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Posted October 2016

USA – Kirin takes a minority stake in Brooklyn Brewery

You’d have thought that the promiscuity of brewers was a thing of the past. But no, it’s having a comeback among craft brewers. Kirin, Japan’s number two brewer, will acquire a stake of 24.5 percent in Brooklyn Brewery for an undisclosed sum, the companies said on 12 October 2016, which will make Carlsberg exceedingly jealous.

US media think that the price tag could be in the hundreds of millions of dollars as Ballast Point, a craft brewery with a similar production volume to Brooklyn, was sold to Constellation Brands last year for USD 1 billion.

Brooklyn Brewery and Kirin said they will form a Japanese joint venture in January 2017 to roll out the Brooklyn brand in the country. The capital contribution will be Kirin 60 percent and Brooklyn Brewery 40 percent. There are plans to take it to Brazil as well, where Kirin bought the local brewer Schincariol in 2011. Read on

 

South Africa – Meyer Kahn’s personal farewell to SAB

Who was the practical joker who uploaded this video on Youtube on 6 October 2016 – the day SABMiller was taken off the stock exchange following its takeover by AB-InBev?

It records a private speech by SABMiller’s former Chairman Meyer Kahn, 77, given to a group of “SAB bulls” as they bid a very special adieu to the South African brewer earlier this year.

Watching Meyer Kahn you can get an idea why he inspired such loyalty and why, together with the late Graham Mackay, SABMiller’s former CEO and Jamie Wilson, its former CFO, they would not have been browbeaten by their major shareholders into selling the company they so arduously had built.

As he says, had he still been in the saddle, he would have fought this deal with his whole being “because we did not build SAB to see it chopped off”.

Clear-sighted as always, Meyer Kahn said that the major shareholders have done a deal and that time will tell if it was a good deal for them. As to their motives – he would only say that “blood is thicker than water and money is thicker than blood.”

It’s a momentous speech, both funny and moving at the same time, given by one who was a literal boardroom heavyweight in his time. They don’t make them like this any longer.

 

USA – Yuengling opposes DOJ settlement with AB-InBev

In a recent letter to the anti-trust watchdog, the Department of Justice (DOJ), the nearly 200-year-old brewer D.G. Yuengling & Son objects to the terms of the settlement between the DOJ and AB-InBev forged in July 2016, which was a precondition for AB-InBev’s takeover of SABMiller.

The family-owned Yuengling worries about AB-InBev’s ensuing oversized influence over the channels of distribution in the US. The brewer, based in Pottsville, Pennsylvania, feels the squeeze acutely, because unlike many super-premium craft beer brands, its beers are priced to compete directly with blue-collar beers such as Budweiser and Bud Lite. Read on

 

South Africa – Coke to buy former SABMiller stake in African bottler

As could be expected, The Coca-Cola Company said on 10 October 2016 that it plans to buy AB-InBev’s stake in Coke's largest African bottler. Coke exercised its right to acquire the bottler under a change-of-control clause. SABMiller previously held a 54 percent stake in Coca-Cola Beverages Africa (CCBA), which was formed in 2014 when several bottlers combined.

Terms of the buyout will need to be negotiated over the next few months. But analysts have already put a price tag of USD 4 billion to the stake.

Coke will pass the stake on to its existing partners. Among those, analysts consider European-based Coca-Cola European Partners and Coca-Cola Hellenic Bottling or Mexico’s Coca-Cola FEMSA as being among potential partners in Africa.
Read on

 

USA – Altria to become a top shareholder in AB-InBev

The tobacco firm Altria has gained a position as a top shareholder in the newly expanded brewer AB-InBev. It will control a 9.6 percent stake, having held roughly 27 percent of SABMiller previously. Altria was expected to receive around 10.5 percent of the fattened AB-InBev upon the sale.

However, more SABMiller stockholders chose to accept AB-InBev’s cash-and-stock buyout option, rather than the all-cash alternative. This resulted in Altria obtaining fewer shares than it anticipated. Read on

 

Ethiopia – Competition to heat up in the beer industry

Never mind the Ethiopian government declaring a six-month state of emergency on 8 October 2016, beer companies still place great hopes on beer consumption going up at the Horn of Africa.

This is thanks to Ethiopia experiencing double-digit economic growth, averaging at around 10 percent since 2005, which has mainly been underpinned by public-sector-led investments.

At present there are six companies vying for a share of the beer market, which has risen to 6.8 million hl in 2015 from 2.7 million hl in 2010 according to the Barth Report. Two more brewery projects are said to be in the pipeline. Read on

 

UK – More beer sold in supermarkets than in pubs

For the first time ever, in 2015, more beer was sold in supermarkets and off-licences than in Britain’s 145,000 pubs, clubs, hotels and restaurants. According to a recent report by the British Beer and Pub Association (BBPA), of the 44 million hl beer sold, 51 percent found its way to consumers via the off-trade channel. The remaining 49 percent was sold through pubs, clubs and other licensed premises.

