Beer Monopoly




    International Reports







Posted September 2013

Ethiopia - Brewers turn to government for loans

Why have all the country's established brewers and upstarts asked Ethiopia's state-owned bank CBE for multi-billion loans, in the local currency birr (ETB), that is? This interesting - but perhaps minor - detail was brought to light recently by Ethiopia's lively blogosphere. Among the loan-seekers, Ethiopian sources say, are Heineken (which owns two breweries and builds a third), Diageo, Habesha, Raya, Zebidar and BGI.

These loans are said to go towards the construction of new breweries or the expansion of existing ones.

Although Diageo and a few others have not admitted as to how much money in loans they seek from the government, the previously confirmed and granted loans add up to roughly ETB 5 billion by our count. That's USD 265 million.

That's all fine and dandy. But still, why ask the government for help at all? Well, there are several reasons for this. It will be remembered that through the privatisation schemes, the Ethiopian government in 2011/2012 pocketed some USD 380 million from the sale of three breweries. Read on


Nigeria - Beer is good for you, but Alomo Bitters is even better

If the blogosphere is right, an alcoholic bitter by the name of Alomo has been biting into brewers' sales. Originally from Ghana, the Jägermeister-clone was only introduced into Nigeria in 2010. Yet, it posted a booming 56 percent volume growth in 2012 according to Euromonitor because the herbal bitter allegedly "promotes vitality in men". I am sure readers will get the drift.

While such virility associations would have faced a heavy handed regulatory clampdown across the majority of western markets, says Euromonitor, a market research company, Alomo Bitters is hitting all the right buttons in Nigeria where a word-of-mouth driven aura of "performance enhancement" can serve as a boon to sales.

Trouble is, Nigerian consumers like to mix Alomo Bitters with non-alcoholic beer. Therefore, sales of lagers and stout have suffered in 2012 whilst non-alcoholic beer gained, Euromonitor reported in August 2013. Read on


Kenya - EABL's profit drops on higher costs and interest payments

Kenyans rubbed their eyes when East African Breweries (EABL), in which Diageo owns a 51 percent stake, released its full year results (end June 2013) in August and posted a 38 percent drop in profit. That was worse than many had expected. And it came despite volume growth of 3 percent, net sales growth of 6 percent and 0.2 percent growth in operating profit before finance costs and exceptional items.

What had happened? Apparently, cost of sales grew 10 percent to KES 31.6 billion (USD 361 million), the brewer reported on 23 August 2013.

The higher cost of sales was a result of higher energy prices, increased warehousing and distribution expenses and a "significant increase in import charges going into Tanzania", Finance Director Tracey Barnes told media.

What was not really emphasised by EABL's management was that profit was weighed down mainly by a surge in financing costs. In November 2011, EABL had to take out a KES19.5 billion (USD 225 million) loan from Diageo to buy a 20 percent stake in Kenya Breweries from SABMiller, while selling a similar shareholding it held in Tanzania Breweries to SABMiller. Read on


India -Can India bridge the gap between beer and barley?

The answer is probably yes, provided maltsters dare invest in India. After two months of India-bashing by global financial media, this seems however increasingly unlikely. Still, Rabobank, in a recent report ("Mind the gap: Can India bridge the gap between beer and barley", published August 2013), anticipates malt production will increasingly move to these new markets in emerging regions, with India a likely candidate as a regional hub.

Why should maltsters look to India? Rabobank argues that global beer producers are faced with a conundrum. On the one hand, global beer production has shifted to emerging markets, where demand is growing at twice the rate of developed markets. On the other hand, agro-climatic circumstances limit where barley can be grown, with the bulk of production remaining in Europe.

Currently, Europe and North America account for over 60 percent of the world’s malt production capacity of 24.5 million tonnes. Asia Pacific, the largest and the fastest growing beer consumer, has just 21 percent of malt production, of which 80 percent is concentrated in China.

Rabobank says that, in an attempt to balance the demand and supply situation, brewers and maltsters may single out India as both a buyer and supplier of strategic importance in the evolving global malt supply chain. In India, malt demand from Indian breweries has shown robust growth, driven by the rising penetration of beer amongst Indian consumers. Rising demand from both brewers and other malt users is likely to require additional malting capacity by 2016/17.

"India offers several tactical advantages to global maltsters and brewers evaluating investment in malt capacity in emerging Asia", explains Rabobank analyst Sudip Sinha. "First, the availability of domestic crops provides access to competitive malting barley. Second, India has an established but growing local product demand base. Furthermore, due to its strategic location between Middle East and Africa and South East Asia, capacity enhancement along the ports will facilitate targeting of malt demand across the South-South trade corridor [between developing countries in Asia, Africa and Latin America]."

