Despite the war in Ukraine, the band plays on elsewhere. In the US, over the past few months, the craft brewer CANarchy was sold to energy drinks firm Monster; San Diego’s Green Flash and Alpine were sold to craft brewer SweetWater (owned by a Canadian cannabis firm); South Carolina’s craft beer pioneer Weeping Radish was sold to the CEO of a construction company; Bell’s from Michigan was sold to Japan’s Kirin, while Salt Lake City’s Uinta was sold to the distributor US Beverage. Are you still keeping track?
The sheer number of craft brewery M&A is probably the reason why recent transactions did not elicit any meaningful reaction. Remember the howls of “treason” when the first round of buyouts occurred a decade ago? That reaction isn’t only muted today, it’s nearly absent.
San Diego’s craft brewer Modern Times seeks buyer to ease debt burden. Many thought it was a bad omen for the whole of the industry when San Diego’s craft brewer Modern Times, which a few years ago was expanding rapidly, on 14 February said it would close four of its eight taprooms and lay off 73 people. Not enough, only ten days later, the brewery’s CEO, Jennifer Briggs, took the unprecedented step and told the website goodbeerhunting.com that Modern Times is looking for an investor or potential buyer to put it back on sound financial footing.
In all likelihood, Modern Times Beer was forced to contract because its business model cost more money to operate than it was bringing in. In 2019, Modern Times sold about 70,000 barrels of beer. In 2021, only 39,000 barrels were produced. Ms Briggs declined to say how much money Modern Times owes.
Political pressure and safety concerns have prompted Western companies to close operations in Russia and Ukraine. Brewers Heineken and Carlsberg have stopped the production and sale of their namesake beers in Russia and will assess the future of their businesses there. Not enough, Carlsberg has scrapped its outlook 2022, saying it is no longer possible to provide a financial forecast for the group.
Ceasing production of their namesake beers is basically a symbolic gesture, as their Russian operations will continue brewing and selling their local brands. This must be seen as a nod to the Russian government, which has since warned that it may nationalise factories, where work has been suspended because of boycotts.
AB-InBev took longer to issue a statement. It said on 11 March that it was seeking to suspend sales of Budweiser beer in Russia and will forfeit all financial benefit from its joint venture with Turkey’s Anadolu Efes in Russia.
After a year of futile wrangling with its Myanmar joint venture partner, Japanese brewer Kirin will exit Myanmar and sell its stake in two ventures. Kirin has been in a dispute with local partner Myanma Economic Holdings Public Company Limited (MEHL) on how to dissolve their two brewery ventures following a military coup against the democratically elected government in 2021. MEHL has links to the military. “We will resolve this issue by the end of June, no matter what it takes,” Kirin CEO Executive Yoshinori was quoted as saying by Reuters. It is unclear whether Kirin can find a buyer, as it will avoid selling to companies related to the military.
Stone Brewing and MillerCoors see each other in court. A trial in a trademark dispute, in which craft brewer Stone is suing MillerCoors (now Molson Coors) for compensation after MillerCoors had niftily rebranded its economy beer brand Keystone and thus stolen Stone’s craft beer customers, began on 7 March 2022. It is scheduled to last for three weeks. Heavens know why it has taken four years for the trial to begin. Stone sued MillerCoors in February 2018, claiming the company rebranded its 30-year-old economy beer brand Keystone Light in spring 2017 to cash in on Stone’s commercial success.
Tax professionals believe that excise taxes on alcohol, tobacco, and sugar could increase in the wake of covid, as governments search for revenue to pay for the pandemic. If only they would say so. The official explanation is that these taxes are necessary to discourage unhealthy consumption. Who can dispute that?
Poland hikes excise to curb alcohol consumption. On 1 January 2022 the excise duty on alcoholic products, including beer, went up 10 percent. In addition, further “rolling” increases in excise duties of 5 percent annually will come into effect from 2023. The justification, according to a statement by the Polish Ministry of Finance, is a concern for the health of Poles and discouraging them from drinking alcohol. It is feared that Polish consumers could develop a new habit: self-importing their beer from neighbouring countries like Germany and the Czech Republic, where it is far cheaper.
The Australian Hotels Association and the Brewers Association continue to campaign for a cut to the increased excise on draught beer, which came into effect on 1 February 2022. Their campaign is in support of pubs, and clubs, many of which are small businesses, that have endured the most difficult trading conditions because of the pandemic. The campaigners hope to sway the government, whose Federal Budget will be announced on 29 March 2022.
Rumour has it that Heineken could dispose of its Strongbow cider brand in South Africa, in order to alleviate competition commission concerns over its proposed USD 2.5 billion takeover of South Africa’s largest alcohol producer, Distell. Distell is the world’s second-largest cider producer, with brands like Savanna and Hunter’s. Heineken is the world’s major cider producer through its Strongbow and Bulmers brands, but in South Africa, Savanna is in the lead. Heineken’s Strongbow was introduced into South Africa in 2016 and has been growing rapidly.
The covid pandemic has hit the German brewing industry hard. Not only have millions of hl in volume sales been wiped out, the total of operating breweries has also declined – the first time in a decade. According to statistics by the German Brewers Association, there were 40 brewery closures in 2020 and 2021 over 2019. These include 26 small breweries, which are classified of having an annual beer output of up to 5,000 hl. Separately, Germany’s commissioner for drugs wants to raise legal drinking age to 18, from currently 16. Whether this is politically possible will be seen.
So Monster and Constellation are still talking about a combination. According to Bloomberg, talks between the two beverage firms are progressing. Indeed, an agreement could be reached in the coming weeks. The similarly sized companies have a combined market value of about USD 90 billion. The rumour about a tie-up first surfaced in November 2021. Investors continue to be underwhelmed by the idea. Shares of both Constellation and Monster have fallen slightly in recent weeks.