February 2024

Covid isn’t over, not by a long shot. In Australia, two major craft breweries, Hawkers and Big Shed, entered into voluntary administration to pursue financial restructuring. They have made loses due to increased production costs and legacy tax debt from the pandemic, compounded by excise hikes and a cost-of-living crisis where people struggle to pay for their increasing mortgages. Over in the UK, craft brewers are struggling too. The 152-year-old brewer Adnams from Suffolk called in advisers to explore options to raise funds. Adnams reported that operating losses in the first half of 2023 widened to GBP 2.4 million (USD 3 million), compared with an GBP 811 000 loss in the same period in 2022, while revenues remained flat at GBP 30 million. The firm may sell some assets – it owns 45 inns – but that will be a band aid only. For as long as beer and pub sales suffer from declining consumer demand, the sad news of craft breweries going bust will keep on coming in.

The minimum unit price (MUP) for alcoholic drinks in Scotland is poised to rise by 30 percent under measures to control alcohol-related deaths and hospitalisations. It will go up from GBP 0.50 to GBP 0.65 (USD 0.82) in May, six years after Scotland became the first country in the world to introduce the policy. The Scottish Parliament still needs to approve the increase. Various rates were debated last year, including one which would have pushed MUP up to over GBP 0.80. The new MUP will hike the price of the cheapest bottle of whisky from GBP 14 to GBP 18.20 (USD 22.90), vodka to GBP 16.90 and a four-pack of basic lager to GBP 4.58. The MUP is not a tax. Any profits made are the retailers’ for keeping.

Expensive spirits? Just ask Indian consumers. They could enjoy a 7.5 percent reduction in spirits prices should the region’s 150 percent tariff laws be halved, Diageo said. India is one of the world’s biggest markets for Scotch whisky – at least in terms of bottles sold – but the country’s tough import tariffs have prevented Scotch from making serious inroads there. Scotch whisky only represents 2 percent of all whiskies consumed in India. The UK would like to strike a free trade agreement (FTA) with India, which would lower tariffs and boost sales. The talks, which began in 2022, are said to be close to completion. However, Diageo remains cautious that a FTA will happen quickly. Reportedly, Scotch is not an issue in the talks. Indeed, Indian negotiators at the FTA talks proposed to allow Scotch whisky imports in barrels and bottles. But in exchange they will bargain hard for mobility and migration related issues – something the UK is not too happy with following Brexit, which was about ending the free movement of people and taking back control of its borders.

Over in the US, AB-InBev closed its Wynwood and Golden Road taprooms. Ten years ago, AB-InBev seemed like the biggest threat to American craft brewing when it snapped up breweries across the country. Now, it seems that craft beer is suffering from declining consumer interest and the brands acquired by AB-InBev are not spared. On 26 January, media reported that AB-InBev is shutting the doors of two of its US taprooms, Wynwood in Miami, Florida, and Golden Road in Sacramento, California. As Wynwood’s site will be sold, its sister business Veza Sur, which is situated nearby, will continue to produce Wynwood’s brands.

It is not just AB-InBev which is shuttering taprooms. Craft brewer New Belgium, which is owned by Japan’s Kirin, announced in early February that it has ceased operations at its San Francisco Mission Bay brewpub and restaurant with immediate effect. The taproom had only opened in 2021. New Belgium had taken over the venue from Australia’s Little Creatures, a craft beer brand also owned by Kirin through its Australian subsidiary Lion. Apparently, the re-branding of the San Francisco venue did not render it profitable. In fact, it had suffered financially in recent years, New Belgium said, and the decision was taken to shut it down.

