Slogans are important. They are memorable. They are a catchy statement regarding your business. AB-InBev’s marketers have coined a new one for the firm’s medium-term strategy: “a future with more cheers”. Sounds positive and encouraging after two years of covid, which have made people frazzled, anxious and snappy. But why the defiant tone? Why did Mr Doukeris, AB-InBev’s new CEO, feel he had to dismiss the suggestion that beer is losing ground to spirits? I can tell you why. Having flicked through hundreds of AB-InBev’s slides, I was in serious need of some eye candy. So I looked at Bacardi’s cocktail trends report (2022). And it struck me: the drinks guys have far better graphic designers. I am not into cocktails but, trust me, before the year is out, I will be juggling cocktail shakers.
AB-InBev mounts a defence of beer. Its new CEO, Michel Doukeris, set the company’s first earnings target on 6 December, forecasting 4 percent to 8 percent in organic growth over the next four years, based on rising beer sales and expansion into other drinks and even food. During the investor conference he said that the global beer market had expanded over the past four years, despite a false narrative that it was not growing. He also countered a widely held belief that beer is losing out to spirits. “Beer is big, beer is profitable and beer is growing,” he said. His investors need some convincing. Shares in AB-InBev have lost almost 30 percent of their value since the start of 2020. In contrast, those in Diageo, the world’s leading drinks company, have rallied more than 25 percent.
So it is hard tea now for AB-InBev. On 15 November, it purchased Hoop Tea, a Maryland-based beverage company known for its tea-infused malt beverages and seltzers, which are sold in cans and pouches. Hoop Tea will be led by founder and CEO Danny Robinson, who has joined Anheuser-Busch. Terms of the deal were not disclosed. Competing in the hard tea segment (that is iced tea+alcohol but taxed like beer), the brand will be up against Boston Beer’s Twisted Tea, which has been around since 2001 and has since captured between 90 percent and 95 percent in market share.
Dealmaking continues in the brewing industry. Still, Heineken will face many hurdles before its proposed three-way transaction with Distell and NBL in southern Africa will reach completion. Itcould take a year to wrap up. With shareholder approval still pending and regulators also having a say in this, the firm to emerge at the end of this process might look different to the one imagined by parties right now.
Larry Bell has kept the sales price top secret so us Nosy Parkers will never know how much Lion splashed out on Bell’s, the seventh-ranked US craft brewer. Most likely it was a lot since Lion and Kirin are not known for stinting.The announcement in early November that Mr Bell had sold his firm to Australian brewer Lion did not illicit the usual sneers (“shame on you for selling out to a Big Brewer”) that accompanied craft brewery sales in the past. Instead, a commentator on vinepair.com wondered who would legally own Bell’s as of now.
It will be New Belgium, a US craft brewer acquired by Lion in 2019. What seems to rankle with the commentator is that one US craft brewer will own another. Hello, who was it that clinched the deal in the first place? It was Lion, whose unit Little World Beverages is the operative arm of Kirin’s international craft beer business. Therefore, New Belgium’s and Bell’s masters sit in Tokyo and Sydney. New Belgium’s headquarters in Fort Collins, Colorado, will merely serve as a regional hub.
A rumour is going round that the maker of energy drinks, Monster Beverage, is exploring a merger with beer and drinks company Constellation Brands. The megadeal, first reported by Bloomberg on 21 November, would potentially bring together beer, energy drinks, wine, spirits, RTDs, and even cannabis, thus reactivating the concept of a total beverage company, which went out of fashion more than a decade ago.
With Monster and Constellation valued at USD 48 billion and USD 44 billion respectively, their tie-up would be the beverage industry’s biggest since AB-InBev’s record-breaking USD 120 billion takeover of brewer SABMiller in 2016.
Constellation Brands has declined to comment. Making matters a trifle complicated is that Coca-Cola owns a 19 percent stake in Monster. Will it approve of Monster stepping into alcohol? Investors too seem to take a dim view of the combination. Monster’s and Constellation’ share prices hardly moved after the rumour was spread. Megamergers are hardly popular. They tend to involve overpaying and under-delivering, observers say.
Royal Unibrew is not done with shopping yet. The mid-sized Danish multi-beverage company, which serves markets in the Nordics, Baltics, Italy, Germany, and France, went on a shopping spree this year, gobbling up the French energy drink Crazy Tiger, the Estonian craft brewer Tanker, the Swedish importer and distributor of drinks and beverages, Solera Group, and Danone’s mineral water brand Aqua d’Or.
