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Posted October 2012

France - Belgian brewers protest against hike in excise

This is what France's President Francois Hollande means by squeezing the rich. In his EUR 7 billion tax rise for the well-off and for firms he did not spare the brewers. On 1 October 2012 the French Government unveiled plans to hike beer excise by a staggering 160 percent. This would hit foreign-owned brewers most, as 90 percent of the beer market is controlled by AB-InBev, Heineken and Carlsberg. Beer production in France stood at 17 million hl in 2011.

However, excise duty on wine will remain unchanged as the French Government is obviously in awe of the country's powerful and often cantankerous agricultural lobby.

The French Parliament will vote on this proposal on 20 December 2012. According to estimates, this measure alone is expected to flush EUR 480 million into the French Treasury's coffers.

As could be expected, Belgian brewers cried murder most foul. Read on

 

USA - AB-InBev-Modelo deal could hit the wall

Where's the leak? According to rumour, the U.S. Department of Justice (DoJ) may seek to block AB-InBev’s proposed acquisition of Mexican brewer Grupo Modelo.

U.S. media say, citing anonymous sources, that the DoJ is unlikely to approve the deal in its current state. A-B InBev, which currently owns a 50 percent stake in the maker of Corona beer, announced in June 2012 that it would buy the rest of Modelo in a USD 20 billion deal. Read on
 

USA - Premiumising the beer market

Beer in a blue bottle? Whatever turns you on. Apparently, AB-InBev's launch of the higher-alcohol Bud Light Platinum in a blue bottle and Bud Light Lime "Lime-A-Rita," a Margarita cocktail-taste-alike flavoured malt beverage in a can, were the most successful debuts this year in terms of volumes. As AB-InBev reported, in the first six months of 2012, Bud Light Platinum sold over 1.2 million hl. Read on
 

Belgium - Duvel Moortgat wants to leave the stock exchange

The family shareholders of Duvel Moortgat NV, the brewer of Duvel, are prepared to splash out EUR 125 million to buy all of Duvel's shares that are not yet in their possession, the company said on 12 October 2012. The family still owns three-quarters of the shares.

The offer was set at a maximum price of EUR 95 per share, which represents a premium of 8.9 percent over the closing price on 11 October 2012. The offer is subject to certain conditions, including an acceptance threshold of 95 percent. If the offer is accepted, it will be followed by a squeeze out under the same conditions, the statement said.

Shareholders, who clung on to their shares, will make a neat profit on the sale. The brewer's share price has climbed to around EUR 90, from EUR 16 in 2003. Between 2009 and 2011 Duvel Moortgat's sales rose to EUR 162 million from EUR 113 million, while EBIT climbed to EUR 40 million from EUR 24 million.

Although Duvel Moortgat would not give a reason for wanting to delist, the family probably thinks that there are too few benefits gained from a stock market listing. Although the brewer does not require capital to finance takeovers (whom should they buy?), the company still has to go through the stock market motions and pay fees for the listing as well as publish reports.

It was not always like this. When Duvel sought a stock market listing in 1999, this was meant to allow various family members to cash out on their inheritance. These days the family would like to exert greater control over their company. Hence the offer to shareholders.

Duvel Moortgat now owns six breweries: four in Belgium, one in the Czech Republic and one in the United States.

 

Greece - Greece's biggest company, Coca-Cola Hellenic, leaves for Switzerland

The saying came to mind about rodents deserting a sinking ship when news broke on 11 October 2012 that Coca Cola Hellenic (CCH) is leaving the country to seek legal incorporation in Switzerland, together with a London stock-market listing. The material impact on Greece will be limited, the company said. The Greek plants will go on working and the business will be unaffected. Read on

 

Bermuda - In its 150th year Bacardi remembers illegal confiscation of Cuban assets 52 years ago

