Posted September 2012
Uzbekistan – Has Carlsberg fallen victim to dodgy machinations?
Or did they just fail to grasp the fundamentals of doing
business in a market which is as “interesting” as Uzbekistan’s?
In early September 2012 Russian media reported that Carlsberg is
in talks with investors to sell its subsidiary in Uzbekistan.
Uzbekistan is the most populous and mainly Muslim country of 28
million people in Central Asia.
Potential buyers of the assets and other conditions of a
possible deal were not mentioned. Obviously, Carlsberg would not
comment on these rumours. When approached, a spokesperson for
the brewer only said that production has been shut down due to a
lack of raw materials.
Now, why would the Danish try to sell a brewery – reportedly
with a capacity of over 1 million hl – in which they gained
complete control in 2009 after having bought out a local
Singapore – ThaiBev throws another spanner into Heineken’s
offer for APB
Heineken’s takeover bid for Asia Pacific
Breweries (APB) is getting more and more into trouble. On 13
September 2012 TCC Assets, another company controlled by
ThaiBev’s big man Charoen Sirivadhanabhakdi, launched a USD 7.2
billion offer to buy out the other shareholders of Fraser and
F&N is Heineken’s joint venture partner in APB.
Two months ago Heineken made a bid to take full control of APB.
On 18 August 2012 Heineken reached an agreement with F&N’s board
for its USD 6.3 billion purchase of all the shares in APB,
including F&N's stake in the maker of Tiger beer.
Whether F&N’s shareholders will agree to the
board’s recommendation when they meet on 28 September 2012 looks
seriously doubtful now.
TCC Assets offered to pay USD 7.2 billion for the F&N shares
that the Thai billionaire did not already own. He is said to
control over 30 percent of F&N’s shares. But industry watchers
say Mr Charoen will need to pay more if he is really set on
taking full control of F&N. The property portfolio alone is
worth more than USD 6.51 billion, Asian media say.
Mr Charoen has managed to notch up his stake in
F&N to 30.36 percent in recent weeks, the bulk of it through
ThaiBev, it was reported. He needs a simple majority of votes at
the September shareholder meeting to overturn the agreement
between F&N's board and the Dutch brewer.
As I see it, this leaves Heineken with two options: either to
make a full bid for F&N itself or to make a joint offer for F&N
with let’s say Japan’s beer and beverage group Kirin, which owns
nearly 15 percent of F&N. Heineken has gone down that road
before when it bought Scottish & Newcastle together with
Carlsberg in 2008.
Kirin said previously it was interested in F&N's
food and non-alcoholic drinks business.
The trouble with both scenarios is that neither Heineken nor
Kirin know what to do with F&N’s property business.
Australia - Foster's raises the alcohol in its main seller VB
Better late than never. Carlton & United Breweries (CUB), the
Australian beer business SABMiller acquired with its takeover of
Foster’s last year, will revert to a formula for its flagship
brand Victoria Bitter, which it abandoned in 2007, and raise the
alcohol content from 4.6 percent to 4.9 percent from October
this year, CUB said on 4 September 2012.
Apparently, SABMiller hopes it was the lower alcohol content
which saw Victoria Bitter, or VB as the locals call it, being
overtaken as Australia’s top seller by rival Lion's XXXX Gold.
Lion is owned by Japan's brewer Kirin.
On 4 September 2012, CUB placed a full-page advertisement in the
Herald Sun, Australia’s top selling daily newspaper, saying “we
got it wrong.”
This brings back memories of another big marketing flop:
Coca-Cola's New Coke. Coke was showered in protests when it
replaced Coca-Cola’s classic formula in 1985 with New Coke. A
few months later a po-faced Coke reintroduced the original
The reason why VB dropped its alcohol content
twice - in 2007 and 2009 - was money. In order to maintain
prices in the face of rising excise levied on alcohol content,
the former Foster's management saw no other way out than to
lower VB's alcohol content.
The company also introduced new packaging and new
variants of the brew to arrest a slipping market share.
Alas, XXXX Gold, has since overtaken VB as Australia's
top-selling beer, a position VB held for over 20 years.
According to Nielsen data, XXXX Gold had a 12.4 percent market
share in the 12 months through June 2012 compared to 12.1
percent for VB.
The decision to up VB’s alcohol content will cost SABMiller more
than AUD 10 million a year in excise tax, it was reported.
