Posted November
2009
Germany – The return of Mr Fix-it
Wolfgang Burgard, the retired
chief of Carlsberg Germany and President of Germany’s Brewers’
Association was given standing ovations by Holsten brewery
employees when it was announced on 27 October 2009 that he was
to follow – on an interim basis – Jörg Croseck, 44, who had been
given the sack by Copenhagen. Apparently, Mr Croseck, who had
been appointed as Mr Burgard’s successor in 2008, had been
unable to deliver the goods. The Danish brewer Carlsberg, which
has to pay off a huge debt load following the takeover of
Scottish & Newcastle together with Heineken, seems desperate
enough to bleed its divisions dry, even if it means selling off
profitable chunks of its business.
Mr Burgard is not to be
envied. He has been given the task of turning around Carlsberg’s
German business (Holsten, Feldschlösschen) in order to meet
profit margins.
From what we have heard on the
grapevine, Mr Croseck did not try hard enough to achieve that
goal and fell for the easy solution to this complex demand:
rather than fixing things, he decided to sell and kill.
It was under Mr Croseck’s
stewardship that a cost saving and profit maximising strategy
was devised which included selling off the supermarket own label
brewing business located at the Braunschweig Feldschlösschen
brewery to Germany’s king of discount beers, Oettinger, in June
this year.
Had it not been for the
economic crisis, which has depressed Germany’s real estate
market, Mr Croseck would have already closed down the Holsten
brewery in Hamburg and sold the land to a developer.
Apparently, this fate is lying
in store for Carlsberg’s Feldschlösschen brewery in Dresden. The
reason? It is surplus to requirements.
In the long run, market
observers believe that Carlsberg will limit itself to operating
just one brewery in Germany, which is the Lübz brewery. The
brewery in north-eastern Germany will become its anchor brewery
– a euphemism for “the one and only” – with the remaining volume
being brought in from across the nearby Danish border, where
Carlsberg has its Fredericia brewery.
As far as we at Brauwelt can
tell, Carlsberg’s Danish management in Copenhagen has decided
that to operate in the whole of Germany is not worth the effort.
Carlsberg’s policy for Germany seems to be a regional one with
the focus on northern Germany, which in military terms would be
called Carlsberg’s “glacis” – the reclaimed territory around
Carlsberg’s Nordic Fortress, where intruders will be fought.
In this regard, it makes
perfect sense that Carlsberg Germany set up a 50:50 distribution
venture – Nordic - with the distributor Nordmann in spring this
year. Having recently received the regulators’ go –ahead, Nordic
will be the largest distribution business in northern Germany.
Branching out into
distribution was the logical next step for a brewer which has
decided to limit its geographical reach. By expanding vertically
into distribution Carlsberg Germany obviously hopes to protect
its market and widen its margin. Brewers’ margins in Germany are
notoriously small.
Had it not sold the
Braunschweig brewery, Carlsberg Germany would have produced 5.7
million hl beer this year. Because of the sale, volumes will
drop to about 4.5 million hl beer.
Russia – Carlsberg will be crying into its
beer
Remember BRIC? Those
much-hyped growth markets? Well, forget about the “R”. While
Russia is considering plans to quadruple excise duties on beer
by 2012, Carlsberg with over 40 percent of the market, reckons
this will add 20 percent to 30 percent to retail prices and lead
to a massive drop in beer sales. The alcohol industry is used to
being seen as an easy target by cash-strapped governments. But
if you think the upward lurch in Russia’s taxes particularly
rough on the country’s foreign brewers, which control about 80
percent of the market, you are right. Where we come from it’s
called gung ho jingoism – a sentiment most dear to Russia’s
powers-that-be, who in their infinite wisdom also decided that
Russia’s huge—and largely locally owned—vodka industry will be
exempted from the excise increase. Read on
Japan – Kirin to close two breweries
Kirin Holdings will close two
of its eleven breweries in Japan by the end of 2012 to
streamline operations ahead of its merger with Suntory, Japanese
media reported at the end of October 2009. Kirin Holding plans
to close two domestic breweries as part of a three-year plan to
increase operating income by around 50 percent. The closures
were announced as part of a business plan designed to
substantially increase group earnings. Whilst in the past the
emphasis has been on raising turnover, the focus now has shifted
to increasing earnings. This shift indicates that Kirin has
accepted it must lay itself open to international standards of
comparison – EBITA rather than turnover - if it wants to compete
globally. Read on
United Kingdom – Learning from the best
There is no need to call
yourself a consumer goods company, or even a fast moving
consumer goods company, as many brewers deem it necessary these
days, to convince investors that theirs is a sound business. But
this should not stop brewers from studying the practices of
consumer goods companies.