However, India's economy stands in disarray. As the New York Times wrote on 5 September 2013, the recent economic decline has laid bare chronic problems: An antiquated infrastructure, a sclerotic job market, exorbitant real estate costs and bloated state-owned enterprises never allowed manufacturing, especially manufacturing for export, to grow strong."

What do export-oriented maltsters need above all: a good infrastructure and affordable industrial real-estate near ports. On both accounts, India rates exceptionally badly.

According to the New York Times, "poor infrastructure has driven up costs for industrial real estate in India, which are high compared with China's. Just in the last five years, China has opened 5,800 miles of high-speed rail routes and 400,000 miles of highways of two or more lanes. That has allowed tens of thousands of factories to move to smaller towns in the interior with much lower land costs."

"India has been unable to open up its interior the same way, building half as many miles of highways over the same period and no high-speed rail routes. At the same time, rent control and other land regulations make it extremely difficult to tear down and replace even the most dilapidated buildings. The acute shortage of real estate less than a day's drive from ports has produced steep real estate prices and rents."

Sensible as Rabobank's strategic musings sound, maltsters may continue to give India a wide berth in years to come, if only for those two - but major - objections.


Germany - July brought some relief to anguished brewers

Good summer weather during the month of July 2013 has brightened up the mood amongst German brewers. Compared with the previous month, beer sales rose 11.9 percent. But during the January-to-July period, beer sales still declined 2.2 percent over the same period 2012.

It's too early to say if this will be an average year - with declines of around 2 percent - or a rogue year, statistically speaking.

According to figures released by the German Brewers' Association, Germans on average drank 107.3 litres of beer in 2012 (2 litres less than 2011), 20.8 litres of wine (-0.2 litres), 4.2 litres of sparkling wine (no decline here) and 5.5 litres of spirits (flat).

Consumption of mineral water stood at 143.4 litres as in the previous year, while fruit juices saw a decline of 1.0 litres to 33.8 litres per capita. Consumption of soft drinks rose 1.4 litres to 123.9 litres per capita. Coffee remains the national drink of choice: hot drinks rose to 317.5 litres (+ 2.7 litres).

All in all, per capita consumption of beverages was 756.4 litres in 2012, up 0.4 litre over 2011.


USA - Miller Fortune versus Bud Platinum?

Is SLOW the operative term for brewing behemoths? It has taken MillerCoors, the number two brewer in the U.S., a full two years to answer Bud Light Platinum with its own more alcoholorific line extension called Miller Fortune. Miller Fortune's alcohol content is to be a bit higher than its competitor's, although both are aimed at "millennial males" (those born after 1980) and hope to steal share from fast-growing spirits brands.

Miller Fortune, which is to debut early next year, will have 6.9 percent ABV compared with 6 percent ABV for Platinum, it was reported. Fortune will be priced similarly to Platinum, whose average price is USD 26.17 per case compared with USD 20.11 for regular Bud Light, according to IRI.

MillerCoors confirmed the launch in a memo to distributors in August 2013. The beer will come in an all-black bottle with an embossed design. Bud Platinum is sold in cobalt blue bottles. Read on


United Kingdom - BrewDog ahead of crowdfunding target

Like Swiss microbrewers, the Scottish brewer and pub operator, BrewDog, has shown the finger to banks and turned to crowdfunding in an effort to raise money for its ambitious expansion schemes.

Crowdfunding is the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organisations.

On 4 September 2013 BrewDog reported that in about ten weeks they had raised GBP 3 million (EUR 3.6 million) of their GBP 4 million funding target. Their Equity for Punks scheme has seen 42,000 shares made available for GBP 95 each. The money is to be used to expand BrewDog's bar and brewery operations.

BrewDog co-founder James Watt was quoted as saying: "Raising GBP 3 million in just two months demonstrates the epic support behind the craft beer revolution. We are now well past our previous record of raising GBP 2.2 million in 2011, and fast approaching our GBP 4 million target, with over 10,000 individual investors now owning shares in BrewDog." Read on


United Kingdom - Controversy over latest issue of The Good Pub Guide

It must be the silly season. Or why has it not taken very long for the latest edition of the UK pub-goers’ Bible to become controversial?

When The Good Pub Guide 2014 was published at the end of August, its editorial comments about the industry immediately caused a storm of protest.