Vic Bitter drinkers have spoken and told us that we should not
have tinkered with their beer,” Andy Gibson, CUB’s chief
marketing officer, was quoted as saying. He added: “We have
However, market observers are not sure if a higher alcohol
content will be enough to restore VB to its former glory. Does
it not seem strange that VB was overtaken by XXXX Gold when the
latter is a mid-strength, low carb beer (3.5 % abv). Ultimately,
many wonder if alcohol content really plays such an important
Australian beer drinkers in recent years have increasingly taken
to buying premium imports. The prices of imported beer are now
more competitive, thanks to a strengthening of the Australian
dollar against the U.S. dollar over the past few years. They
have also taken to more flavoursome craft beers and sweeter
alcoholic beverages like cider.
Could it be that mainstream beers in Australia find themselves
in a bit of a squeeze?
- United Spirits mulls strategic options
This could be Diageo's chance to get its foot into the door at
India's leading spirits company United Spirits (USL), as Vijay
Mallya, the Indian beer and drinks baron, who owns a 28 percent
stake in USL, is struggling to save his troubled Kingfisher
Previously, in 2009, Diageo sought to buy a stake in USL but
According to media sources the world's number one drinks company
Diageo, which owns brands like Johnnie Walker whisky and
Smirnoff vodka, is again holding talks with USL.
Fresh expectations of a deal have mounted in recent months all
the while Mr Mallya is fighting to protect his personal holdings
in the spirits and beer business from the near-collapse of his
Kingfisher Airlines. Kingfisher has been saddled with a huge
debt load and in November 2011 was forced to reduce operations
massively. It currently operates 12 aircraft from the earlier
66, and has reduced daily flights to close to 90 from the
earlier 360, Indian media reported in August 2012.
Mr Mallya seems to be considering all options to save his
beleaguered airline. In early September 2012 Indian media
reported rumours that Mr Mallya may sell up to 27 percent in USL
or offload up to 48 percent in its flagship whisky brand Whyte &
Nigeria – Clouds of corruption hang over
SABMiller’s new brewery in Onitsha
This would not be Nigeria if a new project
did not immediately drown in a mire of alleged or factual
corruption. Same with SABMiller’s new 500,000 hl brewery in
Onitsha, Anambra State in southeastern Nigeria, which is the
brewer’s first greenfield brewery in the country. It was
officially opened on 30 August 2012, in the presence of
Nigeria’s President Dr Goodluck Ebele Jonathan.
SABMiller reported that work began on the
Onitsha site in 2011, following an investment of over USD100
million, making it the largest single investment in Anambra
State for almost 20 years.
Allegations of corruption have been flying
around the internet for months, following a press report in May
2012 in which Peter Stuttard, the Business Development Manager
of the SABMiller, said that 22.5 percent of the new brewery is
owned by indigenous entrepreneurs, with 10 percent for the
Anambra State Government, while other private local investors
have 12.5 percent.
This alerted hacks in Nigeria, who always
seem to smell a rat when they hear of private local investors
taking a stake in a venture.
Nigeria – SABMiller against the rest
It takes some daring to put big money behind
a new brewery venture in Nigeria if you happen to be a latecomer
to the market like SABMiller. The market is basically a cushy
duopoly by Heineken and Diageo, both of whom have been active in
Nigeria for decades. Heineken entered in 1946, Guinness in 1962.
The two heavyweights have the market cornered: Heineken’s market
share is about 70 percent, while Diageo’s is 25 percent.
In this respect, Nigeria is structured the
way big brewers like it best: two major players only, which
means that competitive wrangles can be kept to a minimum in
order not to hurt profits.
When it comes to profits, Nigeria spells
LOADSA MONEY. According to Brauwelt’s estimates, total beer
profits came to about USD 670 million in EBIT in 2011, the bulk
of which went into Heineken’s coffers, thanks to their high
market share. Nomura, a bank, puts the figure much lower at only
USD 450 million in total EBIT, but then it reckons that beer
consumption was only 16 million hl.
