUR 90 million for beer, coffee and sweets cartel

Germany’s trust busters are cracking down on vertical cartels too. After issuing hefty penalties to several of the country’s big brewers, the regulatory agency on 9 May 2016 fined a number of retailers, including EDEKA, Metro, Netto, Kaufland and a regional drinks retailer.

According to the whistle blower AB-InBev, these retailers agreed to fix prices for its brands Beck’s, Franziskaner and Hasseröder.

As in the previous horizontal cartel investigation, which caught Germany’s brewers red-handed in 2014, AB-InBev went scotch-free because it had helped with the investigation. Read on


Belgium – AB-InBev and AmBev shuffle assets in Latin America

AB-InBev and SABMiller did some asset-swapping with Brazilian brewer AmBev, in which AB-InBev holds a majority stake, ahead of the proposed combination of the British and Belgian companies.

AB-InBev confirmed on 13 May 2016 it has entered into an agreement with AmBev, which will see it transfer SABMiller’s Panamanian business to AmBev in exchange for AmBev’s Colombian, Peruvian and Ecuadorian businesses.

As SABMiller enjoys a monopoly in these three markets, relinquishing AmBev’s businesses there should give AB-InBev eventually a near-total market control. In Europe such a transfer would never make it past the trust-busters, but in Latin America, who knows? Read on


Belgium – Dutch brewer Bavaria buys Belgian brewer Palm

Despite several rebirths over the past two decades – from Brouwerij Palm to Palm Breweries to Palm Belgian Craft Brewers in 2014 – the Belgian brewing group Palm has seen its beer volumes decline and has finally sought rescue under the wings of the Dutch brewing group Bavaria.

No financial details were disclosed. Bavaria only said on 10 May 2016 that it has taken a controlling 60 percent stake in Palm Belgian Craft Brewers with the intent to fully acquire the family-owned company in 2021. Palm’s breweries (Palm and De Hoorn) in Steenhuffel and the Rodenbach brewery in Roeselare are part of the transaction. These locations will continue to brew beer in the future. Read on


USA – U.S. craft brewer brews best German-style Pilsener

Again, the World Beer Cup 2016 was a huge affair. 96 categories; 6,596 beer entries from 1,907 breweries; 253 judges from 31 countries. The results were posted on 6 May 2016. Since this year is the 500th anniversary of the German Reinheitsgebot, it was interesting to see who would come out top in a German category.

Incidentally, Category 35: German-Style Pilsener with 108 entries was won by Trumer Pils, brewed by the Trumer Brauerei, Berkeley, California. Silver went to the Dry Dock Brewing Company from Aurora, Colorado. This just proves to show that brewing beer with water, hops, malt and yeast is not a skill only the Germans master.

Fortunately, the bronze medal went to a German brewery, the Bürgerliches Brauhaus from Saalfeld, or those claiming to brew the purest of pure beers would have had to wear sackcloth and ashes. Read on



Australia – Purple is the new blue

For the International Women’s Collaboration Brew Day (WCBD), which took place on 8 March 2016, the Adelaide based Wheaty Brewing Corp created a Bluestocking beer, which was to excel at having a really deep blue colour.

Brauwelt International sent its correspondent John Harvey to the Wheatsheaf pub to check out the “blue” beer when it was tapped on 7 May 2016.

Here is his report: “We found the colour rather disappointing as it is more purple/indigo rather than blue, but there is a hint of blue colour in the foam/head when held to the light. The beer is well balanced with good bitterness and hop character.” As Jade Flavell, the brewer, was not present when Mr Harvey went to taste the beer, he couldn't discuss it with her. But her bar staff described the beer as “an American-style wheat”. Sadly, Mr Harvey could not detect any typical wheat characters.

Never mind, ladies. Better luck next time, I say.

Photo: Tina Bahnisch
The Bluestocking beer has a groovy colour, although it is not quite as expected: more indigo than blue, in fact.


Venezuela – How to bring a country down … and run it dry

Funny that a socialist like Venezuela’s president Nicolas Maduro should think like a French queen. Reportedly, Marie Antoinette said when told that there was a bread shortage: “let them [the French] eat cake.” Well, we know how things worked out for her: she was beheaded in 1793.

A former bus driver, President Maduro probably thought: if they can’t have beer, let them guzzle soft drinks. In early May 2016, Venezuela’s largest beer and soft drinks company Empresas Polar, which produces four in five beers consumed, was still bottling soft drinks, thanks to there being some sugar left, but had to shut down its four breweries, blaming the government, which hasn’t allocated the dollars the company needs to pay for imported raw materials such as malted barley.

