Posted
August 2010
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. Read on
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. Read on
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. Read on
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. Read on
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 Miler Lite and Miller Genuine Draft on
their plate, both of whom happen to be their major sellers.
Industry observers have been whispering it for some time: “Miller’s
clearly having problems. Brands, ahem, well, not doing well.
Gotta do something about that.”
Beer Marketers Insights finally reported at the end of June 2010 that
MillerCoors’ quandary as to what to do with Miller’s legacy
brands was only increasing as time goes on. In the year to date
to 13 June 2010 Miller Legacy brands were down 7.9 percent,
while Coors’ Legacy brands gained 2 percent.
Sadly, there is no easy answer as to why Coors’ legacy brands are doing
better than Miller’s. It is not simply a case of light beers
outdoing full-bodied beers or Coors Light would be afflicted by
the same plight as Miller Lite. And it isn’t a case of bad
marketing versus good marketing either, or sales of Coors Light
should have hit the skids years ago when they first introduced
those tacky pneumatic twins.
Perhaps the answer lies with demographics. If you were to compare the
U.S. with Australia, which your commentator happens to be
visiting right now, you could observe a similar development.
Foster’s major brand VB is losing in volumes and there is
nothing they can do about it.
By all accounts, Foster’s VB fails to address the needs of the younger
male drinker. Aussi males do not drink less beer than their
fathers, it is just that they happen to be less brand loyal.
They want choice, variety, and a good price.
If, in Australia, international beer brands are becoming more popular
with the next generation of beer drinkers, it is because during
promotions they are now priced similarly to domestic brands. And
they taste differently (or better).
I think that it is somewhat premature to write off mega-brands. Yet,
there is no denying that they are under pressure. See Budweiser,
see Miller Lite.
My guess is that brands are in the throes of fashion. Fashions come and
go. In the brewing industry the swings of fashion may take
longer than elsewhere but they do happen.
Miller’s executives should be aware of that. Fortunately, they have
emerging markets to get volume growth and the U.S. for a steady
stream of profits.
Alas, for how much longer will the analysts be content with this
explanation while they contemplate Miller Lite’s and Budweiser’s
declining sales figures?
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.
While the ruling means that AB-InBev cannot get a blanket trademark for
the 27-nation European Union as a whole, the brewer can have
trademarks in individual EU markets. It was already settled in
the past that AB-InBev can keep the Budweiser or Bud name in 23
of the 27 European countries
The UK is one of the few places where both Anheuser-Busch and Budvar beer
are sold under the name “Budweiser”. In the U.S., the original
beer from Budweis is sold under the name “Czechvar”.
Nevertheless, in the Czech Republic people interviewed in the streets
cheered the ruling. Having resigned themselves to the fact that
all their prestigious Czech beer brands are now foreign-owned
and have been streamlined to please international palates (i.e.
to taste like what the Czech derogatorily call “Euro beers”),
they seemed pleased that at least the sate-owned Budejovicky
Budvar carries on the Czech brewing heritage.
Australia – New name for Foster's 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 month’s news) is calling its new wine unit
Premium Wine Brands, although its major seller, the brand
Jacob’s Creek, is anything but “premium”. Same with Foster’s.
In preparation for a demerger of its wine and beer assets, the
Foster's 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?
Read on
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? Read on
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. Read on
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. Read on
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.
Read on
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. Read on
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. Read on
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. Read on
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.
Read on
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