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Beer Monopoly
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Posted February 2012 Something's brewing ... in Israel Israeli beer market 2011 was all about beer. Newspapers, magazines, blogs. Microbreweries got tons of great press. So I went to the Middle East to find out what’s really going on. "You are going to Israel to do ... WHAT? Taste beers?" My friends' response was outright consternation. This took me by surprise. They huffed and puffed and grumbled disapproval. As if I was going to do something frivolous, blasphemous even. I did not think that researching the budding Israeli craft brewing scene was any more outlandish an investigation than travelling to Iceland to study some rare moss. When I retorted: "How am I supposed to do Israel the proper way? Join a tour group and tick off the sights?" all I got were snorts of derision. "To heck", I said to myself and unperturbed set off in search of Israeli microbrewers. Of course, I would be the first to acknowledge that Israel is not like the Bahamas, where the worst afflictions that can befall you are a killer hangover and a sun-stroke. Come to think of it, how many countries are there which sport a wall that runs almost the full length of their territory? Germany's wall went down 20 years ago, but the U.S. (with Mexico), Cyprus, Northern Ireland and Israel still have theirs. And how many countries can you think of quickly, where every other person is wearing military garb in the streets? North Korea must be high up on that list - although I have not been there - beating Iran and Israel into second and third slots. But then again, where on earth do you run the very serious risk of having a rocket lobbed on your head as you go about your daily routines? My friends were right: Israel is different and in more ways than one. In some tourist guidebooks they like to describe Israel and the occupied territories as rich in contrasts. They would, wouldn't they? Israel's got its own Silicon Wadi with thousands of high-tech companies; it's got wide motorways, U.S. style shopping malls, and still half the country under vines; it's got a concrete jungle by the Red Sea and rare tulips in the Negev desert. Add to that the spectacularly scenic Golan Heights (captured from Syria in 1967), where vineyards alternate with cordoned-off minefields, the densely populated West Bank (captured from Jordan in 1967) with its tinderbox atmosphere, the city of Jerusalem, where everybody strives to be holier than thou, and a bunch of downright scary neighbours ... and you will begin to understand why the most frequently used word in Hebrew, by my count, is "lo", meaning "no". But despite all this - and you will have gathered by now that there is a lot of "ALL THIS" - there are millions of people in Israel and the occupied territories who try to lead normal lives, which include having a beer once in a while. What got me intrigued with Israel in the first place was its low beer consumption. For years I have followed the Barth Report's estimates for Israeli beer production. Although the figures show that beer output has been on the increase for the past few years and stood at 980,000 hl in 2010, Israel still ranked far behind countries like Kazakhstan and Malaysia. Strange, isn't it? How come that a predominantly non-Muslim country drinks so little beer? What do people do at those crazy raves out in the desert, or at these all-night parties on the beaches, one gets to read about? Have a glass of water? That must be the case because my calculator would not budge and told me that in 2010 per capita consumption of beer was 13 litres - if, for simplicity's sake, you divide 1.0 million hl by 7.7 million people. That puts Israel on par with Turkey. Official data claim wine consumption is 4 bottles a year - or hardly any, if you happen to be French. Small wonder, when it comes to total alcohol intake for people 15 years and older, Israelis drink only 2.5 litres per year. This is significantly less than the Americans (8.8 litres) or the Russians (11.5 litres) consume, says the OECD in a 2011 survey. Now if you were to factor in the 2.8 million tourists who travelled to Israel that year and probably also had a beer or a glass of wine during their sojourn, ... well, I have always maintained that medians are highly suspect.
What’s on tap for “Joe Goldstar”? These figures underline the gargantuan task Israeli microbrewers face when it comes to teaching their countrymen to enjoy a "better beer".Mazel tov if you are a subscriber to Brauwelt International. Because then you can read the rest of this report. Read on
Posted November 2011 From Russia with love
How the east was won | The day the world changed.
On Christmas Day 1991 Mikhail Gorbachev resigned as the last
leader of the Soviet Union and Boris Yeltsin ordered the red flag
to be lowered from the Kremlin. With 20 years hindsight we know
why the USSR disappeared, not with fireworks but a damp squib.
President Yeltsin inherited a decaying, bankrupt, thoroughly
militarised and just as thoroughly corrupt communist empire,
which he set out to reform through a shock therapy to create a
private sector and open up the country to private investment.
