Over the years it has come to our attention that clubs do not like to serve tap water free of charge. To make sure punters do not make a bee-line to the restrooms to help themselves to a drink of water there, the club’s management often runs the water at high temperatures. The smart set gets around this by always carrying tea bags – just in case. However, we have never heard of governments actually imposing conditions on licensed premises to ensure that free tap water was available in all licensed premises. This happened in the UK under the previous Labour government. The new Coalition Government is barging ahead with even more regulation in an effort to rebalance the Licensing Act to tackle the crime and anti-social behaviour that is too often associated with binge drinking in the night-time economy.
Venezuela
If you cannot beat them, join them
Tough luck if you happen to be the number three brewer in a country and your market share is under pressure. One way out of this impasse is to combine with a larger player. This is what AmBev, Brazil’s largest brewing and beverage company is planning to do. On 20th August 2010 it was announced that AmBev is to merge its Venezuelan unit with Cerveceria Regional, the number two brewer. By taking a minority stake in the combined company, AmBev and Regional hope to strengthen their position in South America’s second-largest beer market, which is dominated by privately-owned brewer Polar.
Africa
Struggle and success never far apart
For almost a full decade prior to the global economic meltdown, Africa enjoyed over 5 percent GDP growth annually. Beer output across the continent rose to 95 million hl in 2009 from 61 million hl in 2000 or 6 percent annually. Even in 2009, at the height of the crisis, Africa’s beer output still nudged up 4 percent over 2008. However, upon closer look, the picture has been far from rosy all over. In August 2010, SABMiller, Africa’s major brewer reported that in Southern Sudan, of all places, it has doubled the size of its existing brewery operations in Juba in only a year, while over in Ghana, it seeks a de-listing of its subsidiary Accra Brewery Ltd. to enable it to implement a business recovery programme.
Tanzania
Competition between SABMiller and Diageo is heating up in East Africa
The days of SABMiller’s and Diageo’s non-aggression pact in the East African region are truly over. At the end of July 2010 the Tanzanian regulatory authorities gave the green light to Kenya-listed East African Breweries Limited (EABL), in which Diageo holds a controlling stake, to acquire a 51-per cent stake in Tanzania’s privately-owned Serengeti Breweries Limited (Serengeti). Serengeti is the number two brewer in a market controlled by SABMiller’s Tanzania Breweries. However, the approval is based on several conditions. Nevertheless, this decision is seen as a major breakthrough for Diageo in Africa. Overly reliant on a Kenyan market that has slowed down in recent years (due to economic and political factors, and a general lack of dynamism) and well placed in a Ugandan market where cost pressures are high and competition with SABMiller is rife, EABL can now bump up its presence in Tanzania.
Netherlands
Cost savings boosted Heineken’s profits
If only there was more of Africa. Africa has become Heineken’s second most important market region by profits. This was underscored by Heineken’s 2010 first-half results. Heineken reported a higher than expected rise in first-half net profit after cost savings helped offset lower beer sales in Europe and the United States. The Dutch brewer said group beer volumes fell 2.3 percent year-on-year, but costs savings, lower raw material and interest costs and its joint ventures led to a 17 percent rise in net earnings. Heineken’s net profit before one-offs increased to EUR 621 million, boosted by EUR 104 million from cost savings, broadly in Europe. Heineken’s first-half results included two months from the beer business of Mexico’s FEMSA, bought in January this year to gain more access to faster-growing emerging markets.
Australia
Foster’s wine unit continues to seep money
A slowing demand for beer, the strong Australian dollar and the international wine glut were behind Foster’s reporting an AUD 464.4 million (EUR 328 million) net loss in its financial year ended 30 June 2010. On 24 August 2010 the beverage group provided few details on its announced demerger plan while brushing aside speculation that SABMiller was planning a takeover of its beer division, once it is separated from its ailing wine division.
UK
A cautious outlook brings jitters to Diageo’s investors
Guinness producer Diageo’s profits were propped up by sales in emerging markets, including Latin America, the Caribbean and Africa. Nevertheless, Diageo, the world’s number one drinks company on 26 August 2010 reported an annual performance in the year to the end of June which analysts called “lacklustre”. Operating profits edged up 2 percent to GBP 2.75 billion, while revenues climbed 5 percent to GBP 9.78 billion (EUR 12 billion). In Latin America and the Caribbean, buoyant sales of scotch, led by Johnnie Walker, and rum, led by Cacique, resulted in a 15 percent net sales growth. In Africa, sales climbed 10 percent, driven by lager, in particular the Harp brand in Nigeria and the Tusker brand in Kenya.
