Beer Monopoly




    International Reports







Posted November 2012

Belgium - Chinese beer importer buys Belgian brewery

The deal raised a few eyebrows. Yu Xiaoning of Vandergeeten & EG Distriselecta, the importer of AB-InBev beers into China, has bought a controlling stake in the small brewery Brasserie d’Ecaussinnes, the Belgian magazine Trends reported on 13 November 2012.

Brasserie d’Ecaussinnes has a portfolio of around 20 beers, which equals about 4,000 hl of annual beer production. According to other media sources, the objective is to increase d’Ecaussinnes’ beer volumes tenfold over the next few years with the help of exports to China.

The previous owner, Hugues Van Poucke, is going to stay in the picture. He will continue to run the on-trade outlet on the brewery site. Read on

France – Senate disagrees with National Assembly over beer tax hike

Brewers should not cheer the Senate’s rejection of a draft law to raise beer excise by a whopping 160 percent. In its vote last week, the French Senate proposed a 120 percent increase instead with a reduced rate for smaller brewers.

According to the Senate’s proposal, breweries producing more than 200,000 hl will see the excise rate go up from EUR 2.75 to EUR 6.05 per hl and Plato, while those brewing less than the 200,000 hl threshold will see it rise to EUR 3.25 from their current reduced rates of EUR 1.38 per hl and Plato. The Senate’s vote means that the National Assembly will have to review its draft law before a final vote can be cast.

Moreover, as The Brewers of Europe point out, the 120 percent excise hike still means a massive increase that will harm everybody: brewers, retailers, publicans and consumers and could lead to a loss of jobs in the industry.

There is another worry to contend with: Should France actually increase its beer excise, it would propel the country to the top of the excise table of major European beer producing countries, while leaving only Germany among those which charge least in excise. Many fear that the French example could put pressure on the German government to do likewise.

Germany – Beer mixes: the next big thing in brewing?

Hop, hop, more hops was certainly the much talked about topic at Brau Beviale in Nuremberg (13 to 15 November 2012), especially after the Bavarian Brewers Association in January this year issued a statement saying that dry hopping was not in contradiction with the German Reinheitsgebot. Phew. You can image how relieved German brewers were, now that this controversial issue has been settled, hopefully, once and for all.

However, brewers further afield seem to have already latched on to the next new thing, which is actually quite an old thing: beer mixes. Global brewers, in particular, have come to realise that they would be daft if they left the big segment of light alcoholic beverages to competitors from the drinks industry. After all, there are swathes of consumers out there who don’t like beer (think of women and a whole generation of consumers brought up to enjoy sweet fizzy drinks only) and in all likelihood will never buy one either.

In the past two decades, brewers have tried their hands at various non-beer products. The ill-fated alcopops and malternatives come to mind. But few brewers had a go at reformulating shandies, those old-time beer plus citrus-flavoured soda, carbonated lemonade, ginger beer, ginger ale, or cider mixes, which have been around like forever. And even fewer were successful at it.

This could change. At Brau Beviale visitors could sample new age shandies, which were made with beer but did not taste of beer. Read on


USA - Budweiser to rain on craft brewers’ parade

No doubt, big brewers face a consumer-led backlash in favour of niche craft beers. But instead of hiding behind a napkin with embarrassment, they have stepped up their marketing efforts to lure consumers back to long-established brands with the help of crafty looking brand extensions. According to U.S. sources, global brewer AB-InBev is preparing to release a new addition to its Budweiser line in 2013. Though called Budweiser Black Crown, the beer will be a golden amber lager, i.e. darker in colour than regular Budweiser, and packaged in special bow tie-shaped cans, it transpired in early November 2012.

What’s also interesting is the upward shift in alcohol content to 6 percent ABV for Black Crown.

The Budweiser brand is apparently not the only one in the AB-InBev range to get a tan. It was reported that the brewer also received label approval for four other brands at the end of September. They include Busch Black Light Lager, Michelob Black Bock Special Dark Lager, Beck’s Black Jewel and Rolling Rock Black Rock Extra Dark Lager.

Although a label approval, which is a compulsory legal requirement, does not necessarily mean that a company will release the beer, that is usually the case.

