On 23 August 2023, a plane carrying Wagner’s top brass including its leader Yevgeny Prigozhin and commander Dmitri Utkin fell from the Russian sky, two months after their short-lived uprising. If you thought this would spell the end of this notorious private military company (PMC), you are mistaken. Although it was renamed Afrikanski Korpus (African Corps) and became subordinate to the Russian Ministry of Defence at the end of 2023, its brand and businesses in the Central African Republic seem to thrive. There, Wagner went for a rebrand, ditching its skull and sniper crosshairs logo for an anodyne 1W9. In June, the logo was found on many buildings across Bangui, the capital. A photograph of several Africans sporting t-shirts emblazoned with the acronym was duly uploaded on to the internet. It means “First”, W, “Ninth”, in honour of Prigozhin (First) and Utkin (Ninth).
The brewery seems to be doing well. It now offers a range of four beers under the label Africa Ti L’Or and, since May, an “Africa Fanta”. It was introduced on Facebook with the tagline “Try this juicy taste of oranges”. Wagner’s Africa Fanta is a cynical greeting to the West. Coca-Cola can’t be happy that the PMC is blatantly violating its trademark. But as Wagner’s Fanta seems to say: “Sue us if you can”.
On 6 August, it became known that Russia has blocked sale of AB-InBev’s stake in their joint venture to its partner Efes. The reasons for the refusal are unknown. Anadolu Efes said that the business in Russia continues to operate as usual under the leadership of Efes. AB-InBev Efes is a 50:50 joint venture of Turkey’s Anadolu Efes and Belgium’s AB-InBev. In April 2022, two months after Russia’s invasion of Ukraine, AB-InBev announced that it would sell its stake, booking an impairment charge of USD 1.1 billion. In December 2023, it was reported that Efes had agreed to purchase AB-InBev’s shares and had applied for a permit with the government commission in charge. Bloomberg valued the entire Russian business at USD 1.1 billion to USD1.3 billion. Observers quoted by Kommersant, a Russian newspaper, speculated that there is a political subtext here.
AB-InBev Efes owns 11 breweries in Russia plus three maltings. In 2023, revenue increased 11.5 percent to RUB 108 billion (USD 1.2 billion), Kommersant said. Net profit rose from RUB 12 billion in 2022 to RUB 17 billion (USD 196 million). Despite the failed sale, the business is expected to hike its net profit to RUB 20 billion (USD 230 million) this year.
Russia’s beer party: sales rise 5 percent to 45 million hl in the first half of 2024.
With an alcohol content ranging between 0.5 percent and 8.6 percent, beer now accounts for 83 percent of all alcohol sales. The growth in sales is due to a hike in domestic tourism, the independent alcohol market analyst Alexey Nebolsin told Kommersant. “Since 1 May, low-alcohol cocktails have been taken out of the market after a fourfold increase in excise tax, and demand has shifted to beer. Plus, the military-industrial complex is on a hiring spree. People go out, they pay good money, they work 24/7. But there is a catch: those who work in the military-industrial complex are banned from traveling abroad. As a result, there was a sharp increase of visitors in tourist regions like Krasnodar, Altai, Siberia,” he said. Others said that the increase in beer – and alcohol – consumption is due to “psychological tension”. “Russians hit the bottle hard to escape misery of war,” The UK’s Times newspaper already reported in June.
In 2023, more than 80 million hl beer were produced in Russia. Almost a third of production is concentrated in the Moscow region, the Volga region and the Novosibirsk region.
AB-InBev’s volumes hit by weaker demand in China and boycott fallout. AB-InBev reported that volume sales in the second quarter fell 0.8 percent, compared with the same quarter last year. They were dragged down by weaker demand in China and the continuing fallout from a boycott of its Bud Light brand in the United States. The world’s number one brewer said on 1 August that volumes sales in China declined 10 percent. This is the latest sign of how economic uncertainty in the world’s second-largest economy is hurting Western companies. Beyond China, AB-InBev also reported lower volumes in North America (-3.2 percent) and Argentina (-20 percent) as the company posted its fifth consecutive quarter of overall organic volume decline.
Carlsberg’s will lose the San Miguel licence in the UK to AB-InBev at the end of this year. It will hit Carlsberg hard. The brand had annual sales of 1.8 million hl and revenues of DKK 1.4 billion (USD 208 million). In actual fact, the San Miguel brand represented more than 50 percent of Carlsberg’s volume sales. Media put Carlsberg’s market share in the UK at 7 percent. With UK beer sales amounting to 45 million hl in 2023, Carlsberg sold only a total of some 3.1 million hl beer.
Carlsberg hopes to fill the hole left by San Miguel with its own brands like Poretti, Brooklyn, 1664 Blanc (formerly known as Kronenbourg Blanc) and Carlsberg Danish Pilsner. Moreover, Carlsberg’s CEO Jacob Aarup-Andersen is looking to diversify away from alcoholic beer as sales slow. As part of the shift, Carlsberg agreed in July to buy UK soft drink producer Britvic for GBP 3.3 billion (USD 4.2 billion).
In July, we were treated to the rumour that Diageo (Johnnie Walker, Guinness) could be taken over and split up. In August, Reuters commentators were asking for the head of Diageo’s CEO. Ms Crew has held the job for a year only. Is this just investors venting their anger over Diageo’s share price performance, which has declined by 30 percent since her appointment in June 2023? Rival Pernod Ricard’s stock is down by some 40 percent year-on-year. Or is there another story playing out in the background?