Russia
Russia’s loss is the U.S.’ gain
While millions of Russians worry themselves sick over what they will feed themselves and their livestock on this winter as a severe drought and rampaging forest fires have already destroyed a quarter of the country’s crops, jittery western investors will have been relieved to hear that commodity shortages and soaring grain prices will not affect brewers’ shares adversely. After the Russian Prime Minister Vladimir Putin signed an order banning grain and flour exports from mid-August to the end of the year, shares in Diageo, AB-InBev, Carlsberg and SABMiller fell slightly. But they were beginning to recover when brewers pointed out that they usually have long-term fixed contracts to protect them from erratic movements in commodity prices. What they also should have said is that the cost of ingredients is only a small part of the cost of a beer. At the most ten percent of the retail price of beer is down to ingredients, with other factors such as delivery and distribution, marketing, staff and energy costs being just as, if not more, significant.
South Africa
Brewers in a froth
Gone are the days when African beer markets were neatly divided monopolies. Brewers in search of growth show less and less inclination to respect each other’s territories – a lesson SABMiller is learning the hard way. Its South Africa unit SAB is fighting hard to protect its 90 percent market share from rivals Heineken and Diageo, which have expressed their ambition to achieve a 20 percent share of the market. Moreover, in early August SAB faced some tough questions in an anti-competition hearing. The case, which has been going on for about six years, involves allegations that SABMiller abused its dominant market share to the detriment of independent distributors, who claimed they lost out in sales once SAB upped its direct sales volume.
Belgium
AB-InBev’s first quarter beer volumes outshine SABMiller’s
AB-InBev said second quarter beer volumes rose 2.1 percent, thus surpassing rival SABMiller who had reported a decline during the same quarter ending 30 June 2010. On 12 August, AB-InBev said that second-quarter profit rose 7.3 percent to USD 1.15 billion from USD 1.07 billion a year earlier. Like SABMiller, AB-InBev’s beer sales enjoyed a boost from the World Cup. In fact, AB-InBev sponsored its official beer – Budweiser. In advance of the Cup, AB-InBev started selling the brand in Russia which might have helped compensate for the brand’s decline in volume in the United States.
Mexico
Anti-trust watchdogs muzzled and gagged?
How often has Mexico’s anti-trusty body Cofeco investigated “monopolistic practices” in Mexico‘s beer industry over the past decade? Too often for us to remember. Did anything come of it? Ah, ehm, err, no. Did it tell leading brewers FEMSA Cerveza and Grupo Modelo to toe the line? Ah, ehm, err, no. So seasoned Cofeco Watchers remain sceptical that Cofeco’s recent probe into the country‘s beer distribution and sales practices announced on 9 August 2010 following allegations of abuse by SABMiller’s local unit could lead to anything much.
Denmark
Carlsberg’s beer volumes dropped 2 percent during first half
Danish brewing group Carlsberg said on 17 August 2010 that its first-half net profit jumped to DKK 3.1 billion (EUR 416 million), from DKK 1.7 billion in the year-ago period, and also lifted its fiscal-year profit growth guidance. Meanwhile first half-revenues declined 2 percent to DKK 28.9 billion, with beer volumes down 2 percent to 55.8 million hl. The Russian beer market, where Carlsberg earns most of its profits, declined 9 percent in volume in the first six months driven by significant price increases after the introduction of a higher excise duty. Carlsberg said it raised its market share in Russia to 40.1 percent in the second quarter from 39.1 percent in the first quarter.
Germany
World beer output in 2009 dropped
It was to be expected, yet the Barth report for 2009, out now, makes sobering reading. For the first time since 1992, world beer output did not rise, but fell by nearly 10 million hl. In total, more than 1.8 billion hl of beer were brewed worldwide, or about 18 times the volume produced in Germany. Nearly all the western industrialised countries registered a fall in output. Had it not been for China, which further raised its beer output and produced more than 423 million hl, global volumes might even have declined. As in the previous year, Germany, with beer output of around 100 million hl, ranks fifth behind China, the U.S., Russia and Brazil.
Australia
Foster’s circled by buyers
Ever since the Foster’s Group announced in May 2010 that it would split its beer and wine businesses, the rumour mill has been running non-stop. At least two investment banks are reportedly busy working on behalf of clients with a view to making takeover bids for Foster’s beer business valued at AUD 12.5 billion (EUR 8.6 billion). Various possibilities of what may happen if the brewing arm had a new owner are the subject of conjecture… one is that a new site could be found for the Group’s brewing operations in Melbourne – the Abbotsford brewery – and the real estate value of the prime inner suburban area be realised.
USA
Craft brewers unite
Some craft brewers have seen the light. Bigger is better – especially when it comes to selling beer under the adverse conditions of the U.S.’ Three Tier System. In early August this year, Portland-based Craft Brewers Alliance said it will pay USD 13.9 million (EUR 10.5 million) for Hawaii’s Kona Brewing Company, cementing what had been a nine-year partnership. Under the agreement, Kona will become a wholly owned subsidiary of Craft Brewers, which also distributes the beers of Chicago’s Goose Island Brewery. Craft Brewers was formed when the Widmer Brothers Brewing Company and the Redhook Ale Brewery merged in 2008.