Many observers have wondered if these dark beers could be a bid by AB-InBev to compete more directly with the craft beer industry and its higher-alcohol, more flavoursome beers. Well, it certainly looks like it. This year already, AB-InBev has launched the higher-alcohol Platinum and Lime-A-Rita under the Bud Light label. Read on


Australia – Coopers and Lion in another public spat

Outgoing Lion CEO Rob Murray seems to be a sore loser. On 20 October 2012, in an interview with Australian media, he called the family behind the largest Australian-owned Coopers brewery “dysfunctional”, referring to Lion’s highly public but ultimately unsuccessful attempt in 2005 to take the smaller brewer over.

In the interview Mr Murray claims that, when Lion made its bid for Coopers, he had been encouraged by older members of the family but was blocked by the younger ones.

The Coopers family could not leave this allegation hanging in the air. They retorted that, despite strenuous efforts of Lion Nathan and its advisers, Coopers’ shareholders voted by 93.4 percent to 6.6 percent to block the bid. The defence of the hostile bid cost Coopers brewery AUD 8 million (USD 8.3 million), but has served to strengthen it in maintaining its independence. Read on


India - Diageo will become biggest shareholder in United Spirits

As I predicted some months ago, the Indian drinks baron Vijay Mallya would eventually be done in by his struggling Kingfisher Airlines. I was proven right. Strapped for cash, he was forced to sell the biggest stake in his other business venture, United Spirits, to drinks company Diageo on 9 November 2012 for about USD 2 billion.

The price represents a multiple of 20 times last year’s EBITDA, which is high for deals in the sector. But India's alcoholic beverage market is estimated at USD 6 billion and is growing at 15 percent a year, market observers say.

Whether Mr Mallya will use the proceeds from the sale to revive his airline, which was grounded in October 2012 after disputes with staff who had not been paid in months, remains to be seen. Perennially bleeding red ink, Kingfisher has debts totalling about USD 2.5 billion. It is believed that Mr Mallya and other investors will have to put more than USD 1 billion into Kingfisher Airlines to see it fly again.

Acquiring United Spirits will make it possible for Diageo to meet its self-set goal of realising half of its revenues in emerging markets years ahead of its initial 2015 target. About 40 percent of sales come from these markets now. A spokesperson for Diageo commented that India will become Diageo’s number two market after the United States.

United Spirits is India's major spirits company with a market share of perhaps 55 percent and revenues of about USD 3.3 billion. It owns several popular Indian liquor brands like McDowell’s, Bagpiper, Royal Challenge and Antiquity, most of which are Indian Whiskeys. India is the world’s largest market for that spirit but the whiskeys are made from molasses, not grain. Read on


France - Brewers of Europe send clear message to French government

Ho, ho, that's a tough one. The Brewers of Europe, an industry body not known for its foam-at-the mouth rhetoric, recently wondered aloud if France is an EU member state, thus expressing its shock over the French government's anti-industry, anti-EU ministerial stance.

As reported, France is planning a 160 percent hike in beer excise, a move which has already received strongly worded protests from the Belgian Brewers Association.

On 6 November 2012 the Brewers of Europe issued a statement saying that "in the course of the French parliamentary debate on a proposed French law to raise the tax on beer by 160 percent, the French Minister of Budget insinuated that the measure would principally affect foreign, multinational brewing companies, which did not, in his eyes, merit any sort of compassion."

"I really hope the Minister did not mean what he said in the Parliament", commented Pierre-Olivier Bergeron, Secretary General of The Brewers of Europe. "If this were to be the case, then I wonder whether the minister realised the falsity and discriminatory character of the picture he painted."

Mr Bergeron argued that "a substantial part of the French beer market is held by three brewing companies that are historically, deeply rooted in Europe and have invested locally in France, also in French brands. Purchasing raw materials in France, operating breweries in France and selling their beers through French shops, cafés and ‘brasseries’, these companies are also making a substantial contribution to the 65,000 French jobs and EUR 2.6 billion in government annual revenues that beer creates in France."

Venting his anger, Mr Bergeron, who is French, added: "One wonders, on top of the provocation to the brewing sector beyond the French borders, whether the minister should not keep in mind that France, until further notice, is a Member State of the European Union."

