November 2021

Data firm IWSR says that total beverage alcohol volume across the Asia Pacific region dropped 8 percent in 2020. It forecasts that only by 2025 will volumes return to pre-covid levels. Observers wonder for how long the Chinese government will pursue its zero-covid policy, which involves strict lockdowns, extensive testing, robust contact tracing, quarantine mandates – and keeping most foreigners out. No one knows when China will reopen: next year, or even later? As Diageo’s investment shows, China can shut itself off completely and still have a very big and attractive domestic market.

In early November, drinks company Diageo broke ground on its first, USD 75 million whisky distillery in China. It hopes to turn more local drinkers into whisky lovers, in a market that has long been dominated by baijiu makers like Kweichow Moutai. The British firm, which also makes Johnny Walker whisky, expects to complete construction of the distillery-cum-visitor centre in Eryuan County, Yunnan province, in 2023. The distillery will produce Diageo’s first Chinese-origin, single malt whisky, which could hit the market in 2026 at the earliest.

Competition in China’s premium beer segment is intensifying. The country’s beer production has been on a downward slope since 2013. In 2020, domestic beer output stood at 341 million hl, which is a 7 percent decline over 2019. If this downward trend continues, the market leader, China Resources Beer, which makes Snow beer, will be lucky to achieve flattish volume sales, observers say.

Thailand has reopened to vaccinated tourists but most bars remain shut, which does not spell good news for tourists hoping to let their hair down. The BBC reported that the coronavirus pandemic has hammered Thailand’s economy, which would previously attract 40 million tourists a year, contributing up to 20 percent of GDP. In 2020, when travel abruptly halted, the country lost about USD 50 billion in tourism revenue.

Due to lockdowns in Sydney and Melbourne Australia’s largest family-owned brewery, Coopers, saw its draught beer volume tumble by 8 percent in the July-to-October period. Packaged beer sales could not offset the slide during those extended lockdowns. This dire state of affairs came after Coopers, on 8 November, reported that it had defied the first year of the pandemic by posting a sales volume of 823,000 hl beer in the 12 months to 30 June 2021, up 2.8 percent over the previous financial year.

Coopers’ domestic rival Lion (owned by Japan’s Kirin) has agreed to purchase US craft brewer Bell’s. Michigan’s Bell’s Brewery, which was among the first wave of craft breweries in the 1980s, ranked seventh on the list of top US craft breweries in 2020. Bell’s will be operated by fellow US craft brewer New Belgium, which was acquired by Lion/Kirin in 2019. The Chicago Tribune newspaper said that Bell’s founder, Larry Bell, 63, began exploring a sale in January this year, fuelled in part by his falling ill with cancer last year. Terms of the sale were not disclosed. The firm is estimated to produce nearly 600,000 hl beer this year. New Belgium is on pace to sell about 1.3 million hl beer.

Stone Brewing’s Napa taproom and brewery was closed at the end of October, after a judge gave its landlord the power to evict the firm. Almost 40 people lost their jobs. Reportedly, Stone failed to make rent payments during the covid pandemic, although its Napa venue operated without any restrictions. This did not go down well with the judge, and he upheld an eviction order, which Stone had contested.

It must have been a tough decision to take: Boston Beer, the maker of Truly hard seltzer, threw away excess stock, instead of discounting it. This was in response to a category-wide sales slowdown. For the past quarter, Boston Beer reported an unexpected loss of USD 4.76 per share, although revenue of USD 562 million topped projections of USD 532 million. Still, the firm’s bottom line was hurt by USD 102 million in direct costs related to the hard seltzer slump, as well as USD 31 million in indirect costs.

At long last, Heineken said it will buy South Africa’s Distell and Namibia Breweries. Provided the plan receives shareholder and regulatory approval,Heineken in one fell swoop will widen and re-organise its interests in southern Africa. Distell is Africa’s leading producer and marketer of ciders, RTDs, wines and spirits, and NBL is the beer market leader in Namibia. Once the deals are completed, Heineken said it will contribute these assets as well as its interest in Heineken South Africa into a new company, which will be valued at EUR 4 billion (USD 4.6 billion).

The news came as South Africa’s brewers warned against another alcohol ban. They worry thatthe government could re-introduce prohibition, should a fourth wave of covid infections hit the country over the December holiday period. The previous four alcohol bans saw the brewing industry lose 161 days of trade since March last year, with a loss of approximately USD 2.3 billion in tax revenue and a loss of USD 700 million in excise revenue.