Venezuela’s two major brewers have had to contend with declining beer output. It has dropped from 22 million hl in 2013 to 19.7 million hl in 2015. Because of the plant closures, workers are hit too. About 10,000 of Polar’s workers had to be sent home. Read on


Belgium – AB-InBev to sell SABMiller's central European unit

Those who wondered if AB-InBev were to keep SABMiller’s Pilsner Urquell brand after the takeover can now rest assured: they won’t. On 29 April 2016 AB-InBev announced it has offered to sell all of SABMiller’s assets in Hungary, Romania, the Czech Republic, Slovakia and Poland, including the rights to Pilsner Urquell outside the United States. Within the U.S. AB-InBev has already agreed to sell Pilsner Urquell to Molson Coors as part of a larger deal divesting its stake in MillerCoors. The job lot also includes brands such as Polish beers Tyskie and Lech, Hungarian beer Dreher, and the Romanian beer brand Ursus. The assets could fetch between USD 5 billion and USD 8 billion, according to analysts’ estimates.

Again, AB-InBev justified its decision to offload these assets in order to gain regulatory approval. The European Commission, which is the European Union's antitrust regulator, is set to deliver its verdict on the takeover of SABMiller by 24 May 2016.

But historically, central Europe’s beer markets have not been of interest to AB-InBev, which sold its own regional operations to the private equity firm CVC in 2009. These have since ended up with Molson Coors. Read on


USA – Stone sets up angel fund for craft brewers willing to sell

In theory this sounds like a good idea. Stone Brewing co-founders Greg Koch and Steve Wagner, on 2 May 2016, announced the formation of True Craft, a USD 100 million company aimed at investing in craft breweries. The new organisation will buy small stakes — no more than 25 percent — of interested craft breweries. That will allow the breweries to expand or fund other improvements without compromising their independence by borrowing from banks, dealing with venture capitalists or selling to the Big Brewers.

Though the goal is clear – offering craft brewers an alternative to selling out to Big Beer - the details are still vague. Like: how much is Stone Brewing or Mr Koch contributing? Who are their partners? Where will True Craft be headquartered? Who will lead it? Read on


USA – Boston Beer draws shareholders’ scorn

It’s a cruel world out there. Boston Beer, once the darling of the financial markets, is about to turn into its pariah. Why? Because its growth rates have disappointed. The volume shipped by Boston Beer, the maker of Sam Adams beer, last year rose just 3.6 percent after enjoying double digit increases for years.

Mind you, Boston Beer continued to grow but obviously not enough – whatever enough is. This slowdown has been reflected by its share price. Since reaching a record high of USD 324 a share in January 2015, its stock price has dropped by more than half to USD 154 in early May 2016.

Several analysts have advised Boston Beer’s shareholders to sell their stock, especially when in April 2016 the company reported a 47 percent decline in first-quarter earnings and gave a depressing forecast for the year. Boston Beer expects beer volume to decline in 2016.

The company is now valued at less than 11 times this year's estimated EBITDA, which is a lower multiple than for the majority of its peers. Its market capitalisation still stands at USD 1.9 billion, though. Read on


Australia – Lion buys craft brewer Byron Bay

If AB-InBev can do it, so can Lion. Buying up craft brewers, that is. In early May 2016 Lion reported it was buying Byron Bay Brewing Company, a 5,000 hl craft brewer, after being approached by its owner Barry Schadel. This will expand the number of craft breweries in its portfolio to half a dozen.

Media say Lion’s craft beer portfolio represents about 50 percent of Australia's entire craft beer market, which is estimated to have reached 5 percent of Australia’s entire beer market. Read on


Australia – MegaBrew receives regulatory approval

On 5 May 2016 the Australian Competition and Consumer Commission (ACCC) advised that it will not oppose AB-InBev’s acquisition of SABMiller. Chairman Rod Sims said: “The ACCC has concluded that the proposed acquisition is not likely to substantially lessen competition in the Australian beer market…. While AB-InBev’s brands have been successful in Australia, particularly Corona, they have previously been distributed via either Lion or CUB. AB-InBev has only a limited direct company presence in Australia and does not brew beer here.”


USA – Who’s next for AB-InBev?

Mr Brito, we hear you. The same day – 27 April 2016 – AB-InBev’s CEO Brito told shareholders that his future acquisitions are more likely to be in beer rather than in other beverages, a panel of Wall Street analysts at the Beverage Forum in Chicago said that AB-InBev could either do several smaller beer acquisitions or take on a heavyweight like PepsiCo or Coca-Cola.

Mark Swartzberg, an analyst with Stifel, told delegates that AB-InBev could take several USD 10 billion bites among the remaining beer industry players, referring to speculation that AB-InBev’s next potential targets are Diageo’s beer unit Guinness or France’s Castel group, which has a large African presence.

While Carlos Laboy, an analyst with HSBC, firmly expressed his belief that the Coca-Cola Company was top on AB-InBev’s list, citing Coke’s recent attempts at refranchising its bottler system as proof, Bonnie Herzog, an analyst with Wells Fargo Securities, pointed out there was a 50:50 chance that AB-InBev would go after Pepsi, not least because of its valuable snacks division.

Meanwhile, Mr Brito told media that AB-InBev does not believe in going too much outside beer because staying in beer makes the likelihood of success in integration higher.

Mr Brito reiterated his conviction that AB-InBev will seal its USD 100 billion-plus acquisition of SABMiller in the second half of the year. Read on


Italy – AB-InBev buys prestigious craft brewer Birra del Borgo

So now it’s Italy. Having almost “rolled up” the U.S. craft beer industry, AB-InBev has turned its attention to Italy, where it clinched a deal with Birra del Borgo, one of the most well-known craft breweries in Italy. The transaction was confirmed by AB-InBev on 22 April 2016. No financial details were disclosed.