Mr Bergeron had said previously that "this 160 percent tax hike is a kick in the teeth for a European brewing sector that has suffered greatly in the crisis, yet fought to survive and continued to invest in order to help play a positive role in the implementation of the EU’s Growth Pact."

The law to raise beer excise has already passed though France's National Assembly and is now being discussed in the Senate. At the time of writing, the Senate had not cast a vote. It is expected for 13 November at the earliest. As we understand the political process in France, parties represented in the Senate can submit amendments. Furthermore, as the beer excise hike is part of a much wider draft law to generate revenue, it could very well happen that the whole proposal will be sent back to the National Assembly for review.

Sadly, this being Europe, not all brewing industry bodies think and act alike, obviously taking their cue from Europe's quarrelsome politicians. On 31 October 2012 the British Beer & Pub Association issued a tersely worded comment on the proposed French excise hike: "It looks as if French beer tax will increase from six pence per pint, to around 16 pence. It’s a hefty increase, but it still leaves French beer duty at around one quarter of the rate here in the UK."

What did the BBPA mean? That brewers in Britain are worse off , so continental brewers should stop being such whingepots and get on with it?

Seems like a Brewers' United Front in Europe is still a long way off.


Russia - Carlsberg sells less beer in Eastern Europe

Good or bad is a matter of perspective. On 7 November 2012 Carlsberg reported that in the third quarter 2012 beer volumes declined 2 percent in its Eastern European unit (which is mainly Russia and the Ukraine), compared to the same period a year ago. In the January-through-September period the beer volume decline was even more pronounced: - 7 percent to 34.3million hl year-on-year.

However, the brewer said that for the third quarter in a row, its Russian market share improved to reach 38.9 percent. In Russia, Carlsberg's unit Baltika is the market leader. Obviously, other brewers (i.e. AB-InBev and Efes) must have lost even more volume than Carlsberg in Russia this year to allow this to happen. Read on

Russia - President Putin cracks down on tobacco but shies away from vodka

Several media reported at the end of October 2012 that Russian President Vladimir Putin is stepping up his attempts to fight the bad health of Russians by banning smoking in public places and setting a minimum price on wine. Already it's illegal to drink alcohol in public places.

Smoking and drinking kill 900,000 people a year in Russia, the world’s second-largest market for cigarettes and alcohol, according to official estimates. Alcohol and tobacco abuse cost the Russian economy at least USD 104 billion a year, or 5 percent of gross domestic product, the government estimates.

The government crackdown risks encouraging Russians to smoke counterfeit cigarettes. The illicit tobacco trade may expand to 40 percent of the market from 1 percent, media sources say.

Prime Minister Dmitry Medvedev on 16 October 2012 reportedly lashed out against four foreign-owned tobacco companies, blaming them for addicting millions of children and women to cigarettes. Thirty-nine percent of Russians smoke regularly, according to the World Health Organisation.

Incidentally, the four companies under attack control 93 percent of the USD 19.5 billion Russian tobacco market.

Doesn't this sound all too familiar - the Russian government railing against foreign companies accusing them of all that ails Russian society? First it was the brewers - all foreign-owned and controlling 80 percent of the market - who were hit by a massive hike in excise, meant to curb alcohol consumption.

And now it's the tobacco companies. Read on


Belgium - AB-InBev to raise prices next year

As of 1 February 2013, Belgium's major brewer AB-InBev will increase the price of its beers by EUR 0.02 per glass on average, Belgian media reported in early November 2012. Allegedly, the price hike is due to higher input costs.
The price increase applies to the beers AB-InBev sells in Belgium, whose main brands include Jupiler, Stella Artois, Hoegaarden, Leffe and Belle-Vue.

Pub and bar operators have already complained against the price hike. They point out that in the past year alone prices for coffee (6 percent), cola (9 percent) and water (13 percent) have all gone up. Read on

France - Coca-Cola to launch Beautific "beauty drinks"

Cynics in the beverage industry may think that drinkable beauty elixirs are to the 21st century what snake oils were to the Wild West: an expensive fad. However, in their quest for the Next Big Thing, global beverage companies cannot leave the booming beauty market untapped. If there are millions of desperate women out there who might succumb to the idea that a bottle a day will keep the plastic surgeon away, why not serve them with a beverage that they think will give them everlasting youth and beauty?