Belgium
Duvel Moortgat reaches agreement to buy De Koninck brewery
That was a quick deal. On 5 August 2010, the brewer of Duvel and La Chouffe beers agreed to buy the family-owned Brouwerij De Koninck for reportedly EUR 30 million. As part of the deal, Duvel Moortgat is also acquiring de Koninck’s real estate portfolio, mainly located in the Antwerp region. This includes the brewery site, about seven other properties and 63 cafés. In the hotly contested Belgian on-premise market, de Koninck’s pub estate must have seemed an attractive proposition given that the 60,000 hl brewery suffered losses of about EUR 300,000 on a turnover of EUR 6.6 million last year.
USA
What’s the problem with Miller’s legacy brands?
You bet there will be a lot of humming and hawing at SABMiller’s executive suite when quarterly sales volumes for the U.S. are reviewed. Many Miller executives’ faces should turn crimson each time they compare their figures with Coors’. While many Coors brands perform well even in the current economic crisis, Miller’s flagship brands seem unable to resist the pull of gravity and continue to decline. This is not a recent development, unfortunately. Miller’s legacy brands have been struggling for some time. So what is it that takes these established brands south? Miller’s corporate honchos may take consolation in the fact that their rivals at AB-InBev are also struggling to turn around Budweiser’s sales. However, the Brazilians only have Budweiser to worry about, whereas the South Africans have got Miller Lite and Miller Genuine Draft on their plate, both of whom happen to be their major sellers.
Europe
EU court rules Anheuser-Busch cannot register Budweiser
At long last, the top EU court ruled on 29 July 2010 that AB-InBev cannot register an EU-wide trademark for its Budweiser brand because of a Czech brewer’s previous claims to the word in Austria and Germany. The ruling dealt Anheuser-Busch a final blow in a long-running legal battle with Budejovicky Budvar of the Czech Republic to reserve the exclusive rights to the Budweiser brand in Europe. In 1996, Anheuser-Busch applied to register Budweiser for an EU-trademark but Budejovicky Budvar sought to block the application.
Australia
New name for Fosters wine business
Who the heck do they think they are fooling? Just giving a business a pretty new name does not improve it. Drinks company Pernod Ricard (also in this weeks news) is calling its new wine unit Premium Wine Brands, although its major seller, the brand Jacobs Creek, is anything but “premium”. Same with Fosters. In preparation for a demerger of its wine and beer assets, the Fosters Group has renamed its AUD 2 billion (EUR 1.4 billion) global wine business Treasury Wine Estates. Please tell us, how can portfolio be treasured that includes plenty of mass-market brands? Perhaps these name changes are PR spin for investors, but can these guys really be fooled by corporate jargon that only puts old wines into new bottles?
France
Pernod Ricard restructures its brand portfolio
The days when a decentralised organisation was all the rage among management gurus are over. Stricter control is the new creed. Being a dutiful follower of management fashions, Pernod Ricard, the world’s number two drinks company, has decided to club together its wine brands in a new brand company called Premium Wine Brands and its vodka brands (Absolut, Friis, Wyborowa along with other Polish vodkas) in another. So this is only an organisational change, then? Honi soit qui mal y pense. Or could Pernod Ricard be turning its newly formed wine and vodka units against each other – all to the benefit of the company’s bottom line, of course?
USA
Private equity player buys Pabst – but what is he buying?
Bravo. Our colleagues over in the U.S. have finally woken up to the fact that private equity is getting more interested in beer. Beer Marketers Insights reported that private equity player Dean Metropoulos’s recent purchase of the U.S. brewer Pabst is the most prominent example yet of an intriguing trend. Other private equity deals in the U.S. include the Griffin Group’s takeover of Fritz Maytag’s Anchor Steam brewery in San Francisco, and KPS Capital Partners’ acquisition of the High Falls Brewing Company and of Anheuser-Busch’s Labatt USA unit, which they united under their North American Breweries umbrella. Nevertheless, these deals pale in comparison to other private equity manoeuvres elsewhere, namely AB-InBev’s sale of its Korean Oriental Brewery to Kohlberg Kravis Roberts & Co or even AB-InBev’s disposal of its central European business unit to CVC Capital Partners. As Brauwelt International reports in a survey of takeover scenarios in the brewing industry, out later this month, these private equity deals will be the most interesting ones to watch.