Diageo and Sean Combs settled their legal feud. Mr Combs had sued the London-listed drinks group last May and accused it of underinvesting in their jointly owned drinks as well as racism. A joint statement said that Mr Combs had “withdrawn all of his allegations about Diageo and will voluntarily dismiss his lawsuits against Diageo with prejudice”, adding that the two parties will have no ongoing business relationship. Diageo will retain full ownership rights of the Ciroc vodka and DeLeón tequila brands. Financial details of the settlement were not disclosed. Embattled Diageo was probably lucky to settle with Mr Combs out of court. Mr Combs himself is facing several lawsuits over alleged rape and sexual assault, filed towards the end of 2023. The former rapper has denied the allegations.

Molson Coors hiked marketing spending to steal from Bud Light. Molson Coors ended its 2023 financial year with net sales growth of 9.4 percent to USD 11.7 billion, thus meeting its full-year guidance. The firm increased its underlying net income by 32 percent to USD 1.2 billion. One of the drivers of that growth was the downfall of Bud Light. Molson Coors reported close to double-digit growth in US brand volumes for Coors Light and Miller Lite. That growth was partly due to a 19 percent higher marketing spending in its fourth quarter 2023.

To the analysts, who were sceptical that Molson Coors’ gains were sustainable, CEO Gavin Hattersley replied: “Our data shows that the majority of consumers who switched to our brands post-April [when the Bud Light boycott began] have stayed with us throughout 2023, and then much more loyal to our brands than historically. … There is no reason to believe that these buyers are suddenly going to revert.”

January data indicated that Bud Light is still having trouble luring back customers. Sales were down 30 percent year-over-year for the week ending 20 January, according to the latest numbers by Bump Williams Consulting, which were obtained by Fox News.

Heineken’s modest 2024 profit forecast disappointed investors on 14 February, sending its shares down 6.5 percent, as the world’s number two brewer struck a cautious tone. In 2023, the Dutch brewer’s net revenue improved to EUR 30.3 billion (USD 32.7 billion), from EUR 28.7 billion in 2022, but its operating income only came in at EUR 3.2 billion, compared with EUR 4.3 billion a year ago. For the full-year 2023, the brewer reported a net income of EUR 2.3 billion, down from EUR 2.7 billion reported last year. In an attempt to offset rising costs, the company had raised its average prices by 10.2 percent globally last year. Partly as a consequence, Heineken’s organic beer sales volume dropped 4.7 percent to 243 million hl in 2023. Two markets alone – Vietnam and Nigeria – were responsible for 60 percent of the decline.

Carlsberg’s Full Year 2023 results, announced on 7 February, were closely watched – guess where? – in Russia. According to the Russian news agency Interfax, Carlsberg recorded an impairment loss of DKK 7 billion (USD 1 billion) on its Russian assets. The Danish brewer recognised accumulated foreign exchange translation and hedging losses from 2004 through 2023 of DKK 41.5 billion (USD 5.98 billion). In total, the group recognised a loss of DKK 47.75 billion (about USD 7 billion) from discontinuing operations in Russia, Interfax had worked out. In 2023, Russian beer production grew moderately, up 1.8 percent, to 83 million hl.

What Interfax omitted to report was that Carlsberg hiked revenue – organically – year-on-year from DKK 70.3 billion to DKK 73.6 billion (USD 10.6 billion), an increase of 4.7 percent. The brewer also increased its operating profit organically by 5.2 percent in 2023, within the forecast range of 4 percent to 7 percent.

If there is a long-term trend, it certainly points south. In 2023, German beer production declined 4.5 percent over 2022, wiping out all hopes that brewers’ output could eventually return to pre-Covid levels. In retrospect, 2022 was just a rogue year: beer production rose because people went out more to resume their normal lives after the pandemic. But production volumes in 2023 (-3.9 million hl over 2022) underline that there is no reversing the overall downward trend. In the course of the past 30 years, German brewers have seen their annual beer volumes drop to less than 85 million hl, compared with 116 million hl in 1994. Although it is too early to say how per capita beer consumption performed in 2023, the Bavarian Brewers Association reckons that it came in at less than 90 litres – a decline of some 30 percent compared with 30 years ago.