In 2000, more than two-thirds of beer was drunk in pubs and other on-trade locations, while the figure was almost 80 percent in 1990. This shows that supermarket sales of beer have been on the rise for decades so it probably was just a matter of time before they would overtake pub sales. The BBPA thinks that the reason for consumers switching to buy their beer in supermarkets is the huge difference in prices, not least during promotions. Read on

 

UK – Aldi sells organic wine in beer bottles

Millennials are seen as such a strange breed of consumers that the German discount retailer Aldi has decided to launch its own range of craft wines in 0.5 litre beer bottles with groovy looking labels and sealed with crown caps. The reason? Craft beer is setting the standard for the whole alcohol category.

In the UK Aldi is set to shake up the wine category with a new wine range, designed to attract millennials by using cues normally associated with craft beer or artisan spirits. In November 2016 it will start selling four wines, which were created in partnership with Origin Wines from South Africa. It includes a Craft & Origin Organic White and Organic Red Wine 2016 (at GBP 2.99/USD 3.70 for a 0.5 litre bottle) and No Monkey Business White Moskato 2016 and No Monkey Business Moskato Rose 2016 (each at GBP 2.49/USD 3.10 for a 0.5 litre bottle).

With a nod to craft beer customs, the funny spelling of Moskato (it should be spelt Moscato) is obviously deliberate as is the obvious steal of the Monkey moniker from the popular gin brand Monkey 47 (owned by Pernod Ricard) and the Denver-based winery Infinite Monkey Theorem, which is delivering top-shelf wine to the masses in 250 ml cans sold in four-packs.
Read on

 

Russia - Heineken to cease beer production in Kaliningrad

It was only a matter of time. With Russian beer consumption in decline for the past eight years, Heineken said on 5 October 2016 that it will suspend production at PIT Company, its affiliate in the Russian city of Kaliningrad, from 1 January 2017. Kaliningrad is a Russian enclave by the Baltic Sea and lodged between Poland and Lithuania. It has a population of about one million people.

Heineken bought Russia’s PIT group of breweries in 2005 for reportedly USD 560 million. The Kaliningrad plant had an estimated capacity of 250,000 hl and would have been the smallest in the PIT Group. Read on

 

Australia – CUB’s market share to rise after brands transfer from Lion

Following the loss of various AB-InBev brand licences, including Corona Extra in September 2016, Kirin’s Australian unit Lion will be dethroned as the major brewer in Australia. Kirin had a licensing agreement with AB-InBev under which it sold several popular brands. These rights reverted to Lion’s domestic rival CUB after the takeover of SABMiller by AB-InBev.

Australian media say that Lion is Kirin’s cash cow, generating nearly half of Kirin’s profit in 2015 and thus helping to offset a weak performance in Brazil, where Kirin took over the beer and beverage company Schincariol in 2011.

Although Kirin will receive compensation for the cancellation of the licensing deal (up to USD 200 million), the loss of market share in Australia will nevertheless be a blow as the AB-InBev brands accounted for 10 percent of Lion’s volume sales.
Read on

 

Brazil – AmBev launches home delivery to boost sales

The Brazilian beer industry has reinforced the distribution channel as a strategy to increase sales, which are under pressure in a declining beer market. The latest bet of AmBev, the largest player in the segment, was the launch of a delivery service of beers to consumers in the cities of São Paulo, Ribeirão Preto, and to the ABC Paulista region, all in the São Paulo state, Brazilian media say. Consumers can order beers on the Zé.Delivery website, and distributors, bars or registered supermarkets will deliver cold beer to their homes within an hour. Read on

 

Ireland – Cheating publicans sold Heineken beer as craft beer

How could this happen? Heineken Ireland has claimed that some of its beers have been purposefully mislabelled and sold as fake craft beer in certain pubs in Ireland, fuelling consumer debate over what constitutes a ‘craft’ beer. The scandal broke in September 2016 and has had punters wagging their tongues since.

Reportedly, some of Heineken’s draught beers had been sold at a number of pubs under the guise of local craft beers, although the company claims that the practice has since stopped. It is unknown how widespread this practice was, or for how long it went on. It is also unknown if any Heineken employees were aware of the mislabelling at the time. Read on

 

USA – Corona Extra sales continue to rise

Americans’ summertime preoccupation with barbecues and beer has again been a boon to Constellation Brands’ top and bottom line. When the number three brewer in the US released its second quarter (ended 31 August) earnings report on 5 October 2016, it revealed that sales and profit were higher than what Wall Street had expected, due in no small part to the strength of its beer segment.