In 2007, U.S. brewer Anheuser-Busch was probably the first to venture into this market. It signed a global licensing agreement with Scott-Vincent Borba, one of Hollywood's favourite beauty gurus and occasional walker of actress Demi Moore, to distribute and promote his line of BORBA beauty waters in traditional beverage channels. While expectations were high under the licensing partnership, Mr Borba and Anheuser-Busch parted ways shortly after the InBev acquisition. Apparently, the Brazilians did not think much of the concept of beauty from the inside out.

Read on


Bahamas – Is Heineken squeezing out its local competitor?

Reports are popping up in Bahamian newspapers about a growing feud between the privately-owned Bahamian Brewery and Beverage Company (BBB), based in Freeport on Grand Bahama island, and its big rival Commonwealth Brewery, which is located in Nassau on New Providence island.

Heineken holds a 75 percent stake in Commonwealth Brewery, which the owner of BBB, a colourful local character by the name of Jimmy Sands, has tried to use to his advantage by giving their competitive wrangles a David-against-Goliath twist.

Tiny islands with small consumer bases make for “interesting” beer markets, especially in the Caribbean. The Bahamas is one of those markets. With a population of about 300,000, most of whom live in Nassau, a city of 250,000 people, the Bahamian economy is driven by tourism and financial services.

Lucky are those brewers that enjoy monopolies on their respective islands. But even monopolists may find their businesses hard going. Lack of scale, wobbly economies (read declining numbers of tourists) and parallel imports (sometimes a euphemism for plain smuggling) can cause executives sleepless nights. Guess what happens if a local competitor appears on the scene? More sleepless nights as those in charge desperately try to find a quick fix to their problems.

Commonwealth Brewery started production in the late 1980s as a joint venture between Heineken and the Associated Bahamas Distillers and Brewers. It has 70-plus labels, 380 members of staff, a major recycling operation, and brands such as Heineken, Kalik, Guinness, Eclipse, and Vitamalt.

All went well until Mr Sands’ brewery BBB went on stream in 2007 with a capacity of 40,000 hl beer per year. Its portfolio of brands includes Sands, Sands Light, Strong Back Stout, High Rock Lager, Bush Crack Beer and Triple B Malt. Although Mr Sands took the highly controversial decision at the time to base his brewery on the island of Grand Bahama, far away from the island of New Providence, where 80 percent of all beer consumers are based, his business took off eventually. Admittedly, BBB’s rise in sales and volume was helped by a generous tax break: under the current scheme, passed in the 2010-2011 budget, Commonwealth Brewery pays USD 5.0 per liquid gallon in taxes, while BBB pays USD 2.0 per liquid gallon - giving the latter a USD 3.0 advantage.

Mr Sands recently told the Tribune Business publication that maintaining the tax difference was crucial to his brewery’s survival, especially given that it incurred a USD 1.04 per case in transportation costs to get its products from Freeport to Nassau - costs Commonwealth Brewery did not have.

Today total beer consumption in the Bahamas is about 180,000 hl – and flat. Market observers say that Mr Sands’ BBB has a market share of 17 percent, while imports account for 8 percent, which gives Heineken’s Commonwealth Brewery a market share of 75 percent.

Even in a stagnating beer market you would have thought that this sort of split would allow both brewers to live happily ever after. Ah, but not so on the Bahamas. According to local media, things turned a shade more vicious when Commonwealth Brewery had an Initial Public Offering last year and Heineken reportedly repatriated the USD 60 million windfall profits back to The Netherlands. What is more, prior to the IPO, on 1 January 2011 a new dividend policy had become effective, under which 100 percent of Commonwealth Brewery’s net income is to be distributed as dividends to shareholders.

What are the implications of such a high pay-out? To all appearances, a fierce turf war as Commonwealth Brewery struggles to protect its market share from being eroded by a smaller competitor.  Read on


USA – Beck’s in the U.S. or Schlitzing your wrists

Is AB-InBev running the risk of doing a Schlitz with its Beck’s brand in the United States? In the early 1970s, the then number two brewer in the U.S. changed the brewing process for its flagship Schlitz brand. The executives and company were making money and they thought all was well but then the brand dropped and never came back. Finally, in 1982 Schlitz surrendered to an offer by rival brewer Stroh.