Did Fidel Castro even spare a thought on 15 October this year that his soldiers botched the takeover of Bacardi's Cuban assets exactly 52 years ago? After the Communist government announced that it was nationalising sugar mills and rum factories - including the island's most famous business, Bacardi - Cuban soldiers immediately headed to Bacardi's office in Havana with a one-page official document that gave them control. However, the soldiers made a crucial mistake. They went not only to the wrong building but also to the wrong city. Read on

 

Singapore – Heineken gets Asia Pacific Breweries in the end

The earth shook briefly on 28 September 2012 when Heineken’s executives dropped tons of worries, having received news that shareholders of Fraser & Neave (F&N), the Singaporean conglomerate that owns Asia Pacific Breweries (APB), had finally voted to approve the sale of the brewing unit to Heineken for a sweetened price of 53 Singapore dollars, or USD 43.24, for each share of APB the Dutch brewer did not already own.

After a two month battle with the Thai billionaire Charoen Sirivadhanabhakdi the Dutch probably know only too well how Carlsberg must have felt when they had their run-in with Mr Charoen a decade ago and were forced to beat a retreat with their tails between their legs: this Asian tycoon is not to be slighted.

Full control of APB will cost Heineken dearly: about USD 6.3 billion. The deal values APB at around USD 11 billion or 18 times EBITDA, media say.

After decades of often difficult negotiations with its Asian partner F&N, winning control of APB will allow Heineken to implement its own policies in crucial growth markets in developing Asia.

APB, which is listed in Singapore, operates 30 breweries across Asia, including in far-flung countries like Mongolia, Papua New Guinea and the Solomon Islands. Its brand portfolio includes Tiger beer and Bintang lager, although Heineken's brands make up around 30 percent of APB's sales by volume and around half its profits, it was reported.

Why Heineken did not make a move on APB sooner, only the Dutch will know. But when Mr Charoen steadily began building up his stake in F&N, Heineken's executives knew they had to act. They did raise their offer once and in mid-August even got approval from F&N’s board for their offer. However, the outcome was still far from certain a few weeks ago as by that stage Mr Charoen had already increased his shareholding in F&N to over 30 percent, the critical threshold, at which he had to make a full offer for F&N. Which he did.

Throughout Mr Charoen’s cloak-and-dagger machinations Heineken basically had only two options: either to let the whole thing blow up and walk away from APB, or force Mr Charoen to compromise by making a full offer for F&N themselves. The agreement between Heineken and ThaiBev, which was signed a week before the crucial shareholder vote and which secured for Heineken Mr Charoen’s backing for the sale of APB, implied that the latter had seemed a genuine feasibility. Read on

 

Thailand – Carlsberg partners with Singha

It’s like with second marriages. Hopefully they work out better than the first ones. After an acrimonious split from its first Thai partner, Charoen Sirivadhanabhakdi, and his Chang brewery (later to become ThaiBev) in 2005, Danish brewer Carlsberg at the end of September 2012 tied the knot with ThaiBev’s rival Singha, the company behind Thailand’s first brewer Boon Rawd and maker of Singha and Leo beer brands.

The move is to expand Carlsberg’s presence in Southeast Asia. In its past financial year, the region, including China, contributed only 16 percent to Carlsberg’s volumes and 9 percent to Carlsberg’s profits (EBIT). In Thailand, with a population of about 67 million and a per capita consumption of 29 litres of beer, Carlsberg has had a negligible footprint.

Although the Thai beer market has grown to about 20.6 million hl in 2011, according to the Barth Report, this has not necessarily boosted brewers’ profits. According my estimates, the beer profit pool (EBIT) was about USD 200 million in 2011, which is low compared with other emerging beer markets.

The 50:50 joint venture with Singha will oversee the marketing, sales and distribution of Carlsberg's international beer brands in Thailand, while Singha's brands will be launched in selected markets outside of Thailand through Carlsberg's international network, the company statement said. At this stage Carlsberg’s brands will not be brewed in Thailand but will be imported from one of the Carlsberg breweries in the region.

