Beer Monopoly




    International Reports







Posted November 2015


USA – Which future for medium-size brewers?

While AB-InBev’s takeover of SABMiller is still underway, media pundits have started wondering what lies in store for the world’s medium-sized brewers like Heineken, Molson Coors and Carlsberg? Resorting to common sense quips, their strategic position boils down to: being in the middle either sucks or can be fun. At the moment, the first interpretation seems to prevail.

Several armchair pundits say that the merger of their two biggest competitors into what has been dubbed MegaBrew leaves medium-size brewers without a clear way forward, as they will find themselves squeezed between a global heavyweight that will produce almost a third of the world’s beer and a growing army of craft brewers. Read on


United Kingdom – Carlsberg to overhaul business and cut jobs

If you need proof that price promotion is a finite strategy, look no further than to Carlsberg. “Probably the best beer in the world” will need to cut its lager beer production in the UK and axe up to 100 jobs, after the supermarket chain Tesco said last month that it will stop stocking Carlsberg’s beers in all but 200 of its stores.

To all appearances, Carlsberg did not meet Tesco’s targets, not even when they used bargain prices to deliver higher supermarket sales. What this means for the Carlsberg brand is all too clear. Analyst Trevor Stirling, at Bernstein, put the finger into the wound when he told The Guardian newspaper: “In order to stay in Tesco they were putting money into price promotions instead of investing. They need to put more money behind the brand.” Read on


Denmark – Russia, China and UK are hurting Carlsberg

Just when you think things cannot get any worse, they will. Such is Murphy’s Law and Danish brewer Carlsberg was forced to acknowledge as much when on 11 November 2015 it had to announce that the situation in Russia was bad, that China was beginning to look grim too and the UK remained a headache. Given such a triple whammy, Carlsberg is to launch a global restructuring programme which will lead to the axing of 2,000 white-collar jobs. About 1,300 employees have already been notified, media say. Read on


USA – Richmond sells bonds to back Stone’s new brewery

Virginia's capital does not seem to have any vocal teetotalers because the city was allowed to raise “beer money” via the sale of bonds. Officials pledged USD 23 million towards the first phase of the brewery project, which would be repaid over the course of a 25-year lease between the Californian brewer Stone and the authority, which was signed in March this year.

The ninth-largest U.S. craft brewer will pay the 218,000-person city to lease the facility and won't be on the hook to repay investors. Taxpayers will. Total costs for the brewery will be around USD 42 million.

U.S. media reported in early November 2015 that this may be the first time an American city has put its credit on the line for a brewer. This shows how craft beer has been drafted into the long-running bidding wars among states and cities for businesses.

Stone picked Richmond over more than 300 other sites. The Richmond brewery will have a restaurant and beer garden. It's projected to create 280 jobs and will open early next year.

Pat Tiernan, Stone's Chief Operating Officer, told media that economic incentives had been available at all of its other top sites but what had set Richmond apart was the opportunity to revamp an area near the James River that was not rebuilt after flooding in the 1970s.

Stone’s beer output this year will exceed 300,000 barrels (350,000 hl), Mr Tiernan estimates. He said the Richmond facility will eventually be able to make 700,000 barrels (820,000 hl) beer.


United Kingdom – The battle for SABMiller is over and the battle with regulators begins

As was widely expected, AB-InBev has reached an agreement with MolsonCoors to sell SABMiller’s 58 percent stake in the MillerCoors business to its joint venture partner for USD 12 billion. This is to ward off U.S. anti-trust opposition to its GBP 71 billion (USD 107 billion) takeover of rival SABMiller. AB-InBev already controls 46 percent of the U.S. beer market.

After two months of negotiations, on 11 November 2015 AB-InBev unveiled details of a recommended offer to create a brewer controlling almost a third of the global beer market and almost half of the industry’s profits.

If the proposed deal closes it will create a company with revenues of USD 64 billion and EBITDA of USD 24 billion, surpassing Coca-Cola in sales and roughly matching the revenues of Unilever and PepsiCo. Only Nestle and Procter & Gamble would have significantly greater sales than the merged company in the consumer products industry.

