Beer Monopoly




    International Reports







Posted September 2014

United Kingdom – AB-InBev hovers over SABMiller

What’s that supposed to mean? On Sunday 14 September 2014 Bloomberg news agency reported that, according to rumour, the world’s number two brewer SABMiller had approached the world’s number three, Heineken, with a takeover offer.

Bloomberg said that the offer was made in the past two weeks. However, late at night on the same day, Heineken issued a statement saying that it had turned down the offer because it intends to remain independent.

Heineken’s statement reads: “Heineken has consulted with its majority shareholder and concluded that SABMiller's proposal is non-actionable.”

Heineken’s largest shareholder is the Heineken family. The family itself has informed SABMiller of its intention to preserve the heritage and identity of Heineken as an independent company. “The Heineken family and Heineken’s management are confident that the brewer will continue to deliver growth and shareholder value”, the statement concluded.

That Heineken would rebuff SABMiller was to be expected. All of Heineken’s past deals were structured thus that the Heineken family would stay firmly in control of the brewer. Read on



Sweden – Exporting beer to Sweden: make sure your labels pass Systembolaget’s muster

In many respects, Sweden must be the most libertarian country in the world – but not when it comes to alcohol. Many of the rules and regulations in place to control (read: limit) the consumption of alcohol would have to be called ridiculous if the whole matter were not so critical.

Take beer. All serious beer purchases (that is beer with an alcohol content of more than 3.5 percent ABV) are limited to Systembolaget, which is a government-owned chain of liquor stores in Sweden. Although it functions like any retailer world-wide in how it selects its portfolio of brands, it also acts like a political watchdog when it comes to labels.

Explicit no-nos are labels that show alcohol in connection with work, sports, weapons, traffic, sexuality and children.

So far so clear, you’d think. But not when you walk down Systembolaget’s aisles. There you will find wine bottles, which should clearly have not been put on the shelf, if Systembolaget had taken its own rules seriously.

That’s why the Swedish newspaper Dagens Nyheter on 13 September 2014 ran a story which expressed its surprise over some of Systembolaget’s decisions: namely which labels were ok and which labels were not.

For example, a wine with a label featuring a bomb (“Boom Boom Syrah”) had been vetted acceptable, whereas the Bollinger’s James Bond Special Edition champagne (GBP 150 per bottle in the UK) had been pulled because the figure “7” in “007” had been made to look like a pistol.

Incidentally, Captain Morgan rum, whose well-known label features a pirate with a sabre, had been given the nod of approval whereas Renato Ratti’s Ochettis Nebbio d’Alba wine had been deemed offensive because it showed an 18th century soldier leaning on his musket. Can anyone explain, please, why a musket and a pistol are objectionable while a sabre and a bomb are not? One would have thought that all of the above can be deadly.

If you find this confusing, wait for this. When it comes to sexual allusions, the decisions by those in charge of policing labels in Sweden are hardly any more comprehensible. Systembolaget decided that a German white wine whose label featured a series of Andy Warhol-type lip-sticked lips was chaste whereas a Cote du Rhone which ran by the label “Wacky Chicks” and sported lipstick imprints of several kissers was lewd. Oh well.

You may say that it serves vintners right if Systembolaget rejects their funky labels. Alas, brewers can also fall through the sieve. Because its label showed railroad tracks, a pale ale by the Swedish Train Station Brewery was rejected as Systembolaget thought it alluded to drinking at work, which is taboo.

If the brewery had known this in advance, it probably would not have called itself Train Station Brewery but, say, Communication Junction with Public Facilities.

So craft brewers beware: If you plan to sell your beers in Sweden, make sure you understand Systembolaget’s regulations for labels.

Canadean, a market research company, says that the demand for imported beers has risen sharply in recent years and in 2013 stood at more than a quarter of all domestic sales (27 percent). In 1999 imports represented just 11 percent of overall beer sales.

Is this a handbag? You would not have believed that bag-in-a-box-packaging that trivializes alcohol like this would be ok with Systembolaget?



Ireland – Diageo officially opens new Dublin brewery

Diageo’s long saga of building a brewery in Ireland drew to a close on 10 September 2014 when it opened its new EUR 169 million state-of-the-art brewery at its old site at St James’s Gate in Dublin. The plant, dubbed the “biggest stout brewery in the world”, will produce approximately 6 million hl beer a year, most of which will be exported.

Speaking at the opening of Brewhouse No. 4, Diageo’s CEO Ivan Menezes described it as a great day for Diageo and for Guinness. He said the new brewery, which consolidates all brewing by the company in Ireland, as evidence of Diageo’s commitment to Ireland. Read on



Czech Republic – Heineken said to mull over the sale of Czech operations to Molson Coors

It’s a rumour only, but further consolidation of the Czech beer market would make sense. Czech media reported on 9 September 2014 that Heineken is in talks about selling its Czech operations to Molson Coors. Needless to say, both Heineken and Staropramen, the country's second biggest brewery which is owned by Molson Coors, declined to comment on the rumour.

