February 2022

Faced with “crazy increases” in the cost of ingredients, energy and transport, brewers will need to hike prices this year. To what extent – that’s the question. Brewers’ pricing may be a little more restrained than in other Consumer Packaged Goods categories because they all want to grow share, and they are all very mindful of their volume sales. The metric to watch is revenue per hl. As Jim Koch of Boston Beer explained recently, “pretty much all the big players can get their revenue per hl up by dumping the low end of their brand portfolio and replace it, maybe not fully replace it, at the high end.” He added: “If their revenue per barrel goes up more than ours that is because we don’t have a high end to migrate to and we don’t have a low end to dump.”

Heineken’s outlook dims as inflation pinches consumers, raising the risk that they will cut back on beer. “If you look at the inflation that we’re currently experiencing, it’s the highest in ten years and it’s not just in our product categories – there might be a macroeconomic thing happening here,” Heineken’s CEO Dolf van den Brink told Bloomberg. It could take several years for the European hospitality industry to fully recover from the impact of the pandemic, given the number of outlets permanently closed by the crisis, Mr van den Brink said.

Heineken’s CFO Harold van den Broek added that the company aims to raise prices for its beer by “courageous” amounts across the world to offset soaring expenses.

Carlsberg warned that its organic operating profit could grow only between zero percent and 7 percent in 2022, down from a 12.5 percent hike in 2021, citing higher costs and continued coronavirus restrictions. In other words, if the worse comes to the worst, operating profit could be flat this year. Analysts were told that Carlsberg will be able to cover the cost increase per hl with revenue per hl increases. Those will be spread across mix, products, channels, price mix – and price increases. Carlsberg refrained from giving more details about its price increases.

Boston Beer reported weaker-than-expected results in the latest quarter, as the brewer faced further challenges related to its Truly Hard Seltzer. The brewer of Sam Adams booked a fourth-quarter loss of USD 51.8 million, mainly due to volume adjustment costs, compared with a profit of USD 32.8 million a year earlier. Shipment volume for the quarter was approximately 1.8 million hl, a 25.5 percent decline 4Q 2020, reflecting decreases in the Truly Hard Seltzer and Angry Orchard brands. Truly is the number two hard seltzer brand in the US with a market share of 26 percent.

The company’s hard-seltzer business has struggled since last summer. In July, Boston Beer said it had overestimated demand for its Truly product. It had forecasted the hard seltzer category to grow 70 percent in 2021. In the end, it saw just 35 percent growth in 2021, after being up 64 percent in 2020, and 126 percent in 2019, according to estimates by Euromonitor, a market research firm.

Over in South Africa, Distell’s shareholders, on 15 February, voted overwhelmingly in favour of the Heineken takeover. In November 2021, Heineken made a ZAR 38.5 billion (USD 2.6 billion) offer for Distell, which still requires competition authorities’ approval. The aim is to combine Distell’s ciders, RTDs, spirits and wines with Heineken’s interests in southern Africa, including Namibia, and select export markets in East Africa.

The Heineken takeover has taken its first hurdle. But there is one small issue: Distell’s cash cow, the Gordon’s gin brand. Global drinks firm, Diageo, which internationally owns the brand, has been trying for years to reclaim the Gordon’s brand in South Africa. Apparently, the contract is very specific, so up until now Diageo has been unable to do so. Maybe the change in ownership will do the trick?

Just when you thought BrewDog had put its annus horribilis behind it, a BBC documentary rehashed all the well-known accusations and some more. BrewDog found itself back at the centre of controversy, after a BBC Disclosure documentary, which was aired on 24 January, and featured former as well as current staff, made fresh allegations over a “toxic culture” and criticised CEO and co-founder James Watt. Mr Watt has strongly denied the claims, dismissing them as “totally false”, and warned that he would take legal action against the broadcaster.

Among the more serious allegations was the claim that Mr Watt, in 2017, spent GBP 500,000 (USD 680,000) to buy Heineken shares (legal – but very un-PC for a punk brewer), and contractually guaranteed private equity firm TSG (it bought a 23 percent stake in BrewDog in 2017 for USD 125 million) an 18 percent return per year. This means that BrewDog’s 200,000 investors under its Equity for Punks scheme could see their returns reduced if BrewDog floats for less than GBP 2 billion (USD 2.7 billion).

Planning to go on a brewery tour? Diageo will open Guinness microbrewery in London’s Covent Garden in 2023. It plans to spend GBP 73 million (USD 98 million) on the project. Apart from providing punters with a full-scale brand experience, Diageo hopes to generate more revenue from venues, like the Guinness Storehouse tourist centre in Dublin (opened in 2020) and the Johnnie Walker scotch whisky outpost in Edinburgh (opened in 2021).

