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Posted November 2008

USA – What’s Grupo Modelo up to?

Carlos Fernandez, the CEO of Mexico’s major brewer Grupo Modelo must know what he’s doing. Not only has he reiterated at a recent conference call that his company, under no circumstances would sell its shares to its part-partner Anheuser-Busch, thus angering some of his shareholders with his blatant arrogance. Grupo Modelo on 16 October 2008 also has filed a notice of arbitration against Anheuser-Busch Cos. Inc., saying that the company's pending sale to InBev violates their investment agreement.     

Since the USD 52 billion deal to sell the brewer of Budweiser and Bud Light to InBev was announced this summer, Grupo Modelo, Mexico's largest brewer, has said that it has consent rights over the deal. The company, which is 50 percent owned by Anheuser-Busch, had been in talks with InBev related to that.

In late July, Grupo Modelo Chief Executive Officer Carlos Fernandez said the company has rights to be able to choose whether it enters a partnership with InBev.

On 16 October 2008, the company, which is controlled by a small group of shareholders, filed a suit of arbitration against Anheuser-Busch in an attempt to exercise these rights. It said in a news release its investment agreement under Mexican law prohibits Anheuser-Busch from taking actions that would mean a transfer or sale of its interests in Grupo Modelo to a competitor in the beer business. The catch phrase on which Grupo Modelo builds its case is “under Mexican law”. The brewer believes that under Mexican law its shareholders would have the right to buy back the shares in Modelo and its subsidiary, Diblo, which would be transferred by Anheuser-Busch to InBev. Anheuser-Busch's roughly 50 percent stake in the company is non-controlling.

Anheuser-Busch and Belgian brewer InBev said in separate statements that they believed Grupo Modelo's claims have no merit.

Both companies said the arbitration would have no impact on the deal and it would close by the end of the year as expected.

Shareholders of Belgian-based InBev, maker of Stella Artois, Beck's and Bass, approved the deal in late September. Anheuser-Busch's shareholders are set to vote on it on 12 November.

So what is Grupo Modelo playing at? At the moment the board with its “under no circumstances” attitude is angering those shareholders who might like to sell out to InBev if the price were right. That means that Grupo Modelo must have a long-term plan of sorts to engage in a public spat with Anheuser-Busch and InBev.

Media commentators have refrained from speculating why Grupo Modelo has filed a notice of arbitration. Without saying as much, many probably believe that Grupo Modelo is engaging in what in the boxing world would be called “shadow-boxing”. After all, if Grupo Modelo had really wanted the deal to collapse it would have asking for an injunction outright.

It did not.

Given that the case may take perhaps up to a year (I am guessing) before it is settled, Anheuser-Busch, by that time, will have been fully integrated into the InBev system. Now why would Grupo Modelo pursue arbitration well aware of the fact that the verdict will come too late to have any material impact on the contested sale? 

The interesting aspect to arbitration is that it the claimant, Grupo Modelo, has to submit a statement of claim. Something along the lines of …. “if the verdict is in my favour I want this and this …”

To date, Grupo Modelo has refrained from disclosing what is in its statement of claim. Again, I am guessing. But let’s assume that Grupo Modelo eventually will be vindicated by the court of arbitration. Then its chances of buying back its shares at a discounted price are high – provided this is what its statement of claim reads.

If this is what Mr Fernandez is gambling at – buying back his shares for cheap in order to sell the company lock stock and barrel to the highest bidder – then the arbitration proceedings make great sense.

 

Australia – Feeling the pinch

Home brew shop operators report that world’s financial turmoil has brought about a resurgence in home brewing in Australia, with more people buying home brew kits as they seek to reduce living costs.  Read on

 

Australia – The debate on binge drinking cont.

Six months on from the Federal Government’s tax increase on RTD’s in April, the Department of Ageing & Health is pleased with the impact the rise had on the market, pointing out that “recent Australian Tax Office figures show a 23 percent decrease in pure alcohol sold in spirit form, between April and June”.   Read on

 

Germany – Esau & Hueber with new strong backing

In the grand scheme of things, the recent change in shareholders and management at Esau & Hueber, a privately-owned supplier to the beverage industry, would only warrant a short notice. But given the current turmoil at international financial markets, Esau & Huber’s story behind the headline shows the vulnerability of companies which do not have a strategic investor whose interest in them is vital and long-term.    Read on

 

Germany – Hövels Original: a beer for all courses

In the past I have had to sing for my dinner. I even had to give the dinner speech once. But never, never before did I have to cook my own dinner when I had been invited out. Well, to be honest never did I have a Michelin-starred chef to teach me how to cook my dinner. Which makes all the difference. Especially if there is copious amounts of Hövels Original to be enjoyed.     Read on

 

Ghana - ABL launches nationwide campaign for Redd’s

Heineken watch out. While the Dutch brewer still seems to pondering as to what to do internationally with its Strongbow and Bulmers cider brands, SABMiller’s subsidiary in Ghana, Accra Brewery Limited (ABL) in October has launched Redd's, which a premium alcohol fruit beverage “made for the modern, confident woman”. Read on

 

India - SABMiller takes on Kingfisher

In October SABMiller launched a new national beer brand in India, appropriately named Indus Pride. The new mild beer is to crack Kingfisher’s dominance as the best-selling beer. Kingfisher is owned by United Breweries in which Dutch Heineken has a 37.5 percent stake. SABMiller is the number two brewer in India with a market share of 35 percent in its core markets.      Read on

 

Kenya – End in sight for Kenya’s beer monopoly?

Keroche Breweries has become east Africa’s newest beer maker, launching three brands on 24 October 2008. The brands — Summit Lager, Summit Malt and a yet-to-be-named “black” beer, will compete with East African Breweries’ Tusker Lager, Tusker Malt and Guinness respectively. Until the entry of Keroche, EABL was Kenya’s sole large-scale brewer.   Read on

 

Serbia – Heineken and Efes united – under Heineken’s roof

In October 2008 United Serbian Breweries announced that, following the merger of Heineken and EFES in Serbia earlier this year, it will operate the combined business in Serbia under one management team and one name - United Serbian Breweries. In order to become one of the leading players in the Serbian market, United Serbian Breweries has also announced the closure of the former Efes brewery in Pancevo and the decision to scale back production at its breweries in Zajecar and Novi Sad from a total capacity of 2.1 million hl to 1.5 million hl. Read on

 

USA – End of Zima

MillerCoors LLC announced that it will discontinue the clear malt beverage Zima, introduced by Coors Brewing Co. in 1992, because of "challenging malternative segment sales and declining consumer interest."    Read on

 

United Kingdom – InBev launches campaign for new Stella Artois 4%

Oh la la, ce beer est très hot. Stella Artois’ new campaign is probably going to bring out the best franglais in the Brits. Emphasising a spurious French past, the ads will make many punters walk up to the bar and order a lower strength Stella by saying: “Bonjours le you. I voudrais a Stella quatre!” In October InBev has InBev UK unveiled a new TV, press and outdoor campaign to promote Stella Artois 4%. The lower-strength Stella Artois 4% was introduced to the off trade in August this year. A draught version is being rolled out in the on-trade from November.  Read on

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