Beer Monopoly





  International Reports








Posted November 2011


Belgium - Fundraising the Trappist way

The Abbey of Saint Sixtus in Westvleteren, one of the smaller brewing establishments of the Trappist monks in Belgium, is famous for its beers. It is generally not possible to buy the Westvleteren beers in shops. If they are available in specialty beer bars, it's because someone has gone to the trouble of personally picking them up at the monastery by the crate at a pre-given time.

As with other Trappist breweries, demand exceeds supply. The Westvleteren monks only brew 4,750 hl beer a year as producing higher volumes would counteract their contemplative life which follows the rules of "ora et labora" ("pray and work") set up by St Benedict some 1,500 years ago.

This posed a dilemma when the monks discovered that one wing of their abbey, which housed their cells, was subsiding. They needed to raise quite a bit of money to build new quarters.

Initially, the logical solution to their problem - sell more beer and make more money - was off. But following the recent financial crisis, donations only trickled in slowly. That's when Theo Verfloet, President of the Belgian Brewers' Association, managed to convince them that selling extra beer was the way forward.

The obstacles to his plan were massive: not only would the higher production volume affect the monks' lives, it could also potentially harm the image of their beer if it were pushed into the market without much ado.

So the brewery's pro bono project team, consisting of marketers Jan Callebaut, Piet Jaspaert, Luc Struyf and Krishan Maudgal, came up with the idea of a one-time offer.

Mr Verfloet then worked out that, in order to raise a few million euros, the monks would have to brew an extra 1,300 hl beer, or an extra batch per month for ten months. Why just ten months? Simple. If the stock-building had taken any longer, it would have seriously reduced the shelf-life of this beer, which is three years.

While the monks were busy brewing extra stock, the marketing team determined that each of the 93,000 Bouwsteenboxes ("brick boxes" to underline that the proceeds would exclusively contribute to the new building) were to contain six 330 ml bottles of the Westvleteren XII beer (10.2% ABV) and two degustation glasses by Ritzenhoff. The asking price was set at EUR 25 (USD 34) per box.

The next challenge was to find a single national distribution partner. Giving the beer to all of Belgium's 1,500 or so beer wholesalers was not deemed feasible as it would have bogged down the monks for weeks with invoicing alone.

Fortunately, the Belgian discount retailer Colruyt offered itself. Its logistics partners picked up the beer when it was ready at no charge and took it to all of Colruyt's 213 outlets where the boxes were made available to punters on 3 November 2011.

To prevent the boxes from being snatched up by resourceful internet auctioneers, the marketing team had also launched a newspaper campaign which included coupons. Only Colruyt shoppers with coupons would be able to purchase one box per person.

The marketers had thought that it would probably take a week to sell all the beer. But, to their great surprise, on 3 November 2011 early in the morning long queues were forming outside Colruyt stores. Within 48 hours 98 percent of the Bouwsteenboxes were gone.

What's more, Colruyt delivered on its promise to return EUR 25 per box sold to the monastery.

The Bouwsteenbox campaign will be continued in 2012 in order not to exclude Westvleteren's international wholesalers from this once-in-a-lifetime offer. Wanting to give all their partners a fair chance, the marketing team devised an auction, whereby wholesalers obtained a contingent of certain batches. If all goes to plan, the last batch will be shipped in August 2012.

As could be expected, some of the Bouwsteenboxes have already appeared on ebay. When I checked on 13 November 2011, the starting offer for one was USD 150 plus USD 47 for shipping.


Denmark - Overwhelmed by meteorological challenges

Russia: down. Western Europe: down. How much worse can it get? On 9 November 2011 Danish brewer Carlsberg reported an almost flat net profit for the third quarter 2011 amid declining sales in most of Europe and Russia. "2011 has been a challenging year and we have faced headwinds from rising input costs, adverse weather conditions and soft trading conditions in our largest market," chief executive Joergen Buhl Rasmussen said. Read on


Belgium - On being number one

Seems like the winner gets it all. Being the market leader in the U.S. and Brazil, AB-InBev got away with raising beer prices by 9.4 percent in Brazil and 3.7 percent in the U.S. in the first half of 2011. As a result, third-quarter profits rose by over 16 percent to $2.03bn compared with last year's equivalent of USD 1.86 billion, the company reported on 9 November 2011. It says its revenue grew by 3.6 percent to in the third quarter even though volumes decreased by 0.2 percent. Read on


Germany - AB-InBev to relocate 600,000 hl of Beck's to the U.S.