According to the recent Barth Report,
Nigeria’s beer consumption in 2011 was 19.5 million hl, which
makes it Africa’s second highest behind South Africa’s. Given
that the country has a population of 170 million people, per
capita consumption is fairly low - under 10 litres. Most of
Nigeria’s beer consumption is concentrated in the southern half
of the country where the predominantly non-Muslim population
That’s why it was a non-brainer that
SABMiller would build a new brewery in the southern state of
Anambra. And SABMiller built big. The Onitsha brewery has an
annual production capacity of 500,000 hl, says SABMiller. Add to
that SABMiller’s Port Harcourt brewery, which was acquired in
2009 and has a capacity of 400,000 hl, plus the - perhaps -
800,000 hl former Castel brewery in Ilesha, whose management
SABMiller took over in 2011, and the calculator reads 1.7
million hl of installed capacity.
To put this into perspective: Heineken’s
installed brewing capacity is 18 million hl, Diageo’s is 6.5
However, as we all know, installed capacity
is one thing - sales volume is what really matters.
Although SABMiller does not say how much beer
it produces in Nigeria, insiders estimate that sales volumes
this year could be as high as 800,000 hl (300,000 hl in Port
Harcourt and 500,000 hl in Ilesha).
Apologies for sounding arrogant, but that’s
almost nothing, especially as SABMiller has been in the market
for over three years and obtained the management of the
successful Castel brewery more or less by chance thanks to a
pan-African deal with Pierre Castel in 2011.
Perhaps SABMiller’s beer volumes will rise
more quickly now that the Onitsha brewery has come on stream.
But I daren’t make the same forecast for profits as Eisili
Eigben, an analyst at Stanbic IBTC Bank, already warned last
year that it could take SABMiller a decade, if not two decades,
to reach a market share of 10 percent. SABMiller current market
share is about 4 percent.
Fortunately, the Nigerian beer market is
forecasted to grow by about 6 percent annually. Surely,
SABMiller’s future prospects would look far grimmer if the
Nigerian market entered a phase of flat sales.
In retrospect, it seems that SABMiller
recklessly underestimated the challenges it would face in
Nigeria. Perhaps it thought it could break Heineken’s and
Diageo’s stronghold over the country’s bars and clubs more
easily and quickly. According to Mr Eigben, 80 percent of all
beer in Nigeria is consumed in the on-premise.
Of course, if SABMiller were prepared to put
a lot of money on bar owners’ tables, it might be able to
persuade them to sell their beers instead of the competitions’.
On the other hand, why should bar owners take the risk of
serving an SABMiller beer brand to their customers that hardly
anybody else seems to drink?
Incidentally, SABMiller’s new lager from the
Onitsha brewery is called Hero Lager. How appropriate. It takes
a real hero to go into battle in Nigeria’s beer market.
USA – North American Breweries possibly for
By rule of thumb, private equity companies
like to seek an exit after three to four years. That’s why it
should not come as a surprise that North American Breweries,
which sells Genesee and Labatt beer in the U.S., is rumoured to
have been put up for sale by its owner, private equity firm KPS
Capital Partners, media reported on 6 September 2012.
Representatives from KPS were quick to refute the allegation.
The beer company was bundled together in 2009
and produced over 3.2 million hl beer in 20011at its four
breweries says Beer Insights, a trade publication. According to
insider estimates, it had sales of over USD 50 million and could
be worth around USD 400 million.
Switzerland – Basle’s publicans annoy
Heineken with parallel imports
The beer wars between the Association of
Basle Publicans and the country’s major brewers Carlsberg and
Heineken have entered a new stage. In May 2012, the Basle
publicans began self-importing Carlsberg beer. As of September
2012, they will also self-import Heineken to protest against the
brewers’ wholesale prices for draught beer.
"We want to teach the cost drivers Carlsberg
and Heineken a lesson that we are not willing to tolerate their
price policies any longer," said Maurus Ebneter, the spokesman
of the Association of Basle Publicans. Through parallel imports
the association hopes to encourage other publicans to circumvent
the brewers’ official sales channels.
What has led to the new round of boycotts is
Heineken’s recent price increase. Heineken Switzerland, which
brews the domestic beer brands Eichhof
and Calanda, had announced in July 2012 that it would raise
prices by an average of 3.9 percent as of October.
Heineken only followed its competitor Carlsberg, whose local
unit, Feldschlösschen, had announced a few months previously a
price increase of 4.4 percent. Outraged, the Association of
Basle Publicans lodged an official complaint with the country’s
competition authority, Weko, in February this year.