Beer industry veterans know this story only too well. That’s why they are following with interest the recent “scandalette” around Beck’s.

In November 2011 AB-InBev decided that all Beck’s to be sold in the U.S. – that’s several hundred thousand hl – was to be brewed in the U.S. as of 2012.

The move was risky because U.S. consumers like their high-end beer brands to be imported rather than brewed locally. Both Corona Extra and Heineken, which are the top-selling international beer brands, are imported from Mexico and The Netherlands respectively.

Some time earlier this year Beck’s born in the U.S. started to appear in the market at a price equalling Heineken’s – around USD 8.50 per six-pack (that’s for the Chicago area).

Apparently, this was not lost on the consumers. On 25 October 2012 the magazine Newsweek ran a long piece called “The plot to destroy America's beer” which tells the plight of Brian Rinfret, a loyal Beck’s drinker who tried to complain to AB-InBev against its decision to locally brew Beck’s for the U.S. market. Here’s what Newsweek wrote:

Brian Rinfret likes imported beer from Germany. He sometimes buys Spaten. He enjoys an occasional Bitburger. When he was 25 years old, he discovered Beck’s, a pilsner brewed in the city of Bremen in accordance with the Reinheitsgebot, the German Purity Law of 1516. It said so right on the label. After that, Rinfret was hooked.”

One Friday night in January, Mr Rinfret, 52, stopped on the way home from work at his local liquor store in Monroe, N.J., and purchased a 12-pack of Beck’s. When he got home, he opened a bottle and to his surprise it tasted light. It tasted weak. To him, says Newsweek, it wasn’t a German beer. It tasted like a Budweiser with flavouring.

When he examined the label, it said that the beer was no longer brewed in Bremen. He was also miffed to have paid the full import price for the 12-pack.

Next, Mr Rinfret left a telephone message with AB-InBev, but nobody got back to him. According to Newsweek, Mr Rinfret had better luck with e-mail. An AB-InBev employee informed him that Beck’s was now being brewed in St Louis along with Budweiser. “But never fear, the rep told Rinfret: AB-InBev was using the same recipe as always”, writes Newsweek.

As Mr Rinfret was not satisfied with the reply, he posted a plea on Beck’s official Facebook page in March: “Beck’s made in the U.S. not worth drinking. Bring back German Beck’s. Please.” Others felt the same. So Mr Rinfret kept trashing Beck’s on Facebook until, he says, AB-InBev “unfriended” him in May - the Facebook lingo for banning someone from its site. Afterwards Mr Rinfret could not post anything there any longer.

But Mr Rinfret, says Newsweek, was only temporarily silenced. He now complains on a Facebook page called Import Beck’s from Germany.

The Newsweek article next quotes an industry consultant, Bump Williams, who says that sales of Beck’s at U.S. food stores were down 14 percent in the four weeks ending 9 September 2012 compared with the same period last year. “They are getting their proverbial asses kicked,” Mr Williams was quoted as saying. “Too many customers were turned off when the switch was made”, he added.

I can only speculate as to what prompted AB-InBev to transfer the brewing of Beck’s from Bremen to St Louis. Most likely, it improves the brand’s bottom line. However, this strategy – declining volumes yet higher profits – cannot go on forever. No wonder, many people fear that Beck’s in the U.S. could go the way of Schlitz, which would be a shame, really.

Reporting its third quarter 2012 results, AB-InBev said that Beck’s global volumes grew 5.0 percent. However, taking a nine month view, they were down 1.7 percent.

USA – Only half a victory for AB-InBev in Illinois distributor battle

Anheuser-Busch (A-B), a subsidiary of AB-InBev, can retain its minority ownership stake in one of Chicago's largest beer distributors, Illinois liquor regulators ruled on 31 October 2012, allowing the brewer to have some control over its sales. However, they said no to A-B’s plan to completely take over the distributor City Beverage.  Read on

Belgium – AB-InBev revenues up but beer volumes down

AB-InBev, the world's biggest brewer, said on 31 October 2012 that in the third quarter (July to September) revenues rose by 9.1 percent to USD 10.3 billion, despite a slight decrease in the global volumes of sales. Total volumes dropped 0.3 percent, the brewer reported, after having declined 0.1 percent in the previous quarter.