According to the guide, which is edited by Alisdair Aird and Fiona Stapley, up to 4,000 pubs across the country will close in the next year. The editors forecast that between 2,500 and 4,000 of the 49,500 public houses in the UK will be forced to shut and even say it is "high time that they closed their doors" to make way for more energetic and dynamic new licensees.

The reason they should shut down is that they are "stuck in the 1980s" and offer indifferent drink and food. While the closures may be bad news for staff and customers, it was high time that "bad pubs" went out of business, giving visionary and energetic licensees a chance to open new ones.

Luckily, the guide predicts that more than 1,000 new pubs will open next year, often in former hostelries that have been shut for years.

More than 4,700 pubs are featured in The Good Pub Guide and those with full entries are required to pay a fee, which helps to cover research and production costs. To buy a copy of the guide costs GBP 10.

The guide’s callous stance has not only been attacked by licensees, who said it was a "sweeping statement" to dismiss pubs that are forced to close as "bad pubs".

Also Roger Protz, editor of the Campaign for Real Ale’s 2014 Good Beer Guide, publically criticised the editors, calling them "absolutely heartless". "The editors were clearly trying to create quick headlines to sell their book and they have been successful, but they are not helping their own industry. I find that morally repugnant, saying pubs deserve to close when they are talking about people who will lose their jobs, premises and livelihoods," Mr Protz told media.

He added: "How bizarre that a book called the Good Pub Guide should welcome the closure of as many as 4,000 pubs. Pubs need to be saved, not thrown on the scrapheap."

According to CAMRA's estimates, over 1,000 pubs are likely to shut down this year.


Germany – Is there a logic behind Germany’s alleged beer cartel?

After the flour cartel, the coffee cartel, the chocolate cartel, the potato cartel and now the beer cartel, it’s kind of hard to dispel the impression that the German food industry is a hotbed for illegal activities and that it’s only thanks to the Cartel Office’s prying eyes and severe crackdowns that unsuspecting consumers aren’t screwed by big and cunning corporations.

While investigations into the potato cartel and the beer cartel are still on-going, eleven manufacturers of confectionery were fined EUR 60 million (USD 80 million) this year for illegal price fixing. Also this year, 22 flour mills were penalised EUR 65 million over accords. Still, the highest fine for collusion to date was slapped on three coffee manufacturers in 2010: EUR 160 million (USD 211 million).

All these penalties pale next to the EUR 380 million that cement producers had to cough up, or the EUR 240 million that the manufacturers of liquid gas were forced to hand over for similar offences.

But as few Germans shoppers regularly buy cement, they can be forgiven for thinking that the only place where they are systematically and impudently charged more than they should be is at the supermarket till.

Strangely enough, this may not be quite true in the case of beer, where the German anti-trust watchdog is said to have found evidence that almost a dozen major German brewers and 24 brands colluded over prices “for decades”.

Actually, if you were to look at the development of the weighted overall average price for a crate of 10 litres of beer - on which rest the trustbusters’ watchful eyes - you can see that between 2003 and 2012 it declined by 5 percent. Read on


Russia – Retailers push private label beers

Retailers’ mind-sets never fail to baffle. Viz Russia. Why several of the country’s leading retail groups decided to sell their private label (PL) beers in these controversial big plastic bottles is beyond me. Why not offer PL beers at both ends of the price range as the British retailer Tesco does with its “Tesco Finest” and “Tesco Everyday Value” ranges?

Besides, wouldn’t the ban on kiosk sales as of January this year have driven enough traffic through the retailers’ doors to make such a two-thronged policy viable? Kiosk sales accounted for one third of overall beer sales, it was reported. From what we hear, the ban has not been fully enforced yet. But gradually punters will have to migrate towards what is called the modern trade (ie supermarkets) or they will be left without their beer.

So far, the Kremlin's campaign against alcoholism through new regulations and higher taxes has been successful, considering that in 2012 the beer market went flat following years of decline. Across the industry, sales have dropped 20 percent by volume since 2010 as per capita consumption slipped 13 percent due to rising prices.

However, one segment to grow was private label (PL) beers. PL beers have been rising in popularity since their first appearance on the Russian market in 2007. While initially attracting consumers through their competitive prices, PL beers also managed to gain a reputation for quality. Nevertheless, it was the almost total ban on beer advertising (including TV, mass media, the internet and outdoors) which stemmed the influence of big brands and paved the way for the lesser known PL segment to increase by almost 150 percent over 2011. Read on


Russia – The outlook is grim

So is this the end of the BRIC era? That’s a question global brewers’ strategy departments will have to find an answer to. What is certain is: Brazil’s, Russia’s, India’s and China’s growth rates are slowing. This is not the beginning of a bust. But the "Great Deceleration", as The Economist quipped at the end of July 2013, will be having its effect on beer consumption.