Second quarter revenue came in at USD 2.02 billion, up 17 percent over the same quarter last year. Net income for the quarter stood at USD 358.9 million, up from USD 302.4 million in the prior-year period. Constellation attributed these results to a 20 percent increase in net beer sales and a 12 percent increase in wine and spirits net sales. Read on

 

USA – Falling out of love with pumpkin ales?

You know that something is very wrong if chocolate Santa Clauses appear in supermarkets in August. Although international trade and advances in farming mean that seasonal food supplies are definitely a thing of the past, there are some traditions that should be upheld, even if only for the sake of tradition.

The same applies to pumpkin ales. They used to be autumn specialty beers but in recent years were made available as early as May. The inevitable happened in 2015. Sales of the once cultish seasonal style declined. The problem was overproduction, oversaturation, and overly hot autumn temperatures. Not only had established craft brewers pepped up production of pumpkin ales, new breweries were also trying to cash in on the craze. For the first time, big quantities of pumpkin beers sat on the shelves months past their sell-by dates and a lot of breweries, wholesalers and retailers lost money. In some cases brewers even had to buy old stock back from their distributors.

It was the “Great Pumpkin Debacle of 2015” and self-critical craft brewers were the first to admit that the early start in delivery to supermarkets and bars may have contributed to the fatigue factor. Read on

 

Belgium – SABMiller’s and AB-InBev’s shareholders approve of merger

By the time you will be reading this, SABMiller will be no more. After winning shareholder approval on 28 September 2016, AB-InBev will drop the SABMiller name and begin trading as a combined company on 11 October 2016. SABMiller ceased trading on the London and Johannesburg stock exchanges on 5 October 2016.

The tie-up of the world’s two largest brewers concludes a year of financial wrangling, after the deal won the support of over 95 percent of SABMiller’s shareholders, shrugging off a minority protest vote by investors who claimed the GBP 45 a share takeover offer was too low. In July, AB-InBev was forced to raise its offer after some activist investors in SABMiller revolted following the pound’s post-Brexit plunge. Read on

 

USA – AB-InBev buys SpikedSeltzer maker

If in need, clinch a deal. With their beer sales under pressure, AB-InBev have branched out into another new hot beverage category which comes by the name of alcoholic Seltzer. In September 2016 they bought the company Boathouse Beverage which produces the SpikedSeltzer brand. The beverage in question is basically an alcopop because it’s made from fermented sugar that creates a carbonated-water beverage with 6 percent ABV. It comes in flavours like Valencia Orange, Cape Cod Cranberry and Indian River Grapefruit.

No terms were disclosed. Boathouse Beverage began making alcoholic, carbonated-water beverages in 2013 and has increased sales to more about 45,000 hl, it was reported. Read on

 

India – AB-InBev fined USD 6 million to settle bribery accusations

The practice of slipping bureaucrats a back hander is coming under increased scrutiny by US regulators. Not just in the US, but in foreign countries too. A minority-owned joint venture of AB-InBev used third-party sales promoters from 2009 to 2012 to make improper payments to officials in India to boost sales and production.

On 28 September 2016, AB-InBev agreed to pay USD 6 million to settle charges that it had violated US foreign bribery laws and “chilled a whistleblower”, according to the US Securities and Exchange Commission (SEC), which had conducted the investigation. AB-InBev owned 49 percent of the joint venture, Crown Beers India, at the time. Read on

 

South Africa – Heineken launches Sol

Heineken’s introduction of Sol Mexican lager to South Africa in September 2016 forms part of a plan to boost its market share in a country soon to be dominated by AB-InBev. Fearing that AB-InBev may bring with it Corona Extra plus a host of other international brands, Heineken decided to be the first to offer a Mexican beer. Read on

 

Nigeria – Trouble brewing for Diageo

A shortage of foreign currency has forced Guinness Nigeria, which is majority-owned by Diageo, to ask the drinks maker for a USD 95 million loan. The loan became necessary because Nigeria is in recession due to a slump in oil prices, which has hurt its currency and government revenues. Guinness Nigeria said in September 2016 that the company’s currency needs were much bigger than it was able to source locally and from its exports. So Diageo stepped in with the loan. Read on

 

Australia – Strike at CUB turns ugly

AB-InBev may walk into an interesting situation in Australia when they take over SABMiller. Since June 2016, a labour dispute at CUB’s Abbotsford brewery in Melbourne has simmered, leading several well-known local pubs to turn off their Carlton Draught and VB taps. A union-led boycott fighting for the reinstatement of 55 laid-off fitters and electricians at Carlton & United Breweries (CUB) made thousands of protesters march through Melbourne in early September to show their solidarity with the workers on strike. Read on


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