The brewer’s EBITDA was also somewhat disappointing to investors. At USD 3.98 billion it was slightly up year-on-year, but below the analysts’ consensus of EUR 4.06 billion.  Read on  


Russia – To stay or to leave: that’s the question for AB-InBev

Third quarter beer sales in Russia could prove a mixed bag for brewers. While Heineken on 24 October 2012 reported beer volume gains in its Central & Eastern European unit (that’s Bulgaria, the Czech Republic, Poland, Romania, Russia and Serbia!) by 3.6 percent on an organic basis, AB-InBev was forced to admit on 31 October 2012 that it saw its Russian beer volumes decline by 17 percent in the quarter.

AB-InBev is the number three brewer in Russia with about 15 percent market share. Carlsberg is the biggest brewer with a share of about 37 percent, followed by the Efes/SABMiller tie-up with perhaps 16 percent. Heineken holds roughly 13 percent.

One way for AB-InBev to cut free from the declining Russian beer market is to sell out and pocket up to USD 4 billion. As I argued in a Brauwelt International report on the Russian beer market in June 2012, I thought that this was a likely move by AB-InBev.

Now an analyst has confirmed my musings. Nomura analyst Ian Shackleton said in an interview with on 2 November 2012 that AB-InBev is “losing critical mass” in the country. Moreover, the Russian unit was only contributing 2 percent to the brewer’s total profits.

He predicted that a sale of the unit will be more likely in 12 to 18 months’ time to allow for some recovery in the Russian market and a higher profitability.

Alas, neither he nor I can make any prediction as to who might like to buy AB-InBev’s Russian assets. Mr Shackleton added that what could stand in the way of a sale is AB-InBev’s reluctance to sell to a rival such as Heineken, who may be keen to acquire AB-InBev's 15 percent market share, as it would catapult Heineken to number two spot.

The price tag Mr Shackleton attached to AB-InBev’s Russian and Ukrainian units is about USD 4 billion, based on a multiple of 2 x annual sales.  Read on


Netherlands – Skyfall: Bond drinks Heineken

Vodka Martini, James?” “No, make mine a Heineken.” The day after James Bond was first seen sipping a Heineken out of a bottle on the big screen – a deal reportedly worth USD 45 million to the Dutch brewer - Heineken said on 24 October 2012 that its third-quarter revenue grew 7.1 percent to EUR 4.97 billion, with an organic growth of 4 percent. Volumes were up 1.5 percent thanks to the brewer selling more beer in the Americas, Eastern Europe and Africa.

However, in Western Europe, group beer volume declined by 2.1 percent organically in the quarter because of lower sales in Finland, a double digit volume decline in Portugal due to the challenging economic environment and a low-single digit decline in the UK, Netherlands and Spain because of cautious consumer spending in the on-premise channel.

Still, Heineken managed to hike prices in several markets and cost savings contributed to profits going up. EBIT (beia), on an organic basis, increased in the mid-single digits, the brewer said.

In the end, investors were neither shaken nor stirred, much like most movie goers, who will have to get used to the idea that James Bond does not just have a licence to kill but also a licence to hawk a full drinks cabinet. In the latest Bond film, the Bond character is seen drinking Macallan whisky, Bollinger champagne and Heineken beer, not to forget his trademark cocktail.

South Africa – Norman Adami becomes Chairman of South African Breweries

It’s an interesting management change. Norman Adami, a 33-year veteran of SABMiller and currently Chairman plus Managing Director of the brewer’s South African unit SAB, will be promoted to the new role of Chairman, SABMiller Beverages South Africa with effect from 7 January 2013, SABMiller announced on 22 October 2012.

While relinquishing his duties as Managing Director, Mr Adami, 57, in his new role will assume overall strategic responsibility for SABMiller's beverage businesses in South Africa, and will continue as a member of the Group Executive Committee, SABMiller said.

To keep Mr Adami on board makes absolute sense as South Africa is the second most important EBITA contributor to the group’s earnings behind Latin America. During Mr Adami’s tenure SAB has grown its share of the South African beer market to about 90 percent.

It had dropped to 87 percent following the loss of the Amstel licence in 2007. Read on




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