The takeover will result in SABMiller departing the London Stock Exchange, where it has been listed since 1999. The new business, as yet unnamed, will have a primary listing in Brussels and secondary listings in Johannesburg, Mexico and New York. The deal is expected to close in the second half of 2016, pending clearance from regulators and shareholders. Read on


United Kingdom – Brewing politically correct beers

In case you did not know, 1 November 2015 was World Vegan Day and media took the opportunity to report that the Irish brewer Guinness is changing the way it produces its eponymous stout by eliminating fish bladders, thus making it acceptable to vegetarian and vegan consumers.

Specifically, Guinness plans to swap isinglass, made from fish bladders and used to filter yeast particles from the finished product, with an animal-free method next year. Read on


United Kingdom – Diageo offloads its Argentinian wine business

If you want to burn money quickly just invest in wine. This is the lesson one could draw from Diageo’s on-going attic sale. The world's number one drinks company said on 5 November 2015 that it has sold its wine interests in Argentina to the country’s largest producer, Grupo Peñaflor. The sale includes the Navarro Correas and San Telmo wine brands along with production sites and vineyards, Diageo said.

The sale for an undisclosed sum follows Diageo’s disposal last month of its U.S. wineries and the UK business Percy Fox in a USD 600 million deal with the Australian wine company Treasury Wine Estates (TWE), formerly Foster’s wine division. This deal was given the green light by U.S. regulators on 3 November 2015, Australian media said. Diageo is also reported to have put its Chalone California wine business up for sale after TWE opted not to buy it. Once Chalone is sold, Diageo’s only remaining wine interests will include the London merchant Justerini & Brooks, plus local wine brands owned by Mey Içki in Turkey and USL in India, media reported. Read on


Netherlands – Heineken to acquire remaining shares in Red Stripe brewer Desnoes & Geddes

Wanting to be home alone, the Dutch beer giant Heineken announced on 6 November 2015 that it was buying all the outstanding shares of Jamaican brewer Desnoes & Geddes to gain 100 percent control of the company.

The move comes after Heineken in October 2015 acquired the 57.9-percent stake in the company that had been owned by Diageo, the world’s number one drinks company. Including its own shares, Heineken now holds 73.3 percent of the Jamaican company, which produces Red Stripe and Dragon beers.

It is offering to snap up the remaining ordinary shares at USD 0.259 each, in a tender that is open until 22 December 2015. Heineken bought Jamaica’s Red Stripe beer from Diageo for USD 421 million in an asset swap valued at USD 781 million. Under Jamaica’s stock market rules, Heineken has to make a buy-out offer for all other Desnoes & Geddes shares for an implied consideration of USD 194 million. Read on


Australia – Coopers with record sales

The privately-owned Coopers Brewery from Adelaide defied falling Australian beer consumption, increased pressure on margins and higher malt prices to achieve record beer sales and revenues for its financial year 2014/15.

In the twelve months to 30 June 2015, sales rose 4.7 percent to 788,000 hl beer. This marks its 22nd consecutive year of growth. Revenue increased 1.7 percent to AUD 235.1 million (USD 166 million) and after tax profit rose 3.2 percent to AUD 28.9 million (USD 21 million). Read on


Turkey – Efes Group to split into beer and soft drinks divisions again

Revolving doors at Anadolu Efes. After a little more than a year at the helm, Damian Gammell resigned as President of Beverage Group and CEO of Anadolu Efes on 31 October 2015 to take up his new responsibility as Chief Operating Officer of Coca-Cola European Partners, the recently formed western European Coke bottler. Mr Gammell had only been working as Beverage Group President and CEO of Anadolu Efes since January 2014.

Upon the departure of Mr Gammell, the Efes Beverage Group has been restructured into separate beer and soft drink divisions, the company said. Effective 1 November 2015, Robin Goetzche was appointed President of the Beer Division and CEO of Anadolu Efes. Read on


USA - Will Molson Coors take 100 percent of MillerCoors?

Shareholders in Molson Coors certainly think so. The brewer’s stock has risen since news of a possible tie-up between AB-InBev and SABMiller broke in mid-September 2015. The reason why Molson Coors’ shareholders are so optimistic is the performance of Constellation Brands, which was the recipient of U.S. and Mexican assets that AB-InBev was forced to offload when it took over Mexican brewer Modelo in 2013.

Observers believe that MegaBrew will offer Molson Coors the prospect to grab a sizeable market share in the U.S. at a discount. Once the U.S. antitrust body vetoes MegaBrew, Molson Coors will have the right to buy out SABMiller’s stake in its U.S. joint venture MillerCoors.