The privately-owned Singha, formerly known as Boon Rawd Brewery, produces beer, soft drinks, water, ready to drink green tea, and various energy drinks, as well as fish snacks, it was reported.

Asian media say that Singha had a market share of 59 percent of the Thai beer market in 2011, compared with the 31 percent share of Mr Charoen's ThaiBev and the 5 percent share of Asia Pacific Breweries.

With some ill-concealed glee the same media also reminded their readers that this is the second time Carlsberg has partnered with a Thai brewer. The first time Carlsberg formed a joint venture was in 2001 with Mr Charoen’s Chang Beverages, which was an unmitigated disaster for Carlsberg.

The Danish had to end the alliance after just two years, accusing Chang of failing to contribute the assets agreed upon. The partnership with Mr Charoen had been an ambitious one as the Danish brewer folded in all its Asian assets. Sources at the time said Mr Charoen was happy to use Carlsberg to distribute its beer internationally, but did little to push Carlsberg in Thailand. The relationship ultimately fell apart amid frosty accusations and a USD 2.5 billion claim for damages by Chang, once Thailand's "whisky king", Mr Charoen, had received what he wanted from his perhaps slightly naive Danish partner. To add insult to injury, Mr Charoen forced Carlsberg to pay USD 120 million to settle their legal dispute in 2005. Read on
 

Czech Republic – Molson Coors combines European units

Will there be an exodus from Burton to Prague as brewer Molson Coors integrates its European businesses into a single unit as of January 2013? Speculation is rife on the web following the announcement on 1 October 2012 that Molson Coors Europe will combine its UK and Ireland business with its recently acquired businesses in Central Europe and establish new pan-European headquarters in Prague. Read on

 

Israel – Brewers hit by massive tax hike

Higher taxes on beer and tobacco are supposed to pay for several economic reforms, including free schooling from the age of three, Israeli news services say. Israel’s recently craft beer renaissance might start to whither due to a significant rise in excise and purchase taxes that the Israeli Finance Minister Yuval Steinitz ordered at the end of July 2012.

With immediate effect, the tax load on beer almost doubled from NIS 2.18 (USD 0.56) to NIS 4.19 (USD 1.07) per litre. Read on

 

UK – One in three pubs at risk of closure

Is the end near for more than one third of pubs and bars in the UK? According to research by R3, an insolvency trade body, which was released on 26 September 2012, 34 percent of bars and pubs have been identified as “at risk of failure” in the next 12 months.

The report, which made some waves in the UK media, states further that in London, the proportion of pubs and bars “at risk” is even higher, at 37 percent, which highlights that even the capital is not immune to the effects of the squeeze on consumer spending. The only other region worse affected than London is the South East, where 39 percent of pubs and bars are “at risk”.

The figure is compared to a national cross-sector average of 23 percent of businesses “at risk”.

Blow me down, one in three pubs is at risk? Is that really newsworthy? Which business is not “at risk” of going out of business in a country that has suffered under a recession which has gone on far longer than could have been predicted?

Of course, pubs must find it hard to bring people in through their doors if fewer and fewer Brits find the money to spend on discretionary items.

And yes, of course, the rate of failure for restaurant businesses in capital cities is higher than in the rest of the country. Ever heard of the phenomenon of over-supply?

But, let’s face it, running a bar or a pub is an uphill struggle even at the best of times. This may be small consolation to the thousands of pub- and bar-owners, who face the decision to stay open or close up. But depressing everybody with such a gloom-and-doom scenario won’t help either.

 

Scotland – Taxpayer to fund two breweries

Two brewers, Heidi Beers and Brewdog, are the recipients of Scottish government grants awarded to a total of 32 companies under the latest rounds of food and drink funding. On 15 September 2012, it was announced that Heidi and BrewDog have been given grants totalling GBP 2.4 million to help them relocate production to Scotland. Read on

 

Czech Republic - Booze, bullets and Budvar

These days, Czech citizens could be forgiven for thinking that Czech Government is an oxymoron - a contradiction in terms - as the country reels from a scandal over adulterated spirits, an attack on the country's president and a Budweiser Budvar audit which the government is desperate to bury.