Heineken is the number three brewer in the Czech Republic, which it entered in 2003 with the acquisition of Starobrno. In 2007, it bought the then German-owned Krušovice brewery (from Radeberger), increasing its market share to 8 percent. But even with the purchase of Drinks Union in 2008, Heineken's share has languished at around 13 percent.

Same with Molson Coors. It acquired Staropramen in 2012 when its then owner, the private equity-controlled brewer StarBev was sold for USD 3.5 billion. Staropramen’s market share is 18 percent. Read on



Germany – German wheat beer: how to kill a winner

Wheat beers have long enjoyed the highest prices for beer in Germany. They are the measure of how much Germans are prepared to pay for beer at the most. Now that AB-InBev is heavily discounting its national wheat beer brand Franziskaner, German brewers fear the whole price architecture for beer will collapse.

Talking to German brewers you could easily get the impression that relations between them and AB-InBev are somewhat strained. That’s hardly surprising: here you have the proud owners of family businesses going back generations, if not centuries, who can wax lyrically about brewing traditions and the quality of their beers, and there you have even prouder envoys of some distant Brazilian bosses, whose sentences are littered with acronyms like KPIs and COGS.

Cultural schisms aside, relations took a turn for the worse this year when it became known that AB-InBev had turned whistleblower in Germany’s ridiculously ineffective beer cartel, thus escaping a fine while plenty of German brewers had to stomach the grand total of EUR 340 million (USD 440 million) in penalties.

It did not help that the German news magazine DER SPIEGEL in July published a long story about AB-InBev, whose caption “Die Biermaschine” (“the beer machine”) already said it all: that AB-InBev’s business was finance-driven and beer merely an underlying product. Read on



Denmark - Major shareholder reduces stake in Carlsberg

You’d have thought that Carlsberg was merely one of several international companies doing business in eastern Europe – but now the brewer seems to have become the test case for how European companies are going to be affected by the new chill between Russia and the West. Carlsberg does about one third of its business in eastern Europe. Because of deteriorating market conditions, it was forced to lower its 2014 guidance twice already.

That’s not good and certainly not good enough for some money men. On 29 August 2014 Carlsberg said that the Oppenheimer Funds cut its stake in the brewer to 4.78 percent, from previously 6.42 percent. Read on

India – Ex-beer and drinks tycoon Vijay Mallya declared “wilful defaulter”

How the mighty have fallen. The state-run United Bank of India on 1 September 2014 became the first lender to declare Vijay Mallya a wilful defaulter, which in the world of business is the equivalent of a persona non grata. This declaration strips Mr Mallya of the right to borrow from the bank in future. He will lose director-level positions in companies. Criminal proceedings could also be initiated against him if warranted, Indian media report. Read on

UK – Students receive 15 percent daytime discount at all BrewDog bars

What’s the big news here? Bars and restaurants have always had various discount schemes – think Happy Hour - to bring punters through their doors. And why does BrewDog only allow students to benefit from the discount? Why not senior citizens too? They are usually hard up too.

You have to give it to BrewDog: they enjoy such high standing with the UK’s media that even a minor PR exercise is treated like big news. Viz their latest offering of a trial 15 percent discount on all food and drinks in all of its UK bars on weekdays, Mondays to Fridays between 12 and 5pm. Read on


Poland – A cider a day will keep the Russian bear away

A Polish Minister has an idea: What to do with excess apples? Well, turn them into cider. In its spat with Europe over sanctions, Russia on 1 August 2014 officially closed its borders to Polish fruit and vegetables, depriving farmers and exporters of a market worth more than EUR 300 million last year.

Apples accounted for nearly 90 percent, with Poland having recently overtaken China as the world’s largest exporter of the fruit. The Polish Ministry of Agriculture said over a third of Poland's annual apple production of 3million tons is sent abroad, with around 700,000 tons going to Russia alone.

Moscow blamed “repeated sanitary infringements by Polish farmers” for its import ban on apples. This spurious justification is nothing new. In 2006, when Russia wanted to punish upstart members of its ex-Soviet backyard like Georgia and Moldova for “going west”, it imposed import bans on their popular wines.

In the light of these, Russia’s recent embargo on Polish apples and veggies is widely seen as a tit-for-tat because Poland is a staunch supporter of the Ukraine in its fight against pro-Russian separatists and Warsaw has pushed within the European Union for tougher sanctions on Russia.

Polish farmers are sure to take a hit, although Poles, in reaction to the ban, have set up their own social media platform to urge fellow countrymen and –women to eat more apples, using the tagline 'Eat Polish Apples' #jedzjablka. On Twitter prominent faces can be seen eating the fruit.