Molson Coors’ opportunity is similar to the one Constellation seized when AB-InBev in 2013 completed its acquisition of Mexican brewer Grupo Modelo in a deal valued at USD 20.1 billion. To gain regulatory clearance, AB-InBev was forced to sell assets, including Grupo Modelo’s 50 percent interest in its U.S. distributor Crown Imports and the U.S. rights to distribute beer brands like Corona and Modelo Especial. Constellation had the other 50 percent of the Crown Imports joint venture and had the chance to purchase those assets at a reasonable price (a multiple of 9 times EBITDA).

Thanks to the regulators putting their foot in, Constellation suddenly became the number three brewer in the U.S. by volume, and Constellation’s success with Corona and Modelo Especial has cut into sales of AB-InBev’s beers. What is more, shares of Constellation have more than doubled in the past two years. Read on


Belgium – AB-InBev’s net profit falls in third quarter 2015

AB-InBev, which is in the process of taking over rival SABMiller, reported on 30 October 2015 a 45 percent decline in the third-quarter net profit. However, EBITDA improved, along with strong top line results and higher volume.

EBITDA grew 9.6 percent year-on-year to USD 4.40 billion with a margin expansion to 38.7 percent. Organic revenue increased 7.9 percent from last year to USD 12.24 billion, with revenue per hl growth of 6.3 percent, mostly thanks to premiumisation initiatives. Read on


Netherlands – Warm summer weather boosts Heineken’s sales

The family controlled Dutch beer company saw global beer sales in the third quarter of 2015 increase 7.5 percent year-on-year, topping EUR 15 billion in revenue for the first nine months of 2015, it was reported on 28 October 2015.

The Dutch brewer’s performance in the Americas stood out in the three months ending 30 September 2015. It sold 10 percent more across the north and south continents. It also said sales were up in the U.S., outperforming the beer market there.

Heineken grew 10 percent in Europe too, the region that contributes the largest part of sales. Sales however declined in Russia and Belarus, as well as in the Democratic Republic of the Congo and Burundi, while volume growth remained flat elsewhere in Africa, including in Nigeria, Ethiopia, Algeria, Egypt and Rwanda.

Heineken provides only half-year and annual profit figures. Read on


United Kingdom – Supermarket group Tesco pulls Carlsberg from shelves

True, the supermarket chain Tesco has heaps of problems of its own, but perhaps it’s also a sign of the times that retailers think that a reduction in SKUs will take complexities and costs out of their operations. In October 2015 Tesco pulled almost all Carlsberg products from its stores as part of a massive cull of big brands. Carlsberg’s annual sales at Tesco were expected to top an estimated GBP 60 million (USD 92 million).

Carlsberg was not the only beverage company to get de-listed. The juice brands Ribena and Capri-Sun fell off the shelves too, it was reported. Read on


Australia - Treasury Wine takes over Diageo’s wine division

What’s going on at Diageo? After selling some beer assets to Heineken, Diageo continued in its attic clearance mode by offloading the majority of assets from Diageo Wine’s U.S. and UK operations to Australia’s largest winemaker Treasury Wine Estates (TWE) for USD 625 million.

Consider this: when in 2000 Diageo acquired Seagram's wine operations for USD 8.15 billion in a joint bid with France's Pernod Ricard, with Diageo footing USD 5 billion of the bill, this was seen as an exciting opportunity. Fast forward 15 years and Diageo declares that wine is no longer “core” to its business. Has the realisation finally sunk in that wine is a risky business, much like aviation, defence, oil and gas?

TWE’s investors seem pleased – for the time being – that TWE has gone on the offensive after bringing the troubled Australian group, whose brands include leading Australian labels Penfolds, Rosemount and Wolf Blass, back to profitability. Only last year, TWE fought off a USD 3.2 billion takeover offer from Kohlberg Kravis Roberts & Company. Read on


Belgium – Beer tax hike not as high as originally planned

Who or what reined in Belgium’s legislators? Was it political sense or successful lobbying? In any case, the beer tax hike as of 1 November 2015 will not be as high as proposals suggested in July this year. Per degree Plato the excise will go up by 8.5 percent overall, though staggered in absolute sums according to the brewery’s output. Initially, the hikes would have been between 15 and 17 percent. Brewers may heave a sigh of relief. Not so the producers of wines and sparkling wines, for which the excise will increase by 31 percent.



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