AB-InBev's German employees are worried. In early November 2011 workers at the Beck's brewery in Bremen were told that in 2012, about 600,000 hl of Beck's beer will be brewed at the St. Louis brewery. In 2013, another 80,000 hl, currently exported to Canada from Bremen, will be brewed at Labatt's in Canada.

The total volume of Beck's to be relocated to North America represents over 10 percent of Bremen's beer output, estimated at 6 million hl. Read on


Namibia - SAB's new brewery: postponed but not abandoned

Two years ago SAB, the South African unit of SABMiller, announced it would build a brewery in northern Namibia after it had finally obtained a licence to brew beer in Namibia following a decades long struggle. But to date, not even the ground has been broken. What has held up the project? According to rumour, Norman Adami, the powerful Managing Director of SAB, did not want to see 220,000 hl in production volume go to neighbouring Namibia, as he was still desperately trying to cope with over-capacity at his seven breweries after the loss of the Amstel licence which had accounted for more than 9 percent of SAB’s volumes before April 2007 (when Heineken terminated the licensing contract).

Then were delays in rezoning the land on which the brewery is to be built. Mean-minded critics might argue that SAB purposefully chose a plot of land that was not designed for industrial use in order to delay the project even further.

However, these disputes have been solved so construction of the brewery could start next year. Read on

USA - Molson Coors third quarter profit underwhelm

How can they drink beer if they are without jobs? The jobless rate in Britain in October 2011 jumped to 8.1 percent, its highest level in 17 years, and young people, the core customer group for beermakers, are being hit hardest. Experts are talking openly of a “lost generation” without hope of finding a job.

This, combined with the UK economy on the brink of another recession, also affected the UK's number two brewer Molson Coors, contributing to a 23 percent drop in third-quarter profit from a year ago. Read on


Mozambique - SABMiller launches a cassava beer

If they can brew a clear beer with sorghum, why can't they do it with cassava? Actually, SABMiller seem to have come up with a way of doing it. In an effort to provide consumers with an affordable beer, SABMiller at the end of October 2011 put the first cassava-based beer, called Impala Cerjeva, into the Mozambique market.

By using cassava - a drought resistant root vegetable rich in starch - to brew beer, SABMiller will be commercialising a technique used by Africans for generations to brew beer at home.

The cassava root plays an important role in agriculture in sub-Saharan Africa because it does well in poor soils and with low rainfall, and because it is a perennial that can be harvested all year round. However, once dug out of the ground cassava perishes within 24 hours unless it is processed. In Africa farmers usually chip and dry it. But that is not a feasible commercial option. Read on


Germany - Beer, bratwurst and football

So do football and beer go together or do they not? To all appearances, football bodies are in two minds about it. FIFA, the international football federation, thinks it's ok, while the German Football Federation, DFB, begs to differ.

Within the DFB a fierce debate has erupted over whether the federation should extend the sponsorship contract with the German brewer Bitburger, which expires after the European Football Championship in 2012.

According to reports by German sports media in October 2011, some DFB top honchos are in favour of allowing Bitburger to sponsor the German national team. Only they reckoned without the DFB's President Theo Zwanziger. He has called off talks with Bitburger, saying that there is a clash of interests. The DFB has backed the “enjoy alcohol-free sport” initiative drawn up by the German Olympic Sports Federation. This has placed the football organisation in a quandary as to whether it can enter into a commercial agreement with a brewer.

If the DFB were to negotiate a contract extension with Bitburger, we will have to explore very carefully whether, and how, this can include beer advertising,” Mr Zwanziger was quoted as saying.

Bitburger's sponsorship deal with the DFB is estimated to amount to two million euros per year.

A Bitburger spokesperson declined to comment.

It needs to be said that many German football clubs have lucrative contracts with brewers and are therefore affected by the dispute. A general ban on alcohol advertising in the national league, the Bundesliga, will reportedly deprive clubs of EUR 300 million per year in revenues.

