Posted October 2014
United Kingdom – Spurned SABMiller sparks new round of M&A speculation
It was so Hollywood teen movie-ish: boring, unattractive and never-been-kissed geek makes pass at gorgeous high school prom queen in front of the whole class and gets brushed off.
That’s one way to look at SABMiller’s futile offer for rival brewer Heineken, which was rejected as “non-actionable” on 14 September 2014. Although some media say that SABMiller has had its eyes on Heineken for a while, it has never succeeded in eliciting as much as an encouraging smile from the Dutch. Still, SABMiller decided that finally the time had come to publicly hit on Heineken.
As could be expected, Heineken gave SABMiller the fluff, which made SABMiller’s whole approach look “clumsy” as one industry observer said, who was quoted by the UK’s Sunday Times newspaper.
Why, oh why, did SABMiller try to get off with Heineken? Was it in an effort to “bulk up” (the finance industry’s jargon for making oneself too big to be taken over) to prevent a takeover by AB-InBev, as was widely guessed? Or was it merely a very shrewd move to boost its share-price, as I prefer to see it?
Whatever SABMiller’s reasons, the side-effect of SABMiller’s demonstrative signal that it’s “in play” – meaning it’s out on the prowl - is that the chasing pack of brewers has been forced to rush to the sand pit, too. Read on
Russia – SUN InBev and Baltika to close breweries
When will the decline in Russian beer consumption bottom out? Russia’s beer sales have dropped more than 25 percent in the period from 2008 to 2013 and a further seven percent in the first six months of 2014. Brewers have responded by scaling back capacities and closing breweries.
AB-InBev’s subsidiary SUN InBev said on 1 October 2014 that it would close its Angarsk brewery in East Siberia. This marks the fourth plant closure by the world's major brewer in Russia in two years. Russian media report that SUN InBev’s beer sales were down 13.6 percent in 2013 and 10 percent in the first six months of 2014.
SUN InBev would not say what it will do with the plant, only that the volumes of beer produced in Angarsk will be relocated to other SUN InBev plants.
“Given the general market decline, we must act and take the necessary measures to maintain the competitiveness of our Russian business,” Andrey Gubka, Anheuser-Busch InBev's president for Russia and Ukraine, said in a statement.
Excise tax increases and various restrictions and bans have made Russia one of the most regulated markets worldwide.
Baltika, the Russian unit of Denmark's brewer Carlsberg, also suspended production at its Chelyabinsk and Krasnoyarsk plants in September 2014, Russian media report.
On 16 September 2014 the World Bank said that Russia’s economy may have escaped recession, but that economic activity is stagnating. The World Bank forecasts GDP growth of only 0.5 percent for 2014. Higher food prices and the ruble depreciation already elevated consumer prices inflation in August.
All this does not bode well for beer consumption.
Japan - Kirin ties up with craft brewer Yo-Ho
If BrewDog can open a bar in Tokyo – they did so in March 2014 -, something must be underfoot in this market. Although the big four brewers Kirin, Asahi, Sapporo and Suntory combined probably control 99 percent of all beer sold nationally, craft beer is gaining in popularity. The country’s 200 craft brewers presently account for 1 percent of overall beer sales in Japan, but the percentage is expected to increase to 2 to 3 percent by 2020.
This must have alerted Kirin, Japan’s number two brewer, to the idea that buying into an established craft brewer would help them learn the business of craft beer in order to counter a declining share of a shrinking market.
In September 2014 Kirin acquired a 33.4 percent stake in craft brewer Yo-Ho, based in Nagano Prefecture, handing over about 1 billion yen (USD 9.12 million) to its owner Hoshino Resort, an operator of luxury hotels. The size of the stake is meaningful as it gives Kirin veto rights on board decisions.
Set up in 1996, Yo-Ho is one of the major craft brewers in Japan, best known for its Yona Yona Ale and other unique offerings. Read on
United Kingdom – Brits believed to spend more on drugs and hookers than on alcohol
Good grief – what will the number pushers, aka statisticians, come up with next? The Morning Advertiser, a UK trade publications, reported on 1 October 2014 that some guys at the Office of National Statistics (ONS) have worked out that UK consumers spend more every year on illegal drugs and prostitution than on beer and wine.
The ONS figures show that GBP 12.3 billion (EUR 15.7 billion) was spent on illegal substances and sexual services in 2013 as opposed to GBP 11 billion (EUR 11 billion) that was spent on wine and beer.
How did they arrive at these figures? Read on
USA – Pabst Brewing Company sold again for allegedly USD 700 million
If the rumoured figures are true, Dean Metropoulos, the private equity tycoon, made a killing when he sold the Pabst Brewing Company (PBC) to the Russian beverage company Oasis for USD 700 million (EUR 560 million) in cash.
Mr Metropoulos bought PBC in 2010 for about USD 250 million. Since taking over PBC, Mr Metropoulos has turned management of the company over to his sons, Evan and Daren, who have served as co-chief executives. They are expected to step down after the sale, which is believed to be completed in mid-November this year.
PBC’s portfolio of brands includes cheap malts such as Colt 45, Schlitz and Old Milwaukee, as well as regional favorites such as Lone Star ("The National Beer of Texas"), National Bohemian (a Baltimore classic from the "Land of Pleasant Living"), Rainier ("We Heart Seattle") and Old Style ("Chicago's Beer since 1902.")
