April 2022

As the war in Ukraine drags on, western firms still doing business with Russia had better monitor Ukrainian foreign-office twitter accounts. A tweet by Ukraine’s ambassador to Germany, Andrij Melnyk, forced the German chocolate maker Ritter Sport to publicly justify why it refuses to pull out of Russia. This was not enough for activists, who continue to call for a boycott. His colleague, the Ukrainian ambassador to Denmark, Mykhailo Vydoinyk, was more successful. His threat of launching a global campaign against Carlsberg probably compelled the Danish brewer into a hasty retreat. Western firms may fear taking a public stance on their continued involvement with Russia, but this won’t solve their dilemma: take a hit to revenue or to reputation.

That was quick: Only days after Carlsberg said it was leaving Russia for good and sell its Russian unit Baltika (28 March), in response to Russia’s invasion of Ukraine, the Danish brewer allegedly received two offers. According to the Danish newssite berlinske.dk, the Russian producer of water and non-alcoholic beverages, Chernogolovka, and Israel’s CBC Group have come forward.

Baltika, Russia’s number to brewer, has eight breweries and employs more than 8,000 people. With a market share of 27 percent, Baltika had to cede its long-term market leadership to AB-InBev-Efes (30 percent) in recent years. However, it still produced 21 million hl beer in 2021.

Initially, the invasion caused Carlsberg to stop selling its namesake brand, stop investing and advertising in Russia. But Carlsberg was subsequently subjected to increasing criticism, especially when Ukraine’s ambassador to Denmark, Mykhailo Vydoinyk, announced a global campaign against the Danish firm. In the end, Carlsberg chose to put its Russian activities up for sale.

Meanwhile, Carlsberg has warned it will book a USD 1.4 billion writedown from the sale of its Russian business. The writedown does not take into account any external offers for the business, Carlsberg said on 22 April.

The Danish group has more exposure in to the market – at least in terms of revenue and profit contributions – than any other international brewer. In 2021, Carlsberg generated approximately USD 958 million in revenue (9 percent of total) and USD 100 million in operating profit (6 percent of total) in Russia.

AB-InBev, too, plans to exit Russia. It has started negotiations with its joint venture partner, Turkish brewer Anadolu Efes, that runs its operations in Russia and Ukraine. AB-InBev expects to take a USD 1.1 billion charge as a result. Heineken will also pull out of Russia in a move it said will cost it around EUR 400 million (USD 438 million). No news as yet, who could buy the business.

Although Russia’s hops imports have not yet been affected by Western sanctions, Moscow is becoming increasingly isolated from international trade. This must be the reason why Russian brewers fear they could be cut off from hops supplies. Most Russian-owned firms have enough hops to last them a few months but could run into serious problems in the summer if supplies were disrupted. Brewers have asked the agriculture ministry to help them find ways to replace imported hops in the next few years, Reuters reported.

Observers say Russian brewers had another reason to sound the alarm. They will remember President Mikhail Gorbachev’s sweeping anti-alcohol campaign in the 1980s, which made Mr Gorbachev very unpopular immediately. Maybe Russian brewers worry that the same fate could befall Russia’s current President, Vladimir Putin, should a lack of hops strain beer supplies?

Over in the US, craft brewer Stone won its lawsuit against Molson Coors but its financial future remains uncertain. After four years of legal wrangling and three weeks of trial, the eight-person jury’s decision, on 25 March, was unanimous, but the victory was not necessarily everything Stone may have hoped for. The jury ordered Molson Coors, the maker of budget beer brand Keystone Light, to pay Stone USD 56 million in damages. While not a crippling sum to Molson Coors, the payment will still hurt.

Stone had sought USD 174 million in lost profits and another USD 42 million in “corrective advertising” to reverse the damage from the Keystone rebrand. This added up to USD 216 million.

Molson Coors could still appeal the decision. In its statement, Molson Coors took another swipe at Stone, saying that the jury awarded Stone “a fraction of what they were demanding.” The lawsuit, the company contends, “was not driven by consumer confusion, [but] that Stone Brewing has a USD 464 million debt to pay to their private-equity investors in 2023.”