In China and India we may have seen the last of high annual growth rates, while Brazil’s and Russia’s beer markets may turn flat or continue to decline respectively. Forecasts say that Brazil’s beer industry will be either stagnant or show a single-digit decline for the year. The situation is worse in Russia, where Carlsberg, the market leader and owner of Baltika, projects the market to decline mid-single-digit after reporting a 7 percent drop in the first half. Read on


Australia – Coca-Cola Amatil to partner with Molson Coors and C&C Group

So this is the announcement we have awaited for two years: Coca-Cola Amatil’s (CCA) return to the Australian beer industry with a line-up of aspirational international beer brands.

CCA’s boss Terry Davis repeatedly had said that he may poach brands from rival brewer Lion, which holds licences for the Heineken, Stella Artois and Beck’s brands, and distributes Budweiser and Corona – the major-selling premium imported beer. Lion itself successfully nicked a slew of brands, including Corona and Stella, from Foster’s after it was taken over by SABMiller in 2011.

After all those winks and innuendos, the suspense got almost too much to bear. So imagine the surprise when CCA announced on 20 August 2013 that, as of mid-December 2013, they will handle Molson Coors' premium brands in Australia. In addition, CCA will distribute C&C brands including Gaymer's cider in New Zealand and the Pacific region.

It is unclear exactly which of Molson Coors’ brands will be introduced to Australia. The Molson Coors range of beers includes Coors Light, as well as craft beer brands such as Blue Moon and premium European brands such as Staropramen.

Gorblimey. That’s what I call an anti-climax. Whether it was intended or not, I am not sure. Still, the media build-up to this announcement was like sitting through 45 minutes (plus commercial interludes) of a mystery show on TV only to be told at the end, as the credits start rolling, that all the clues should have pointed to some character with no lines to speak in the whole episode. In media speak: it was all high concept but low execution.

As, a trade news site, commented: "The partnership with Molson Coors was not the high profile announcement that had been widely anticipated."

A source quoted by said: "My gut feel is that they were hoping to launch with Corona or Heineken, which have existing volume, cut-through and brand equity, but it didn't eventuate." Another source was even more scathing in its criticism: "They talked a big game and haven't really delivered." Read on

Denmark - Brewery wild cat strike put draught beer supplies at risk

Err - what was that? Carlsberg's brewery workers went on strike in mid-August, not because they had fallen out with their bosses. No, they went on strike because a new employee had refused to join their union, 3F.

The strike was called off on 23 August after nine days when a court gave Carlsberg the right to fire the 130 striking employees unless they returned to work. Read on

Switzerland - Heineken loses Managing Director

Here today, gone tomorrow. After merely 18 months on the job, Heineken's Managing Director in Switzerland, Roger Basler, 48, has left the brewer to join the Swiss manufacturer of kitchen and bathroom appliances, Franke, in October 2013. Mr Basler's departure was announced on 27 August 2013.

While Heineken runs two breweries in Switzerland and employs about 900 people, the Franke Group is a CHF 3 billion (USD 3.2 billion) turnover company with 8,000 employees in 40 countries. Mr Basler is to become the new head of the Washroom Systems division.

Before Heineken, Mr Basler worked for Red Bull in Switzerland and Dyson, the manufacturer of vacuum cleaners.

As with all small countries, due to a dearth of home-grown top-notch managers, executives tend to job-hop more than elsewhere. But perhaps Mr Basler's tenure was brief due to other reasons, as some market observers commented. Read on


Netherlands - Heineken's first-half profit falls to EUR 679 million

Poor spring weather in Europe led to weak second-quarter revenue, Heineken said on 22 August 2013. The brewer predicted that earnings this year won’t grow as consumers curb spending.

The second quarter was "clearly below" company expectations "and that will have an impact on total outlook for the year", the brewer said.

Group beer volume fell 3 percent in the first half, led by an 8 percent decline in western Europe after an increase in French beer taxes and a prolonged spell of cool weather.

The company said it expected no organic growth this year in net income.

First-half profit fell to EUR 679 million from EUR 688 million a year earlier, the brewer reported.

Still, Heineken raised its cost-saving target to EUR 625 million between 2012 and 2014. It had previously forecast reductions of EUR 525 million.

Many wonder: where Heineken will find those extra EUR 100 million in cost savings? Can they still cut so much slack?



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