Consider this: although the first victims from methanol poisoning were taken to hospital in early September 2012 and the death toll kept on climbing rapidly to over 25, it took the Czech authorities two weeks before they issued a ban on the sale of spirits with more than 20 percent of alcohol, and almost four weeks before they arrested two suspects.

The total ban of the sales of spirits with more than 20 percent of alcohol was in force for two weeks. Exports of Czech spirits, valued at EUR 80 million last year, were also stopped following EU pressure. To date, a total of 85 people have been poisoned, although at the end of September, the worst health scare for decades in the EU member country of 10.5 million continued to bring new patients to hospitals. Read on
 

UK - 100,000 Britons back a call for freeze on beer tax

Beer drinkers, incensed at excessive tax hikes on the nation’s favourite pub drink, are now set to force a debate in Parliament. By 20 September 2012 over 100,000 people had signed an online petition on the issue, launched by the British Beer and Pub Association (BBPA). Campaigners say it’s a wake-up call for the Government and its damaging tax policy on Britain’s beer and pubs.

The BBPA says that the beer duty has risen by 42 percent since March 2008, when the controversial beer duty escalator was introduced – and 6,000 pubs have closed. A typical British pub is now burdened with GBP 66,500 (EUR 82,000) of duty and VAT on beer every year, which represent a huge drag on pub businesses. Read on
 

UK - Minimum price for alcohol faces EU legal threat

Anti-European hackles have been raised in the UK and Scotland following a legal threat from Brussels, which challenges Scotland's First Minister Alex Salmond’s law to impose a minimum price on booze - a plan which Mr Cameron had hoped to follow in England and Wales.

At the end of September 2012 officials in Brussels told Scottish ministers they had to withdraw legislation to impose a GBP 0.50-per-unit price (EUR 0.62) on alcohol because it was "not compatible" with the EU Treaty.

Spain, Italy, Portugal and Bulgaria are also believed to have concerns about Scotland’s plans as they export drink to Britain. Read on

 

USA - American Indian tribe's lawsuit against beer stores dismissed

Although a federal judge dismissed an American Indian tribe's lawsuit on 2 October 2012 that blamed brewers and several stores for chronic alcoholism on an impoverished South Dakota reservation, the judge also said that the case belonged in a state court, thus giving a subtle moral support to the tribe's claims, U.S. media report. Read on

 

Australia - Arvo 51 first crowd-sourced beer

It's probably a sign of keeping up with the times that Casella, the company behind the Arvo brands, has termed Arvo 51 the first "crowd-sourced" beer.

As reported, Australian consumers were allowed to take a vote on which of the two beers launched by Casella earlier this year they preferred. Arvo 51 Lager made it a winner with voters over its competitor Arvo 34 because of its mellower and less hop driven flavour. Thus Arvo 51 will become a permanent item in the Casella portfolio as they move forward.

Casella's Managing Director, John Casella, was quoted as saying that "with the help of almost 9000 Australians who were with us from the very beginning, we are delighted to announce Arvo 51 as Casella’s first official lager and the nation’s first crowd-sourced beer, created for Australians by Australians. We plan to grow our beer portfolio significantly so it was important for us to invest in the best resources and team available, to help drive innovation."

But how very much "old times" is this: to honour the Australians who took part in creating Arvo, Casella will immortalise one lucky consumer in a bronze statue.

The lucky winner in another competition, launched by Casella in mid-September 2012, will be rewarded with a bronze statue of him- or herself, standing 10 feet tall. The bronze tribute is to make the perfect addition to one lucky person’s backyard, balcony or hometown.

I am not sure many Australians would like to have a statue of themselves standing in their driveways, only to be defecated on by pigeons, or have the missus run into it while trying to manoeuvre the car past it. But, then again, I may be wrong.

 

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