Hans-Dieter Drewitz, the DFB’s vice-president for youth football, maintained that the organisation is not seeking a blanket ban on alcohol sponsorships but may need to establish new ways in which to promote the concept of responsible drinking.

FC Bayern Munich Chairman Karl-Heinz Rummenigge does not seem to understand the controversy within the DFB. The sports newspaper Bild quoted the Bayern boss as saying: "Three things go together: football, bratwurst and beer."

The world football organisation FIFA appears to have no such qualms. On 25 October 2011 AB-InBev announced the extension of its official beer sponsorship for the 2018 FIFA World Cup in Russia and the 2022 FIFA World

Cup in Qatar. The cumulative TV reach audience of the FIFA World Cup is more than 25 billion while the finals attract 700 million people. Apparently, global viewers seem to be more savvy when it comes to responsible beer consumption than fans of the German team.


Brazil - Kirin buys the rest of Schincariol

Kirin Holdings on 4 November 2011 agreed to buy out shareholders in Brazilian beermaker Schincariol Participacoes e Representacoes, completing its biggest acquisition to date.

The Japanese brewer will pay 2.35 billion reais (USD 1.35 billion) for the 49.54 percent stake, giving it control of all outstanding shares, the company said in a statement. The deal settles a dispute with shareholders who had challenged the Tokyo-based beermaker’s acquisition of half of Schincariol earlier this year in the courts.

The minority shareholders did not get a deal as sweet as their cousins did when they sold their majority stake to Kirin in August 2011. Read on


Scotland - Minimum pricing: take two

They don't give up easily. On 31 October 2011 the Scottish Government published its bill on a minimum unit price for alcohol. The bill looks to set a minimum price for a unit of alcohol as a condition of the licence. It also sets the formula for calculating the minimum price (based on the strength of the alcohol, the volume of the alcohol and a price per unit of alcohol).

The Scottish National Party (SNP) failed to push through a similar proposal in May this year after it was rejected by Members of Parliament, but the party's victory in the Scottish election has allowed them to put it back on their agenda.

At this stage, the Scottish Government has not proposed a unit price.

When it first launched its minimum pricing initiative, designed to target own brand vodka, strong cider and basic lagers, the SNP proposed setting the minimum price at GBP 0.45 per unit. Read on


USA - MillerCoors profits drop 14 percent

Brewers usually blame it on the economy or the weather if figures don't live up to expectations. Same with MillerCoors. The number two brewer in the U.S. reported on 2 November 2011 that low consumer spending and rising commodity prices contributed to weaker earnings in the third quarter.

MillerCoors said third quarter net income, excluding one-time items, dropped 14 percent to USD 286.9 million from USD 333.9 million in the same quarter a year ago. Total net sales decreased 2.5 percent to USD 1.97 billion, while volumes declined 4.2 percent to 17.17 million barrels from 17.91 million barrels. Read on


Australia - Lion reports revenue decline

Like most companies across Australia's retail, grocery and other consumer goods sectors, Lion continued to experience tough market conditions during its third quarter. The brewer-to-drinks-to-dairy company, which is wholly owned by Japan's Kirin, reported on 4 November 2011 its third quarter results for the three months to 30 June 2011.

Lion said that year-to-date revenue declines were caused by weak consumer sentiment along with the ongoing consequences of poor weather, natural disasters in Lion’s key markets, the loss of private label contracts and deep retailer discounting on white milk. Read on


UK - SABMiller and Efes join forces

A shrewd move which should have led to some serious chin scratching in Brussels and Amsterdam. The line-up between SABMiller and Turkish Efes not only allows the two also-rans in Russia to better compete against market leader Baltika, it also adds another protective layer to SABMiller and makes the world's number two brewer less easy to take over.

On 19 October 2011 SABMiller said it would transfer its Russian and Ukrainian beer businesses, worth USD 1.9 billion (EUR 1.4 billion), to Anadolu Efes Biracilik & Malt Sanayii and take a stake in the enlarged company to create Russia's second-biggest beer maker.

The agreement implies an exit multiple of about 12.7 times estimated EBITDA according to analysts, which is broadly in line with recent deals in the brewing industry. Read on


Australia - Foster's AGM brawl

Foster's shareholders were not amused. Actually, they were quite irate at Foster's - probably - last Annual General Meeting held in Sydney on 25 October 2011, as 42 percent of shareholders rejected an AUD 5.2 million (USD 5.5 million) pay and perks package for Chief Executive John Pollaers.