As says Bloomberg, the opening comes as brands such as Brixton Brewery and Beavertown, both owned by Heineken, as well as Goose Island and Camden Town, which are owned by AB-InBev, kit out their bars and breweries in London to host customers seeking tours.

It is a remarkable achievement. Dutch craft brewer Frontaal managed to raise EUR 5 million for a new production site. This just goes to show that punters are still willing to put their money behind upstart craft brewers. EUR 5 million (USD 5.7 million) seemed like an ambitious target when Brouwerij Frontaal announced its latest crowdfunding campaign, its fourth, in September 2021. It was also an unprecedented amount for a crowdfunder in the Netherlands. Frontaal’s previous three campaigns had raised more than EUR 1.3 million. Frontaal, in 2021, sold merely 6,000 hl beer and made a turnover of EUR 3 million (USD 3.4 million).

Whether the crowdfunder was Frontaal’s best choice for funding is open to debate. Crowdfunding platforms are no charities. They tend to take a 5 percent cut, on average, and an additional 3 percent to 5 percent fee for payment processing. All this could have added up to nearly EUR 500,000 in costs in the case of Frontaal’s latest crowdfunder.

Dutch beer consumption was up slightly in 2021 but still below 2019 levels and brewers moaned that there is no light at the end of the tunnel. Domestic beer sales were up 2.6 percent in 2021 to reach 10.8 million hl, but they were 10 percent below 2019 levels, when they stood at 12.1 million hl. The 10 percent decline compares to the combined sales of about 13 medium-sized breweries. The hospitality industry somewhat recovered in 2021, growing 14 percent over 2020. But beer sales in bars and restaurants were still down 49 percent over 2019.

Craft brewers, on the other hand, have sailed through the pandemic mostly unharmed. If truth be told, most actually did quite well, benefitting from quickly set up web shops, curb side pick-up, beer deliveries and other such measures. In all likelihood, their profit situation improved over the course of the pandemic, provided they rejigged their route-to-market and cut out the middlemen. There were 911 craft breweries operating in 2021, up from 875 in 2020 and 812 in 2019.

Dry January took on a new meaning this year.The Big Brewers may have kicked off the year by promoting their various non-alcoholic offerings to help us all cut off alcohol. At the same time, they took the opportunity to shed a few assets themselves.

Diageo decided to sell Ethiopia’s Meta Abo brewery to local competitor BGI, which is part of Groupe Castel, the French multinational. It is one of the industry’s unwritten rules, that if you cannot be number one or two, vamoose. This must have been the reason why global drinks company Diageo, decided to dump its Meta Abo Brewery. The fire sale of Meta Abo comes ten years after the Guinness brewer splashed out USD 225 million to acquire the firm from the Ethiopian government in an auction.

In those days, the country of 115 million people was deemed the last beer frontier in Africa. Diageo alone spent more than USD 100 million to triple Meta Abo’s production capacity to 1.7 million hl beer, French media report. Due to Ethiopia’s economic wobbles, rising taxes and not least the civil unrest in Tigray, beer consumption has taken a hit in recent years.

For years, the Opwijk production site, where the Affligem brand is brewed, has been threatened with closure. Now Heineken is getting serious and said the 400,000 hl production site, some 20 km northwest of Brussels, will be shuttered this summer. According to the Dutch brewer, it is too small and fails to reach environmental benchmarks. While Heineken’s previous CEO, Jean-Francois van Boxmeer, resisted calls to close the Opwijk plant, its current leadership does not want to faff around with smaller plants. Besides, Opwijk is not even a full-blown brewery since it does not have its own packaging facilities.

Perhaps Lion perceive that the craft beer bubble is about to burst and they need to dispose of their UK craft beer ventures before this becomes widely known? Lion’s UK unit comprises craft breweries Fourpure in London (acquired in 2018) and Magic Rock in Huddersfield (acquired in 2019), plus a microbrewery and four taprooms. Due to the pandemic, the group’s net revenue had dropped to GBP 9.5 million (USD 13 million) in 2021, and total sales volume to 40,000 hl, reported the website insidermedia.com. In 2021, Fourpure completed a GBP 2.5 million investment to increase its canning operations.

The covid pandemic also led to massive losses for the German brewing industry in 2021. According to the German Brewers’ Association, beer sales dropped 3.4 percent in 2021, compared to the previous year’s record decline of 5.5 percent. This means that more than 2 million hl of beer sales disappeared in 2021. Non-alcoholic beers, which have been growing nicely for years and have now reached a market share of 8 percent, are not included in the official statistics.