Price increases in lockstep have been an all too familiar game
in Switzerland. Between 2007 and 2012 Carlsberg and Heineken
have raised their wholesale prices by more than 20 percent
Switzerland – Cantons bicker over Carlsberg
relocating its procurement division
When Carlsberg announced at the end of
2011that it was establishing in Switzerland a centralised supply
organisation for Europe, incorporating group procurement, supply
chain and logistics functions, Swiss officials rubbed their
hands. The small country in the heart of Europe has received so
much bad press lately because of its banks that Carlsberg’s
decision was most welcome, as it signalled that Switzerland
still bested the rest of Europe when it comes to low corporate
Traditionally, low taxes have been one of the
key reasons for companies to set up shop in one of Switzerland’s
26 cantons (i.e. member states). Unfortunately, they are not
uniformly low, with some cantons having much lower taxes than
That’s why Carlsberg’s announcement on 31
August 2012 to move its supply organisation to the town of
Ziegelbrücke, canton Glarus, was met with scorn by Swiss
officials in canton Aargau, where Carlsberg has a major brewery
in the town of Rheinfelden. The two towns are only 140 km apart
- Rheinfelden lies 70 km to the northwest of Zürich and
Ziegelbrücke 70 km to the southeast of Zürich - but in Swiss
terms that’s worlds apart.
Belgium - The media and the silly season:
let's talk about raising beer prices
Beer price hikes are a non-issue but this has
not stopped Belgian media from making them an issue. For several
years now, it's been like this in Belgium. Preparing for the
long summer months, when the business of politics grinds to a
halt, hacks will go through their archives, wondering if there
is some kind of staple issue that could be taken up again to
fill their pages and TV hours with news. What do they invariably
discover? The issue of higher beer prices. There may be nothing
to this story but this does not prevent journalists from
doggedly pursuing it.
Same this year. On 23 July 2012 someone from
Brasserie du Bocq, a small brewery from the French-speaking part
of Belgium, gave an interview to a national newspaper, saying
that they may have to raise beer prices this year because of
higher costs - giving the usual explanation (which consumers
cannot verify) that barley crops have suffered in the recent
The Belgian hacks sensed a scoop, blissfully
ignorant of the fact that in the world's major barley growing
regions weather conditions have actually been quite good with
yields and qualities well above average (said the Swiss trader
Evergrain on 24 August 2012).
Without any further research, the journalists
followed du Bocq's line of argument and insinuated that all
brewers in Belgium could raise prices this November.
Although Belgium's major brewers AB-InBev and
Alken-Maes, who together control about 80 percent of the market,
have refrained from responding to the allegation that they will
in fact do so, the media would not let go of the story, which
again flared up nationwide at the end of August.
In a free economy, where the government does
not set prices for certain staples like beer, raising the price
of beer each year should be considered normal, yes, normal and
legitimate business practice. It's one means - not the only one,
but one among several - to secure a company's future vis a vis
higher cost bases.
Of course, Belgian readers and viewers will
remember that this year AB-InBev was the first to raise beer
prices by 6 percent in March. Alken-Maes, owned by Heineken,
followed suit a few weeks later. Many smaller Belgian brewers
raised prices in July. However, several have not raised prices
at all this year.
While it is true that between 2006 and 2012
beer prices in Belgium have gone up by about 20 percent, it is
equally true that wages and pensions have risen too over this
period - something the hacks failed to mention.
One should bear in mind that Belgium is one
of the few countries in western Europe that still has an
extensive automatic index-linking for setting wages. This means
that pay and social security benefits are linked to the consumer
price index. Belgium’s measure for wage indexation -- the health
index -- excludes tobacco, alcohol and motor fuels, but it
includes home heating oil, gas and electricity, Bloomberg
reported. The link is intended to prevent the erosion of
purchasing power by inflation.
The interesting aspect to note in this debate
is the following: beer prices still seem to stir public emotion.
I wonder: why is there no consumer outcry if Coca-Cola raises
Denmark - Carlsberg and unions work together
to combat the exploitation of "beer girls"
The working conditions of "beer girls",
euphemistically called "beer promoters", are a disgrace.
Although NGOs have long criticised how beer girls are being
exploited, especially in Asia but also in Africa, it has taken
Carlsberg and the Danish trade unions until this August to come
to some sort of agreement on how to better work together to
materially improve the conditions of beer promoters in Cambodia.