It came to light during the trial that Stone has been losing sales since the Keystone rebrand in 2017. Well, other breweries too saw declines: New Belgium, Sierra Nevada, Boston Beer, Deschutes, to name a few. But the latter managed to turn the ship around. Not Stone. And neither San Diego’s Green Flash, Ballast Point, Modern Times, St Archer. Observers say that among the 9,200 or so US craft breweries, there could be many more whose business is really unsustainable. They may still be paying enough of their bills to plug along, but their owners would have never had a salary; their employees would be underpaid and without benefits, while meagre cash flows would prevent upgrades. As Dogfish Head’s Sam Calagione said in 2014, “there’s a bloodbath coming”, except it has been greatly delayed and there will be little blood left to spill once these breweries finally expire.

It was mostly good news for US craft brewers in 2021, according to data released by the Brewers Association on 5 April. Craft beer sales went up 8 percent last year to 24.5 million barrels beer (28.7 million hl), increasing craft’s overall beer market share by volume to 13.1 percent, from 12.2 percent in 2020. The US beer market grew just 1 percent by volume in 2021.

There were 646 new brewery openings in 2021 and 178 closings, bringing the total number of breweries in the US up to 9,247. Among those were about 7,000 brewpubs and taprooms.

Forecasting types got hard seltzer’s growth wrong. Boston Beer’s Chairman, Jim Koch, already hinted in February that first quarter 2022 beer sales in the US would be tough. And indeed, January proved pretty rough. Taxpaid domestic beer shipments dropped 815,000 barrels (950,000 hl), or 6.2 percent over January 2021, estimated the Beer Institute. In February, shipments declined 5.8 percent over the same month 2021, which is a loss of 681,000 barrels (796,000 hl). These figures include sales of hard seltzer, which for technical reasons and tax purposes are classified as beer too. They will mean a blow to producers of hard seltzer, whose sales skyrocketed in 2019 and 2020 so that plenty of analysts were adamant that hard seltzers could grab 15 percent to 20 percent of the US beer market eventually.

Lester Jones, the Chief Economist of the National Beer Wholesalers Association, never bought into this heady forecast. He blamed the forecasting types for taking one year – 2020 – which had very strong numbers and say we could do it again. In retrospect, this was sheer folly.

I often wonder: Who are those people who file all their grocery bills for further reference? In the US, some 23,000 consumers brought along their receipts and joined a class action lawsuit in 2015 against Diageo, the brewer of Guinness, over misleading labelling on Guinness Extra Stout. Although, at the time, Guinness Extra Stout was brewed in Canada, the packaging led customers to believe that the beer was produced in Ireland.

Over the past decade, several class action suits in the US have asserted that brewers should not deceive consumers about a beer’s actual provenance. In 2015, AB-InBev settled for USD 20 million a class action lawsuit, brought on by consumers who were led to believe that their Beck’s beer came from Bremen, whereas in fact it had been brewed in St. Louis. Plaintiffs then received about up to USD 50 each. At roughly USD 2 million Guinness now got off lightly in comparison.

The Salem News website reported that the deal had actually been struck in November 2021. The more than 23,000 plaintiffs were to receive a total of about USD 770,000. Those who had filed a claim had reportedly receiving cheques of up to USD 5 each, arriving as of February. The rest of the settlement, about USD 1.3 million, reportedly went to the lawyers.

Because of its statutes, the Swiss supermarket chain Migros, which is the country’s largest and its major employer (100,000 people), has asked its members to take a vote by 4 June 2022 whether Migros’ 600 supermarkets as well as its restaurants should be selling alcohol or not. Switzerland is a country of 8.8 million people. Migros has nearly 2.3 million members, which underlines how rooted Migros is in Swiss life. To encourage its members to cast their votes, Migros has launched a campaign featuring its as-yet-to-be-brewed private label beer: one label says “Oui” (yes), the other “Non” (no).

James Watt, the co-founder and CEO of BrewDog, said a criminal prosecution is under way for fraud and malicious communication over an alleged campaign of online harassment directed against him. He thinks that he has been “subject to a 2 year-long coordinated criminal campaign of online harassment, defamation, blackmail, significant fraud, and malicious communications.” The statement came in response to claims published by The Guardian newspaper on 14 March 2022 that Mr Watt had hired private investigators to gather evidence concerning individuals who had criticised him. Mr Watt asserted that BrewDog is “about doing something different and building a business we are proud of and I’m sorry that there are a handful of people on a criminal mission to bring us down.”