Birra del Borgo, located in Borgorose, 100 km to the east of Rome, was founded in 2005 by Dr Leonardo di Vincenzo, 39, a biochemist by training. Together with Sam Calagione (Dogfish Head) and Teo Musso (Birra Baladin), he forms a trio called the Birreria Brothers, who act as advisors to the Eataly chain of gourmet foods and restaurants with 26 outlets around the world, including one in Chicago and one in New York City.

For several years now craft beer has enjoyed quite some interest in the Italian beer market, dominated by international brewers like Heineken, SABMiller (soon to be Asahi), AB-InBev and Carlsberg, with the number of craft breweries shooting up to about 600.

Incidentally, Birra del Borgo’s sale made a few waves among Italian beer lovers, unlike the sale of SABMiller-owned Peroni to Asahi, which had been completed two weeks previously.

Birra del Borgo is among the larger Italian craft beer players, producing about 10,000 hl beer annually. Thanks to AB-InBev’s investment, production is to increase to 50,000 hl beer by 2020. Mr di Vincenzo is to remain with the company he founded.


United Kingdom – SABMiller sold more beer and soft drinks

Seemingly undeterred by the protracted takeover, SABMiller on 21 April 2016 reported it suffered a drop in group Net Producer Revenue (NPR) in its recently-ended financial year, but achieved growth in beverage volume sales. Like other brewers, SABMiller was once again hit by unfavourable foreign exchange rates.

The world’s number two brewer said total NPR (its own metric that measures revenue on an organic, constant currency basis) fell by 8 percent in the year ended 31 March 2016, while beverage volume grew by 2 percent. Read on


Germany – Brewers celebrate 500th anniversary of Reinheitsgebot

If international media coverage is an indication, the German Reinheitsgebot for beer (the so-called purity law) has lost its relevance to consumers around the world – assuming that it ever had one. Especially in the U.S., reports on the celebrations to mark its 500th anniversary were scarce and few in between, the reason being that the U.S., thanks to the craft brewers, has managed to establish a beer culture so vibrant and innovative that it can put Germany to shame.

Meanwhile over in Germany, brewers came to the Bavarian town of Ingolstadt, where 500 years ago the purity law was decreed, for a series of celebrations over three days (21 to 23 April 2016). The location – a huge marquee like at the Oktoberfest – and decorated in Bavaria’s colours white and blue – underlined what was to come: a party Oktoberfest-style with oompah music to boot.

Had it not been for Germany’s chancellor Angela Merkel gracing the event with her presence and a speech, the festivities would have lacked both significance and emotion. The chancellor’s speech was by far the best. Read on


Germany – Stone celebrates purity ban

Guerrilla marketing, or what? To celebrate the 500th anniversary of the often misinterpreted Reinheitsgebot, the Californian craft brewer Stone opened the summer season in Berlin with a series of "rebellious" beers, which were brewed using more unconventional ingredients. Stone is currently working tirelessly to complete the construction of its 100 hl brewery and bar, scheduled to open later this year.

However, in order not to miss out on the Reinheitsgebot celebrations on 23 April 2016, Stone Berlin tidied up the building site and cleared its Library Bar for visitors who wanted to celebrate Stone’s “purity ban” (in German ReinheitsVerbot, a pun on ReinheitsGebot) with 26 beers that do not comply with the Reinheitsgebot. Read on


USA – And another craft brewer goes to AB-InBev

Continuing its strategy of snapping up leading craft brewers in individual states, AB-InBev on 12 April 2016 said it agreed to acquire Devils Backbone in Virginia. Financial terms of the deal, expected to close in the second quarter, were not disclosed.

Devils Backbone, which began operation in 2008 in Roseland, has won more than 28 awards at the Great American Beer Festival over the last seven years, it was reported. According to industry publication Beer Marketer's Insights, Devils Backbone increased production by 38 percent to 62,000 barrels beer in 2015. The brewery is on track to produce 90,000 barrels (108,000 hl) beer this year.

Since acquiring Chicago's Goose Island in 2011, AB-InBev has purchased eight U.S. craft breweries including Blue Point Brewing, Elysian Brewing and Breckenridge (Colorado). Read on


United Kingdom – AB-InBev and Asahi agree on transaction

Let’s hope the Japanese know what they are doing. On 19 April 2016 AB-InBev said it has accepted an offer from Japan’s brewer Asahi for the European beer brands Peroni and Grolsch. Terms of the deal were not released, but AB-InBev in February said Asahi had offered EUR 2.55 billion (USD 2.8 billion) for the brands. The deal is conditional upon the completion of AB-InBev’s takeover of SABMiller.

Besides Peroni and Grolsch, Asahi will get the London craft beer Meantime and businesses in Italy, the Netherlands and the UK. All of those brands are assets of SABMiller. Asahi will not, however, receive the global rights for the beers in the U.S., media say. Read on




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