In this respect, the global
drinks company Diageo could be leading the way. It is adapting
its sales practices to a changing retail environment which is
holding much lower stock levels than ever before. Diageo admits
it is using lessons learnt from the food sector to ensure its
products are both available and desirable for shoppers to take
home. Read on
Russia – Oleg Tinkov sells his brewpub
chain
He is one of Russia’s most
famous “Bisnezmeny”, the closest they’ll probably get to a
perma-grin Richard Branson. Oleg Tinkov came out of the
woodworks in the 1990s, a flamboyant Siberian with roubles
stuffed in his pockets whose source few liked to know anything
about and founded a frozen food company specialising in pelmeni
(Russian dumplings) before setting up St Petersburg’s hippest
and coolest brewpub Tinkoff in 1998. At the height of Russia’s
beer boom in 2005, he sold his beer business to InBev for about
USD 200 million to concentrate on his chain of brewpubs and his
online credit card business, Tinkoff Credit Systems. Now Mr
Tinkov, 43, professional cyclist manqué, and founder of the
Tinkoff cycling team, has sold his chain of ten brewpubs to
private equity company Mint Capital for an undisclosed sum,
having invited bidders through Twitter. Could it be that his
luck has left him in Russia’s economic crisis? Or did he just
get bored? Read on
Austria – Heineken sells stake in
Ottakringer – will Paulaner be next?
If you are looking for a
reason why Heineken sold its stake in Ottakringer brewery at the
end of September 2009 – well it cannot have been the money
Heineken made from the sale. The market value of the Ottakringer
stake, which was held by Heineken’s Austrian and central
European unit BBAG, was EUR 17 million. Evidently, Heineken
pulled out because its executives no longer see any value in
having minority investments which do not provide them with
management control. This does not bode well for Heineken’s stake
in Germany’s Brau Holding International, Heineken’s joint
venture with Schörghuber Group (Paulaner) in which Heineken has
a 49.9 percent stake. Rumour has it that a divorce is imminent
and that the partners are quibbling over a mere technicality:
the price Heineken is asking for its exit.
Eleven years ago, BBAG
acquired a minority interest in the Viennese Ottakringer brewery
– which was five years before Heineken bought BBAG. Although
Heineken professedly wanted out of Ottakringer immediately, it
has taken Heineken and Ottakringer six years before they could
go their separate ways. The final bone of contention was
Ottakringer’s plan to integrate the mineral water brand Vöslauer
into the company, which would have doubled Ottakringer’s
turnover. It presently stands at EUR 80 million annually.
Both parties would not
disclose the terms of the deal.
Ottakringer (592,000 hl beer)
is Austria’s number four brewer, behind Brau Union (owned by
Heineken) which has a 50 percent market share, the Stiegl
brewery in Salzburg (1 million hl) and the Egger brewery in
Unterradlberg (650,000 hl).
Austria’s beer market is flat.
Growth is achieved only at the price of crowding out the
competition. During the first half of 2009, beer production in
Austria declined 5 percent, while the number of breweries
remained constant: 67 breweries and 108 brewpubs in a country of
8.2 million people.
Heineken reported that during
the first six months of 2009 beer production at its 60 breweries
in central and eastern Europe dropped 9.8 percent to 22.5
million hl compared to the same period last year. Turnover went
down 14 percent to EUR 1.5 billion, mainly because of currency
devaluations.
Austria did not perform any
better: Brau Union registered a volume decline of 11 percent
during the first half of 2009.
Belgium – AB-InBev sells central European
business and prepares exit from Germany
Although the rumour mill
spread it as early as July 2009 that AB-InBev would sell the
central European unit to private equity fund CVC Capital
Partners, the deal still makes interesting reading. In
mid-October 2009 it was revealed that AB-InBev will receive USD
1.68 billion in cash to start, with an additional USD 613
million coming in deferred payments and minority interests, and
the possibility of USD 800 million later, depending on the
unit’s future earnings.
To us, this means that
AB-InBev was so desperate that they even gave CVC credit to take
the unit off their hands – although AB-InBev’s accountants will
probably know how to turn that into a win-win. CVC, which
already bought AB-InBev’s Korean business, will get a 15 million
hl operation with a total of eleven breweries in
Bosnia-Herzegovina, Bulgaria, Croatia, the Czech Republic,
Hungary, Montenegro, Romania, Serbia and Slovakia.
The operations will be renamed
StarBev, AB-InBev said. As part of the deal, set to close in
January 2010, AB-InBev will license CVC to brew and distribute
brands like Stella Artois, Beck’s, Löwenbräu, Hoegaarden, Spaten
and Leffe.
This has already raised some
eyebrows in Belgium, since Leffe is marketed as a Belgian
monastery beer and for reasons of credibility should not be
brewed elsewhere under license. But do they still care about
this at AB-InBev? Apparently, not.
In both deals with CVC,
AB-InBev has the option of buying back the assets if they are
ever put up for sale - something the company may be tempted to
do once it further decreases its leverage. But that may only
apply to the Korean business, as Korea is fundamentally a growth
market.
In central Europe, the picture
is different. AB-InBev’s Czech and Romanian units did not live
up to expectations while the Croatian and Montenegrin
subsidiaries failed to boost their market share. Looks like
these central European assets could be gone forever. For further
proof of this assumption, look no further: AB-InBev’s central
European unit was headed by a Brazilian, Francisco Sá.
A CVC spokesperson was quick
to point out that CVC’s investment plan calls for CVC to stick
to these assets for four to six years before exiting. If need
be, CVC will keep them longer.