Just over 56 per cent of shareholders voted to award a short and long-term incentive of about AUD 5.2 million (EUR 3.9 million) worth in shares to Mr Pollaers. He has headed Foster's for less than seven months and is widely tipped to leave when SABMiller takes control of Foster's later this year.

What infuriated shareholders was the fact that the long-term bonuses, payable in 2014 and 2015, were given to Mr Pollaers after SABMiller went hostile in its battle for the Australian brewer. At that time, everybody on Foster's board must have been fully aware that Mr Pollaers would never have to work for his long-term bonus. Read on


Russia - Carlsberg sacks Baltika CEO

On 26 Ocotber 2011 Carlsberg announced it has appointed Dr Isaac Sheps, currently CEO of Carlsberg UK, to take over the leadership of Baltika Breweries (Baltika), Carlsberg's Russian unit. Dr Sheps will also be responsible for Carlsberg's operations across Eastern Europe. He will take over on 1 December 2011 and replace Anton Artemiev, the current CEO of Baltika, who will nevertheless continue to serve as a member of the Baltika Supervisory Board.

The change in the executive suite may take some by surprise but it's the usual last ditch resort once the going gets tough. Baltika’s Russian sales have weakened in recent years following the government's clampdown policies on beer consumption in order to tackle alcoholism. Moreover, competition is likely to intensify as SABMiller plans to join forces with Turkey's Anadolu Efes to become the number two in the market. Read on


Netherlands - Saved by thirsty Africans

Dutch brewer Heineken on 26 October 2011 reported a 1 percent rise in net profit for the third quarter (July to September 2011), claiming that strong sales in Africa and elsewhere offset the impact of poor summer weather in Europe.

Net profit reached EUR 525 million (USD 736 million) in the three months, while sales grew slightly by 0.6 percent from last year to EUR 4.65 billion, despite the disadvantage of a strong euro, the company said.

Heineken sold 56.9 million hl of beer in the third quarter, an increase of 2.7 percent, with western Europe the only region to record a 1.7 percent drop in volume. Read on


Ireland - C&C boss to step down

Pollaers (Foster's), Artemiev (Baltika) and Dunsmore (C&C Group): it must be the season for golden handshakes. The Chief Executive of Irish drinks and cider group C&C (Magners, Bulmers, Tennent's) John Dunsmore will be in line for a multi-million euro payout after he unexpectedly announced his resignation on 19 October 2011.

Mr Dunsmore, who took over three years ago, could cash in to the tune of some EUR 8 million (USD 11.2 million) by the end of C&C's fiscal year when he formally steps down from the board in February 2012. It has since transpired that Mr Dunsmore has a non-compete clause preventing him from joining a rival for just six months.

So come September next year and Mr Dunsmore could return to the drinks industry, perhaps even with former rival Diageo which is said to be desperate to build up a cider business. Read on


USA - Heineken counts on the female touch

Is Heineken breaking the glass ceiling for women or has the brewer run out of male candidates wanting to turn around a struggling brand? In October 2011, Heineken USA announced the appointment of Olga Osminkina, most recently Executive Director of Global Marketing for cosmetics company Estée Lauder, as its Senior Brand Director for Heineken Lager.

From face paint to brews. Interesting. What could the two have in common?

Ms Osminkina is the second high-profile woman to have been hired by Heineken USA. At the end of February 2011, the brewer appointed Lesya Lysyj as the company’s U.S. Chief Marketing Officer. Ms Lysyj had previously worked for Kraft Food’s confectionery division. "Both of the categories are lifestyle categories, and they represent a treat in somebody's day," Ms Lysyj then explained her career move to Adweek, a trade publication. Read on


France - Danone hopes to sell water assets

According to Japanese media, French group Danone has approached Japan’s Suntory Holdings about a potential purchase of the French food giant’s mineral water business, which includes the Evian and Volvic brands, it was reported on 22 October 2011.

Suntory is believed to be keen on the idea and is likely to start negotiating with Danone this month after examining the details of the proposal. Read on


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