The Polish beer market declined by as much as 7 percent in 2023, wiping out some 2 million hl in beer sales over 2022. Average beer prices rose 17 percent, due to high inflation and a cost-of-living crisis. Brewers hope that the decline will slow down in 2024, even as excise on beer goes up again. Polish consumers are very price sensitive, so much so that in 2023, even sales of non-alcoholic beer declined – the first time since they appeared on the market. Non-alcoholic beers control between 5 percent and 6 percent of the market.

It does not help that in January 2024, excise went up again as part of the government’s alcohol road map, adopted on 1 January 2022. In 2022, excise increased by 10 percent. Between 2023 and 2027 it is to rise by 5 percent annually.

In 2022, Polish brewers produced some 37 million hl beer, making Poland the third-largest beer producer in the EU, behind Germany and Spain. Three firms – Kompania Piwowarska (Asahi), Grupa Żywiec (Heineken) and Carlsberg Polska – dominate the market.

But for Czech brewer Budějovický Budvar 2023 was another record year. The state-owned Budweiser Budvar brewed 1.8 million hl of beer, up 4.3 percent (+77 000 hl) over 2022. More than 70 percent of its output was exported. Budvar expects to have reached sales of more than CZK 3 billion (USD 130 million) in 2023. In 2024, it will spend USD 2.7 million on expanding its brewing capacity to gradually increase it to 2.1 million hl. Additionally, in 2026, it will start upgrading its visitor centre and grounds, which will open in 2028, when Budweis will be the European Capital of Culture.

Dutch excise hike threatens beer culture. At the behest of public health advocates, 2024 saw the excise on beer, wines, and spirits rise by 8.4 percent. Some Dutch cities, including Utrecht, Haarlem, and Groningen, also decided to ban alcohol advertising on municipal billboards. As if this was not enough, on 1 January, a system change for beer came into effect – one that had already been approved in 2021 but not yet effectuated. The Netherlands switched from four excise categories (based on degrees Plato) to a system, whereby excise is levied per percentage alcohol (by volume).

If brewers seek to tweak the excise rate, they will need to reformulate their beers to a lower ABV. Observers expect brewers to gravitate towards lower strength beers. In extremis, the new taxation regime could pivot Dutch beer culture from one akin to Belgium’s towards one resembling the UK’s.

The Netherlands also introduced a levy on soft drinks, which was likened to a “sugar tax”. For some technical reasons, the levy also applies to sugar-free soft drinks and even non-alcoholic beers (but not to sugared milk drinks). The implementation of this measure has led to a considerable tax hike for non-alcoholic beer, which is not in compliance with the stated objective of reducing alcohol and sugar-related harms.

Beer industry associations worry that the excise increase will hit brewers hard. In recent years, the Netherlands has developed into a leading beer country with almost 1,000 breweries. The tax hike puts this at risk. In 2023, almost 40 breweries closed their doors, which could make 2023 a year of contraction for the first time in about 25 years.

Funny that. The Austrian Beer Party, founded largely as a joke, said it will enter into this year’s parliamentary elections, provided it can recruit 20,000 new members and raise funds before the end of April. Already, Austria’s politicos fear that the left-leaning Beer Party could fracture the left constituency (mainly Social Democrats and Greens) and help the centre-right parties win the elections. Alternatively, Mr Wlazny could help set up a coalition of Social Democrats, Greens, Liberals, Communists, and the Beer Party, although forming a five-party government might prove hard. To enter into Austria’s parliament, parties only need to capture 4 percent of the votes.

The Beer Party was set up in 2015, to promote the punk-rock band Turbobier and its frontman Mr Wlazny, alias Marco Pogo. It is best known for its light-hearted projects, like launching its own beer brand, Turbobier, packaged in cans and available from its website. But the Beer Party and its leader have since taken serious swipes at the political establishment and those embroiled in corruption and other scandals. The Beer Party has campaigned on issues as frivolous as installing public beer fountains in Vienna, but also on improving the public health system.