Austria
Heineken to close Kaltenhausen brewery (not quite)
Seen from the lofty heights of Heineken’s global headquarters in Amsterdam, its Austrian subsidiary, Brau-Union, runs far too many breweries (8) and distribution centres (20). Given that Brau-Union only produced 4.5 million hl beer in Austria last year, many of Heineken’s hard-nosed controllers could be forgiven for thinking that this is about … err, several “te veel” (too many). However, ever since Heineken took over Brau-Union in 2003, the Dutch brewer has been acutely aware that brewery closures are highly unpopular and could cost Brau-Union dearly in market share. But burdened with an estimated over-capacity of 1.5 million hl, Brau-Union was forced to announce in July the “end of industrial beer production” at its third-smallest 280,000 hl Kaltenhausen brewery near Salzburg as of summer 2011. To prevent a public outcry, Brau-Union, in a shrewd move, said they would turn the brewery into a “beer, culture and innovation centre” – whatever this will be. Eight of the current 128 jobs are to be axed.
Spain
Pernod Ricard Group sells Marqués de Arienzo
With no big deals in the pipeline, the consolidation of the drinks industry these days is limited to reshuffling brands. Usually brands get offloaded, which the seller thinks small fry or low-margin businesses without great growth potentials. Doubtlessly, Pernod Ricard’s sale of the Marqués de Arienzo wine brand, its related bodega and vineyards for a cash consideration of EUR 28 million, which was announced on 22 July 2010, falls into this category.
UK
Thank heavens for the Football World Cup
Aren’t you glad that him-indoors is no longer glued to the boy watching football matches instead of doing odd jobs around the house? Global brewer SABMiller probably secretly moans that the games are over because its beer volumes dipped in the April to June quarter, despite receiving a small boast from the World Cup. The brewer of Miller Lite, Peroni and Pilsner Urquell said on 22 July 2010 that underlying beer and soft drink volumes were 1 percent down year-on-year. Investors were on balance expecting fractionally lower lager volumes, so SABMiller’s London-listed shares were up 2.7 percent following the announcement. Chief Executive Graham Mackay said in a trading statement that lager volumes showed growth in June, which analysts interpreted as a promising sign for the coming quarters, when the company would also benefit from easier comparables in the United States and South Africa. The world’s number two brewer added that its financial performance was in line with its expectations thanks to price increases in some places and some reduction of input costs.
Mexico
Easter came too early
What a shame that Easter, usually a peak beer drinking time, was in the first quarter this year. This is perhaps why the Mexican brewer Grupo Modelo reported on 23 July 2010 that sales in the second quarter only grew modestly from a year ago and operating profit slipped on higher expenses. Grupo Modelo, the maker U.S. import beer Corona Extra, said in a press release that net profit rose to MXN 2.93 billion pesos (USD 227 million) in the April-June period from MXN 1.36 billion in the prior-year period, when the company registered losses from unwinding derivatives contracts. Grupo Modelo said revenues rose 3.6 percent, with domestic revenues up 4.9 percent and exports down 1.5 percent. However, its domestic sales volume slipped 0.2 percent to 10.0 million hl, while export volumes fell 3.2 percent to 4.41 million hl.
Germany
Krones achieves turnaround
With the global economy showing signs of a recovery, the investment backlog in the brewing and beverage industries is now being reduced. Krones, the world’s market leader for beverage filling and packaging technology, has been able to benefit from this favourable trend during the first half of this year. Order bookings rose by 26.4 percent to reach EUR 1.1 billion and sales climbed 16.4 percent to EUR 1.1 billion. In terms of profitability Krones has achieved its long-awaited turnaround. From January to June 2010, the company reported earnings (EBIT) of EUR 32.0 million, while in the same period last year it registered a loss of EUR 15.8 million. First-half net profit was EUR 22.1 million, Krones said. Krones’ financial and capital structure, with an equity ratio of almost 39 percent, and net liquidity of EUR 67.9 million (30 June 2010) continues to be sound, constituting a solid foundation for further growth, the company said in a statement on 28 July 2010.
Germany
The going gets tougher for hop suppliers
Since 2006 the world hop industry has been on a rollercoaster ride. In the course of a few years only the market for hops has gone from under-supply to over-supply. As a result, the pressure on growers to abandon hop gardens will continue rise. Stephan Barth, Managing Partner of Joh. Barth & Sohn, Germany’s major provider of hop-related services, at a recent press conference called a spade a spade and advised hop growers: “There is no point in producing hops for a market that will not buy them.” He added that the recession in the hop market until 2005 was followed by an unprecedented boom on the spot markets in crop years 2006 to 2008. In response, the international brewing industry placed long-term forward contracts on the assumption that beer output would continue to rise. The reality, however, turned out to be different: In 2009, world beer output dropped 10 million hl; Europe alone saw consumption dwindle by 30 million hl.
Spring Barley Report Europe
Smaller harvest of spring barley in Europe
Harvest of spring barley in Europe will be lower than 2009. Except for all the reduced areas, but Denmark, yield and quality will be very heterogen from the vantage point of the present. The wet spring in some regions and the heat during the last weeks stressed the plants.