The Polish government, in an effort to limit the fallout on the coalition that includes the Peasants' Party, is scrambling to support the farmers. Marek Sawicki, the Minister of Agriculture, said in early August that he would ask the government to scrap taxes on cider production until the end of the year and talk to the Ministry of Health about lifting a ban on cider advertising.

From what we hear, the Ministry of Agriculture is pushing towards the possibility for advertising cider, in the same way as beer. However, the Ministry of Health is against this proposal. It is believed they will have to reach an agreement somehow, but this requires a change to the law on the prevention of alcoholism, which could be tough.

When it comes to taxation, market observers say that the Polish government could easily change the rate to 0 (and not suspend the taxes) like it is done in many other European countries (e.g. Spain, Austria, Portugal), thanks to an EU directive.

At the moment, there is an internal “battle” raging among different ministries (Finance, Economy, Agriculture, Health) over the appropriate measures to the ban. But once the Russian embargo makes a more palpable impact in the coming weeks, more concrete decisions will be taken.

Cider accounted for less than 1 percent of the country’s alcohol sales last year, even after almost tripling to about 20,000 hl from 2012. Poles drank 37 million hl of beer and 264.3 million litres of vodka in 2013, according to the International Wine & Spirit Research in London.

Even without the tax suspension the country’s cider production could surge to over 100,000 hl this year, according to the Warsaw-based Polish Council of Winemaking.

It seems that growth in the cider category will come for sure. The question is the scale, and this will again depend on the availability and “mood for cider”.

Russia – Carlsberg hammered by falling Russian beer sales

Is this the answer? Carlsberg, whose Baltika unit is Russia’s biggest brewer, plans to fill some bottles with less beer and make others smaller in order to limit price increases amid political upheaval, its CEO Jorgen Buhl Rasmussen said on 20 August 2014.

Two days later, Russian media reported that the Danish brewer plans to close one or two breweries (out of ten) in the country – but not its St Petersburg brewery which is its largest and one still believed to run profitably.

Only in June, Isaac Sheps, President of Baltika and Senior Vice President Eastern Europe of the Carlsberg Group, had told Russian media that Carlsberg will keep its breweries in Russia running even at reduced capacity, while other brewers were closing plants.

So what’s happened between June and August? Sales at the Danish brewer have been hit badly by falling consumption in Russia and Ukraine. Carlsberg said Russian beer volumes – which account for more than a third of its business – fell between 6 and 7 per cent in the second quarter. Read on


United Kingdom – SABMiller appoints Rio Tinto's Du Plessis as chairman designate

The South Africa born Jan du Plessis, 60, is set to become chairman of two big global companies at the same time when he takes over the role at brewer SABMiller next year in addition to his current position at miner Rio Tinto.

The Anglo-Australian Rio Tinto, with a market value of USD 104 billion, is the world’s second-largest mining company behind Anglo-Australian BHP Billiton at USD 173 billion (estimates: statista).

Mr Du Plessis will succeed John Manser as chairman, following SABMiller’s annual shareholder meeting in July 2015, the brewer announced in August 2014.

Amongst the expertise Mr du Plessis brings to SABMiller is deal-making. The mining industry, traditionally, has been very much into M&A as a route to growth. In 2011 alone, there were over 2,600 deals completed, says PWC. As the Wall Street Journal reminds its readers, Rio Tinto has unfortunately been the poster child for huge investments that went bad, from its disastrous USD 38 billion acquisition of Alcan in 2007 to its 2011 purchase of Riversdale Mining for USD 3.7 billion. In July it sold off Riversdale’s coal-mining assets—bought on Mr du Plessis’s watch—for just USD 50 million.

Market observers concur that big acquisitions are likely off the table at Rio Tinto and other big miners for some time, which would give Mr du Plessis an opportunity to familiarise himself with the brewing industry, of which he has no prior knowledge. Read on


Namibia – SABMiller’s new brewery up and running

After importing beer into Namibia for over 20 years, SABMiller finally in mid-August 2014 had its own brewery up and running. It’s located in Okahandja, 70 km north of the Namibian capital Windhoek. SABMiller’s plan to launch a ground offensive in Namibia has endured a lengthy delay. The Okahandja project was initially set to enter construction phase in 2010 but seems to have been delayed by rezoning obstacles until 2013.

The installed capacity of the brewery is 260,000 hl per annum, which can be expanded to 400,000 hl. The brewery represents an investment of about USD 40 million. It is said to provide 100 fulltime jobs. Read on


Australia – It’s a tough market

Releasing its trading update for the half year ended 31 March 2014, Australia’s major brewer Lion announced on 7 August 2014 that across the entire group, revenue decreased 0.6 percent to AUD 2,674 million as Lion’s various businesses continued to face highly competitive market conditions. Read on


USA - What’s the difference between lagers? The label, apparently

A trial, conducted in Portland, OR, USA and recently reported under the title “Hide the Label, Hide the Difference?” suggested that, when tasting blind, beer drinkers were unable to distinguish between three different well-known European lager brands. Read on



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