Never mind that beer girls have a tough life
in many markets, it was the Cambodian girls' plight that alerted
international NGOs to action. In a statement of 23 August 2012,
Carlsberg said that "working in bars, women sales promoters in
Cambodia are occasionally exposed to harassment from customers,
coerced into drinking, and in some cases, subjected to sexual
abuse." "Occasionally"? "In some cases"? Well, it's all a matter
Singapore - ThaiBev hikes F&N stake to
Oh, oh, it does not look good for Heineken
and its plans to buy out Fraser & Neave's stake in Asia Pacific
Breweries. On 28 August 2012 Thai Beverage (ThaiBev) said it has
raised its stake in Singapore conglomerate Fraser & Neave (F&N)
to 29 percent, just below the 30 percent level that would
trigger a mandatory offer for the whole company.
ThaiBev, controlled by Thai billionaire
Charoen Sirivadhanabhakdi, said it had bought another 2.6
percent stake in F&N for USD 252 million. This brings its
interest to 29 percent. If it hits 30 percent, ThaiBev will be
obliged to bid for all of the Singapore conglomerate.
ThaiBev is a key shareholder in F&N, along
with Japanese brewer Kirin.
A few days previously, the board of F&N had
said it plans to distribute USD 3.2 billion to shareholders if
an offer by Dutch firm Heineken to buy its stake in Asia Pacific
Breweries (APB) is approved. The cash distribution represents 84
percent of the gains after transaction costs, it was reported.
Denmark - Carlsberg's operating profit in
Whose figures do you trust more? Carlsberg
reported that the Russian beer market grew 2 percent in the
first six months of 2012 while Russian media said that beer
consumption was down 0.3 percent to 51.8 million hl
year-on-year. Be that is it may, there is worse to come. Beer
consumption is expected to drop sharply in the first quarter of
2013, when beer sales by kiosks will be banned, while excise
duties will go up 33 percent.
Market observers have pointed out that the
impact of new regulations on the Russian beer market has yet to
be felt, since some producers refrained from increasing prices
until the high summer season. Once tighter regulations are
enacted, consumers are expected to switch to vodka, which is
viewed as a cheaper and more accessible product.
USA - Cashing in on the craft beer boom
About a year after paying USD 38.8 million to
acquire the long-established Chicago craft brewer Goose Island,
AB-InBev plans to roll out its beers nationally as of November
Even before buying out Goose Island's founder
John Hall, Anheuser-Busch had a distribution agreement with the
brewer. Moreover, six years ago, the then Anheuser-Busch had
bought a 40 percent stake in Goose Island, which had been
strapped for cash to fund a brewery expansion.
As could be expected, the full takeover of
Goose Island was met by cries of derision by Chicago's beer
lovers. But do they matter? Or rather, will the rest of the U.S.
care that AB-InBev now fully owns Goose Island?
Australia - Coca-Cola Amatil partners with
It's been all over town that if Coca-Cola
Amatil (CCA) wanted to re-enter the Australian beer scene, it
was only through a partnership with the newly opened Casella
brewery. Lo and behold, in August 2012 the beverage giant CCA
and the beer industry newcomer announced that they have set up a
The company behind the Casella
brewery is the privately-owned wine company Casella, better
known for its international wine brand Yellow Tail.
Casella made a bit of a splash in
June this year when it launched its beers Arvo 51 and 34.
Under the terms of the agreement,
CCA will lend AUD 46 million to a joint
venture vehicle, Australian Beer Company, to double brewing
capacity to 500,000 hl at its winery near Griffith in
south-western New South Wales. This loan will convert to a 50
percent stake in the business on 16 December 2013 when CCA’s
non-compete clause with SABMiller expires.
Australia - Lion's boss Murray succeeded
by ex-Nestle man
Media called him the "Lion King", probably
for his proven staying power at the helm of Australia's brewer
and dairy company Lion. But in February 2012 Kirin-owned Lion
said that its CEO Rob Murray, 51, would step down next year
after eight years spent running the consumer goods giant.
Mr Murray came to the job from Nestle and has
seen Lion through the integration of National Foods, the
acquisition of Dairy Farmers and Lion’s takeover by Japan-based
Lion did not give any reason why Mr Murray
was leaving. Did he not fancy running a beer-to-dairy company?
Or did he think that a decade with Lion was enough for a
In any case, pundits did get it wrong who
would succeed Mr Murray. Most market observers thought Lion
would go for an internal candidate from its beer division.
But no. Lion in August 2012 announced that
the Nestle man Stuart Irvine will take over the role in January
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