Actually, exiting may not be
such a problem for CVC. There is still plenty of scope for
consolidation in these markets. Who knows, once the economy
improves, perhaps Heineken or SABMiller will be happy to buy
some of these assets in order to increase their own market share
and profitability. Of course, regulatory consent permitting.
With central Europe gone,
AB-InBev may even get lucky and find a buyer for its German
business. In Germany AB-InBev is number two and claims to have a
market share of 9.5 percent. Most of its five breweries might
find a buyer if sold off. But market observers think that this
could be the best time ever for a private equity buyer to enter
the market with the aim of thoroughly restructuring and
consolidating it.
The spotlight is on Germany
now.
Germany – Karlsberg launches a novel beer + beer mix
Why would anybody want to mix
a lager beer and a wheat beer and package the result in a
longneck bottle? Richard Weber, the owner of Karlsberg brewery
thinks this is the wrong question. Rather, we should ask
ourselves: why has no one thought of such a mix before? On 9
November 2009 Karlsberg brewery is launching “Mixery Blend“, a
novel product under its Mixery beer mix label. Mixery Blend is a
lager beer (69%) mixed with a wheat beer (30%) and a third,
albeit secret ingredient and targeted at young adults, who,
according to Dr Weber, think most German beer brands dowdy. Read on
Netherlands – Heineken sees light at the
end of the tunnel
Dutch brewer Heineken on 25
October 2009 raised its full-year earnings guidance as it
increased prices and cut costs, offsetting a 3.9 percent drop in
third-quarter revenue from EUR 4.24 billion a year earlier and
decline in volumes by 4.1 percent. The decline was greatest in
the Americas, and Heineken mainly blamed the challenging
consumer environment in North America.
The company said markets in
Europe and the U.S. remain under pressure because consumers are
switching to cheaper beers or just drink less, echoing comments
made by other brewers which have said the move to premium beers
seen before the downturn has slowed. Read on
United Kingdom – Heineken buys struggling
pub company
On 30 October 2009 Dutch
brewer Heineken made its first foray into the UK pub business
after buying the assets of Globe Pub Company, the cash-strapped
pub operator owned by property tycoon Robert Tchenguiz, from the
receivers for GBP 180 million (EUR 200 million).
Heineken acquired the Globe’s
estate of 421 leased and tenanted pubs via a new vehicle called
EBP Pub Company, after the pub group was placed into an
administrative receivership.
Against its will the Dutch
brewer has been drawn into the UK’s pub retail market, having
“inherited” some unusual beer sales contracts from Scottish &
Newcastle, which meant Heineken would have lost even more money
on the Globe had it not saved the Globe. Read on
Mexico – Mexicans still enjoy their beer
Grupo Modelo, Mexico’s number
one brewer, has compensated a dip in export sales with higher
domestic sales to report solid rises in net sales and earnings
for the third quarter of 2009. Net sales for the three months to
the end of September 2009 rose 11 percent to MXN 22.1 billion
(USD 1.68 billion), compared to the same period of last year,
Grupo Modelo said on 28 October 2009.
Net profits for the three
months increased 13 percent to MXN 2.95 billion, with operating
profits up 27 percent to nearly MXN 6.1 billion. Read on
Mexico – Do as bankers tell you
At first there was only talk
that Mexico’s beer and beverage conglomerate FEMSA would spin
off its beer division (Sol, Dos Equis). Now analysts are talking
about the whole of FEMSA being sold. We wonder if Mr Buffett has
a hand in this deal too? It was his willingness to sell his
shares in Anheuser-Busch to InBev which gave last year’s
super-deal the green light. Obviously, the prospective sale of
FEMSA has increased the pressure on Grupo Modelo to agree to a
complete sell-out to Anheuser-Busch InBev. Read on
Germany – Krones expects to break even in
the fourth quarter this year
On 29 October 2009, the
world’s leading manufacturer of packaging and filling machinery,
Krones, reported a 22.8 percent drop in sales for the first nine
months this year and a pre-tax loss of EUR 25.4 million.
While sales in Germany and the
rest of Europe were down, orders continued to come in from all
other regions less affected by the economic downturn. Read on
Japan – Kirin-Suntory merger may be
delayed
The planned merger between
Kirin Holdings and Suntory Ltd may not take place this year as
Japanese regulators request more information, Japanese media
claimed at the end of October 2009. The Fair Trade Commission
reportedly wants the two firms to disclose material which
outlines the impact of their merger on the domestic market.
On 14 July 2009, Kirin and
Suntory, two big Japanese brewers, announced that they are in
merger talks. A marriage would create a company with sales of
YEN 3.8 trillion (USD 41 billion) and a domestic market share of
30 percent for soft drinks, 50 percent for beer and nearly 80
percent for whisky.
Read on
▲
Archiv october 09
·
september09
·
august09
·
july09
·
june09
·
may 09
·
april 09
·
march 09 ·
february 09
· january 09
·
december 08 ·
november 08
· october
08··
september 08
·
august 08
· july
08
·
june 08
· may
08
◄