We need to remember that “the City” (short for London’s finance industry) is primarily about making money for itself and listed companies are the tools to achieve that. In recent months the idea must have caught on with investors that drinks firms only had it so good for the past 20 years because the brewers had been preoccupied with industry consolidation, thereby neglecting competition with spirits. While brewers were sleeping on the wheel, drinks firms could win a significant share of the alcohol category. Not only that, they also created a perception of invincibility around their companies, which meant brewers became also-rans in the stock market game.
As the Big Brewers are beginning to nurture their brands and the beer category, investors expect that competition between brewers and drinks firms will heat up – and that the drinks firms are unprepared for this. Hence the steep declines in the drinks firms’ stocks.
Diageo sees first sales decline since the pandemic. What’s going on? First there was the rumour that Diageo could be a takeover target. And only three weeks later Reuters suggests that Diageo’s CEO should be sacked, although she has only been at the helm for a year. In between these two events came Diageo’s preliminary results for fiscal 2024 on 30 July. They were not as good last year’s results. But they were not disastrous either. The drinks firm had to report a sales decline of 1.4 percent to USD 20.3 billion on a 4 percent decline in volumes as fewer units were shifted in every spirit category other than Indian whisky and Chinese white spirits. Beer volumes were up 5 percent, helped by a strong performance of Guinness in the UK and Ireland. Besides, Diageo had to report a profit decline of 4.8 percent to USD 3.87 billion, from USD 4.45 billion a year earlier. In fact, its operating profits contracted in four out of its five markets.
This is Diageo’s first annual drop since 2020 and Reuters argued that CEO Crew should be replaced. According to Reuters, the only reason Diageo is unlikely to part company with Ms Crew in the immediate future is that the firm has already let go of its Chief Financial Officer Lavanya Chandrashekar. Replacing the CEO and the CFO at the same time would have really rocked the boat.
Trial date set in Diageo’s black mould court case. Justice is not only blind but also slow. Ten years after a couple first filed a lawsuit against Diageo over claims that the drinks firm’s whisky casks stored at a nearby whisky warehouse were responsible for black mould at their property, a trial date has finally been set for March 2025. It has been quite a lengthy legal process for the Chalmers. They first filed a lawsuit against Diageo in 2014, and again in 2017. Next, they had to defend themselves against an appeal by the spirits firm in January 2024. However, Diageo’s appeal was rejected by the Lord justice clerk Lady Dorrian, who criticised the “lengthy and lamentable procedural history to the action”. Observers say that should the Chalmers win the case, it will be a landmark ruling and it will likely set a precedent for distilleries all over the world based in or near residential areas.
The problem is not Diageo’s alone. In the US, Jack Daniel’s (Brown-Forman) is also embroiled in a lawsuit, which saw construction halted on a new barrel warehouse in March 2023 because black mould began to coat neighbouring houses, cars, trees and road signs in Lincoln County, Tennessee.
You booze you lose. Australia’s alcohol tax, on 5 August, went up by 2.2 percent, after jumping 1.8 percent six months previously. No one quite does “sin taxes” like Australia. The government increases its beer, tobacco and petrol taxes every half year – in February and in August – because excise duties are integrated with the consumer price index (CPI). When inflation goes up, the taxes on alcohol rise, too. Since the last federal election in May 2022, excise on beer has risen by more than 10 percent. The latest increase will mean drinkers will pay AUD 25 (USD 16.5) in beer tax and GST for a slab (24 cans) of full-strength beers, or 40 percent to 45 percent of the retail price, according to the brewers’ association. Some publicans said they have to charge as much as AUD 18 (USD 12) a pint for a mainstream beer to keep up with rising costs.
Countless craft breweries have shuttered recently as the embattled industry feels the brunt of high costs and dwindling customers. There are 25 to 30 breweries in the past 12 to 18 months – out of 600 or so – that no longer exist.
Australia’s Coopers brewery opened its new visitor centre on 28 August. It costAUD 70 million (USD 46 million) to build and sports a restaurant, three bars, an expansive outdoor plaza, a microbrewery, and a whisky distillery with an underground stillage for 5 000 whisky barrels. Managing Director “Dr Tim” Cooper told media that the whisky barrels “will take a while to fill”. It will be approximately four years before they will achieve “a nice, mature [whisky] product,” he added. “So, in 2028 you might be able to sell some whisky. Our CFO Brad Grunert says that with any luck, we should get our money back in about 2038,” Dr Tim explained laughing. The new site is replacing the old visitor centre, which attracted some 3,000 people per year. Coopers hopes the new centre will bring in about 100,000 people annually.
Dr Tim explained that the process of getting the visitor centre up and running has been a “labour of love”. Four years ago, Coopers started planning for an AUD 50 million venue. By 2023, they had run over budget and the original opening date – Christmas 2023 – had to be postponed.
German brewers: Soccer championships no longer boost sales. Despite the European football championship taking place in their own country, beer sales continued to fall in the first half of 2024. According to data by the Federal Statistical Office, only 34 million hl beer were sold in the off- and on-premise during the first six months of this year – a drop of 0.9 percent compared to the same period last year. The month of June, when UEFA Euro 2024 took place, was a real disappointment for the industry, as total beer sales fell by more than 11 percent compared to the same month last year. The German Brewers’ Association cited the changeable weather as a major factor for the sluggish beer business. “During UEFA Euro 2024, the rollercoaster ride of temperatures and frequent storms put a damper on business for many publicans, with plenty of garden parties being cancelled,” said Managing Director Holger Eichele.