While its main brand Pabst Blue Ribbon has done well with the hipster set, and sales have doubled since 2004, the broader business has proven weak in sales. Last year was PBC's slowest for beer shipments in at least a decade, according to data from Beer Marketer's Insights. PBC’s volume in 2013 was 5.5 million bbl beer (6.4 million hl), down from 5.6 million bbl in 2012, according to Beer Marketers Insights, while Pabst Blue Ribbon surged to 2.7 million bbl (3.2 million hl), up from 2.3 million bbl in 2011.
The buyer is Oasis Beverages, an eastern European brewer and beverages distributor with stakes in Russia, Kazakhstan, Belarus and the Ukraine. Backing Oasis is TSG Consumer Partners, an American private equity firm focused on consumer goods, which will take a minority stake. Read on
Australia – Treasury Wine Estate’s strange way to sell its business
Did Treasury’s board take the decision to put the company up for sale without consulting its major shareholders? Looks like it.
The board of Treasury Wine Estates, the former wine unit of the Foster’s Group, on 29 September 2014 officially terminated talks with private equity firms Kohlberg Kravis Roberts and TPG Capital about a potential AUD 3.4 billion (EUR 2.4 billion) buyout of the company, after deciding that a price of AUD 5.20 per share undervalued the company. The decision comes five months after an original buyout proposal was made by KKR. Read on
UK – Diageo welcomes Scotland’s “no” vote
Phew – they would have been relieved. Several big names in the retail and beverage industry have welcomed Scotland's decision to remain part of the UK on 19 September 2014, after the likes of Diageo and DIY company Kingfisher had warned ahead of the vote that an independent Scotland would lead to higher prices.
55 percent of Scottish voters voted on 18 September 2014 to stay with the UK, with 45 percent voting for independence.
Diageo has Scottish roots and currently controls around 40 percent of Scotch whisky production. It is one of Scotland's top manufacturing exporters.
On the company's website it cites that 4,000 of its employees work in Scotland in around 50 sites across the country. It said that in total, the spirit brands it makes in Scotland generate over GBP 3 billion (EUR 3.9 billion) worth of revenue each year. Read on
Sweden – Farmers’ Association takes fight for legalizing cellar door sales to EU
Beware of their pitchforks. The Swedish Farmers' Association LRF has filed a complaints notification with the EU commission against the ban of cellar door sales in Sweden, local media reported on 18 September 2014.
LRF has been lobbying for the legalization of cellar door sales or “gårdsförsäljning” in Swedish (“farm sales”) for years, which currently fall foul of Sweden’s strict alcohol laws. Only the state monopolist retailer Systembolaget is allowed to sell beer, wines and spirits above 3.5 percent ABV.
The alcohol monopoly in Sweden is an exception to the EU free market directive that the Swedish government succeeded in negotiating when it joined the EU. The free market directive would normally forbid a monopoly. However, the Swedish government successfully argued that the alcohol monopoly was vital for protecting public health.
According to media reports, the LRF is only asking for the legalization of cellar door sales, not for abolishing Systembolaget’s monopoly.
Experts say a ruling by the EU may take several years.
There are an estimated 150 farms that produce wine in Sweden, plus about 125 small breweries. As it’s fairly hard to get a listing at Systembolaget, all of them would benefit greatly if they could sell their products across the yard to customers passing by.
Systembolaget boasts more than 400 stores, with a further 500 authorized retailers across the country serving smaller communities.
Its monopoly was first dealt a blow in 2007 when the European Union ruled that Swedes could buy wine over the internet from other European countries for their personal consumption.
From this ruling has sprung a number of companies that sell wine and spirits over the internet directly to Swedish consumers. The typical set-up is a company registered and based in another EU country, most likely in neighbouring Denmark. Swedish consumers can order their wines online, but need to make sure that they pay Swedish alcohol duty and VAT upon delivery.
Internet purchases of alcohol represent a niche. However, they challenge Systembolaget’s omnipotence.
USA – Beverage companies pledge to fight obesity
Coke, Pepsi and Dr Pepper said they'll work to reduce the calories Americans get from beverages by 20 percent until 2025 by marketing smaller sizes, bottled water and diet drinks. The announcement was made at the Clinton Global Initiative in New York City on 23 September 2014 and comes as the country's three biggest soft drink makers face pressure over the role of sugary drinks in fueling obesity rates. In many ways, the commitment only follows recent market trends: People have been moving away from carbonated soft drinks on their own for several years. Read on
Poland - Heineken's unit Zywiec to spin off distribution unit
Looks like the going will get a lot tougher as the Polish beer market turns mature. Brewer Zywiec, the Polish unit of Dutch brewer Heineken, will spin off a unit responsible for sales and distribution to small retailers and hospitality clients, Zywiec said in a market filing on 26 September 2014.
Zywiec is the country’s number two brewer behind SABMiller’s Kompania Piwowarska. The new unit will allow for “a more effective and competitive” cooperation with clients of the traditional retail and hospitality segments, the brewer claims.The move will entail transferring 1,500 employees to the new firm, Zywiec said.
Could this decision be related to Zywiec’s poor performance? Read on