The targets seem eclectic. But Royal Unibrew has been a multi-beverage firm long before it became a fashion among brewers to move Beyond Beer. It has been particularly successful in profiling the group as a full beverage company, rather than regarding soft drinks as an add-on, which is what most brewers tend to do.
Sweden’s monopolist alcohol retailer Systembolaget went out of its way to offer home deliveries. In Sweden there is only one company that is allowed to sell full strength beer, wine and spirits: Systembolaget. Actually, the state monopoly does not want to make it too easy for its compatriots to purchase alcohol. But since the end of October, Swedes can have alcohol delivered to their homes.
The entry into e-commerce is a milestone for Systembolaget. So far, you could only buy alcohol in Systembolaget’s 440 outlets, or pick it up from 470 agents, like post offices or supermarkets. However, there are strict rules in line with Sweden’s tough alcohol laws. Therefore, it is faster and cheaper to buy your beer in one of Systembolaget’s shops. That is probably the whole idea.
How not to handle a crisis: Mikkeller’s very public fall from grace has shaken craft beer aficionados. Perhaps the Danish craft brewer should have followed BrewDog’s example, when it too faced accusations of sexism and a toxic culture in May this year. Like BrewDog’s CEO James Watt, Mikkeller’s founder Mikkel Borg Bjergsø should have communicated through traditional media that he was so sorry and would immediately enter into direct talks with his accusers.
Instead, Mikkeller spent months sidestepping the issues. In the end, Mr Bjergsø’s had to apologise on Instagram on 18 October for “not acknowledging responsibility” for the toxic workplace environment. Mikkeller’s drawn-out PR crisis, not to mention its HR crisis, are the result of doing too little and too late. As with all crises, it could take time for Mikkeller to see things return to normal. But the crisis could flare up again. Let’s hope the firm has learnt from its mistakes.
Ball’s customer reduction programme is a bad as it sounds. The current shortage of aluminium has allowed the Ball Corporation, a leading supplier of beverage cans, to weed out its customer base. Ball reportedly plans to increase the minimum purchase of printed cans from one truckload to five, as of 1 January 2022. The news sent shockwaves through the industry. Craft brewers, that do not have a contract with Ball, will have to order about a million cans for USD 150,000 at a time, all with the same label, provided supply is available. Ball also plans to raise prices on each can by as much as 50 percent. And they will no longer keep breweries’ extra can inventory in warehouses in the United States.
Smaller craft brewers feel short changed. They cannot simply switch to fill their beer in bottles instead, as consumers prefer to buy their beer in cans for reasons mainly to do with convenience. Cans currently make up around 60 percent of independent craft packaged volume, up from perhaps 5 percent a decade ago. One thing is certain. Consumers will see prices for their canned craft beer go up significantly in the new year.
Bitburger has bought a stake in Crew Republic, only weeks after the Munich craft brewer, in November, had parted ways with AB-InBev by repurchasing AB-InBev’s 20 percent stake in it. There was no mention of the size of Bitburger’s stake. Previously the founders, who set up the business in 2011, had held 28 percent each according to insiders. Bitburger Group, which ranked third among Germany’s brewing groups in 2020 in terms of volume sales, could be a more natural fit. Not only does it enjoy a relatively strong presence in Germany’s on-premise (it provides 50,000 venues with its beers), it also banks on the growing popularity of contemporary craft beer.
Over in the UK, pub chain Wetherspoon has signed a 20 year on-tap supply deal with AB-InBev’s Budweiser Brewing Group UK&Ireland, marking the end of a four decade-long arrangement between the pubco and Heineken. Budweiser UK will become Wetherspoon’s largest supplier. Heineken will stop supplying Wetherspoons with draught beers, but is in discussions over supplying bottled beers. Heineken’s own pub company, Star Pubs & Bars, is one of the leading leased and tenanted pub companies in the UK with approximately 2,400 pubs in its estate.
The concept is hardly new. America’s largest supermarket chain Kroger began installing in-store craft beer taps in 2015 already. But UK supermarket group Asda will be the first in the UK to trial selling draught craft beer. Shoppers can bring back containers to be refilled or recycled. If the trial, currently underway at its store in Milton Keynes, is successful, then draught beer could come to a store near you, Asda said on 24 November. It has more than 600 stores. Per Statista, Asda (14.8 percent market share in 2020) trails market leader Tesco (27 percent) in terms of grocery sales, but has been in close competition with Sainsbury’s (15.3 percent) for the place of runner-up.