Russia’s major alcohol retailer announced and scraped its IPO within days. Observers rubbed their eyes.Mercury Retail Holding, the largest ultra-convenience store operator in Russia, announced on 26 October it would list on Moscow’s stock market. Trading would begin on 10 November. On 3 November, the offer was priced at USD 1.3 billion, which would have given it a market value of USD 12 billion to USD 13 billion. But on 9 November it pulled out. No reason was given. The firm only cited unfavourable “market conditions”.

A cautious BrewDog also postponed its USD 2.8 billion flotation amid turbulence in the hospitality industry. James Watt, BrewDog’s CEO and co-founder, said a listing might not take place until 2023, after advisers and banks recommended that a delay would be prudent given pandemic-related issues facing the hospitality industry.

Beer sales continue to decline in Germany and the worst is not over yet. In the first nine months of 2021, German beer sales dropped 3.9 percent to 65.6 million hl, compared with 68.2 million hl in the same period in 2020. This year’s decline could be deepening, as during the first half of 2021, German brewers sold 2.7 percent or 1.1 million hl less beer than in 2020. If 2020 was a bad year, 2021 could be an even worse one. The fourth wave of covid-19 is hitting Germany at full force. There is talk of tightening restrictions once more as ICU units are filling up quickly. Some have called on Germany’s state governments to re-introduce local lockdowns.

The Munich craft brewer Crew Republic has bought itself back from AB-InBev only two years aftergetting into bed with each other. No financial details were disclosed. Reportedly, this decision was taken by mutual consent. The divorce will see Crew Republic manage its own distribution as of 1 January 2022.

After a strategic review, Coca-Cola Europacific Partners (CCEP) announced that it will withdraw from the Australian beer and cider market. Can it be the same company that only a decade ago made a big foray into beer, following a strategic review? So what has changed? A change in ownership. Coca-Cola Europacific Partners was formed in 2020, when Coca-Cola Amatil (CCA) sold itself to Coca-Cola European Partners, a big Coke bottler, for AUD 9.8 billion (USD 7.3 billion). In due course, Coca-Cola European Partners changed its name to Coca-Cola Europacific Partners. It has units across Europe and Asia Pacific, including Australia, New Zealand and Indonesia. The first asset to be put on the block will be the craft brewer Feral. The pioneering Western Australian brewer could fetch between AUD 50 million and AUD 60 million (USD 37 million to USD 45 million).

Australian craft brewer Southern Bay with a thirty-year history has collapsed into liquidation. Ithas been operating from the regional city of Geelong, 70 km south of Melbourne, for some 30 years. It was previously known as Geelong Brewing Company. Melbourne had been under lockdown for more than 270 days since March 2020, making it a world record.

A shortage of pallets makes Australian brewers fear for year-end sales. Some of the nation’s largest breweries have considered slashing production by up to 50 percent – a move set to cost millions – because there are not enough pallets for stock to be transported on. Beer supplies could be tight around Christmas, Australia’s peak selling season, and in the next year. The problem, which started overseas, is being driven by a timber shortage. On top of this, local covid restrictions have shut parts of the country’s manufacturing sector. Pallets are locked up in factories and not circulating around the economy. All this has disrupted supply chains, leading retailers to hoard the pallets that they have in order to give them to their preferred beer and beverage suppliers. As there is no liquidity in the system, other brewers are being rationed.

The UK freezes alcohol tax and introduces draught relief. In the Autumn Budget, the UK chancellor Rishi Sunak revealed sweeping changes to alcohol duty, which will reward lower-strength drinks. Mr Sunak’s five-point plan, which comes into effect in 2023, will see the number of bands, at which different duties are levied, cut from 15 to six. This simplified tax system will deprive the Treasury of GBP 555 million (USD 750 million) in revenue by 2027, it was reported- In a separate measure, the chancellor announced a “draught relief”, cutting the tax on drinks served from pumps, such as beer and cider, by 5 percent. The small brewers’ industry body, the Society of Independent Brewers (SIBA), pointed out that the cut only applied to products sold in kegs of 40-litres or larger, meaning craft brewers, which typically sell their product in 30-litre kegs or smaller, will lose out compared to large beer corporations.

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