Among the first to latch onto this opportunity were a motley crew
of Nordic and Indian investors who thought that building the
Russian beer market was the opportunity of a lifetime.
It's important to remember those early crazy years
to understand why Russia's beer market decline (-10 percent/-10
million hl) from 2007 to 2010 is now giving international brewers
such a headache, propelling leader Baltika to fire its
long-serving CEO and SABMiller to combine its Russian brewing
interests with Efes' in late 2011.
Napoleon Bonaparte is said to have quipped that
“history is the version of past events that people have
decided to agree upon.” Most commentators these days concur
that the fall of the Soviet Union in 1991 wasn't inevitable
because of inherent fatal defects. True, from 1981 to 1989 the
growth of the country's GDP slowed to 1.9 percent a year. Yes,
economic stagnation was obvious and worrisome. And yes, by
running the rouble printing presses red-hot, Mr Gorbachev's
government had created a colossal monetary overhang. But many an
inefficient state has muddled through for decades.
If you will, it was three factors which sped up the
Soviet Union's demise: Mr Gorbachev's messed-up political and
economic reforms between 1985 and 1991; Mr Yeltsin's hunger for
power which made him topple Mr Gorbachev when he got the chance
to do so and the Soviet elite's greed for state-assets.
When on 8 December 1991, the heads of three of the
Soviet Union's 15 republics, led by Russia's Boris Yeltsin, met
in a hunting lodge near Minsk, in what is Belarus today, to sign
documents abolishing that 74-year-old state, they demolished a
highly specialised and integrated economy (e.g. dairy in the
Baltics and cotton in central Asia) and caused the collapse of
production across the former Soviet territories, which fell by
almost half in the 1990s.
By the winter of 1991, the Economist newspaper
wrote, Russia had two months’ worth of grain left, and
producers were refusing to sell their crops to the state at
regulated prices. Shops were empty. People were hungry. There was
no money to import food, either. Foreign-exchange reserves stood
at USD 27 million and the country’s foreign debt, inherited
from the Soviet Union, was USD 72 billion.
Price liberalisation, implemented by Mr Yeltsin's
government, made the erosion of Russians’ savings visible,
and was hugely painful. The other task was to break the
communists' grip on assets as quickly and peacefully as possible.
The mass privatisations of the years 1992 to 1995, when the
Yeltsin government sold state-owned industries for a song to
Russian businessmen or foreign companies, were far from just or
clean. Moreover, they only broke the central planners’ grip
yet failed to create the hoped-for shareholder democracy as most
Russians exchanged their vouchers in state-owned companies for
small amounts of cash, or even vodka.
In the early 1990s, Russia resembled a host of
troubled countries. It had Tanzania's subsistence economy,
Pakistan’s corruption, Brazil’s wayward congress,
Italy’s mafia, and a Communist Party all of its own. In
other words, it was a bit like the Wild West - fast forward by
one hundred years.
On to this unchartered territory some Nordic and
Indian investors were the first to step: Finnish brewer
Sinebrychoff, the Swedish-Finnish venture Baltic Beverages
Holding (set up by brewer Pripps of Sweden and Hartwall in
Finland), two twentysomething entrepreneurs from Iceland, Thor
Bjorgolfsson and Magnus Thorsteinsson and, not to forget, the
Indian owners of the Sun Group.
Next came South Africa's SAB and Turkish brewer
Efes, who arrived in 1997 and 1998 respectively, when the others
had already carved out a large chunk of the market for
themselves. For reasons best known to themselves, neither Efes
nor SAB continued to grow through acquisitions in the final years
of the decade. Considering that Efes had spent a reported USD 120
million on its brewery in Moscow and SAB, in order to buy Miller
Brewing in the U.S., had put a cap on expenditures, the reason
for their reluctance become clear.
Lastly, brewers Interbrew and Heineken were in a class of their own. For one, they were late-comers, for another their strategy differed fundamentally from the aforementioned because they chose to buy breweries which had already enjoyed some degree of westernisation: Interbrew bought a stake in Sun in 1999, while Heineken acquired Bravo from the Icelanders in 2002.
Writing history or hiding the truth
If history, pace Napoleon, is the version of past
events that people have decided to agree upon, then the history
of brewing in "the 1990s Russian Wild West" (The
Economist) still needs to be written.
Apologies, but the rest of this report is reserved for subscribers to Brauwelt International. Read on
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