Update: Heineken to control S&N in Britain

The dust has settled on the Carlsberg and Heineken takeover of Scottish & Newcastle and the picture becomes clear. S&N's British business will not be divided between the Danes and the Dutch but will be wholly controlled by Heineken. This means the Dutch group will be in competition with Carlsberg in the British market and Tetley brands will not be moved to John Smith's brewery in Tadcaster. However, the long-term future of Tetley must be in doubt as it has to vacate its Leeds city centre site.
Heineken is delighted by its stake in Britain. The Dutch group at present accounts for only 1% of the British market but this will grow considerably as a result of the takeover. The chief executive of Heineken, Jean-Francois van Boxmeer, will sell both Heineken and Kronenbourg in Britain (as well as Foster's) and believes there is growth in the British lager market. Most observers -- including this writer -- think this is ill-conceived. The demand for premium lagers produced by global brewers is in sharp decline. Van Boxmeer is viewing the British lager sector through the prism of his imported Heineken, which is doing well in Britain but only because it replaced the risible 3.5% version brewed under licence here for decades.
Van Boxmeer is excited by the potential of the cider sector -- he will own Bulmer's -- but after an explosion of sales in recent years there are signs that demand for Bulmer's and Magner's "over ice" is beginning to slow.
There are still many questions hanging over the deal. All the John Smith's Bitter brewed at Tadcaster is keg. The cask version is now contract brewed. Will Heineken have any interest in cask beer, of which it has no experience? The knock-on from this is the future of S&N distribution company, Waverley TBS, which is a major wholesaler of cask beers. Without the company, many smaller cask beer brewers would find it hard to get their beers to market.
Heineken will now pick up S&N's 30% stake in the Caledonian Brewing Company in Edinburgh, which makes the successful cask beer Deuchars IPA. Already, there are City rumours that Heineken will off-load its ale brands, including John Smith's, which might be of interest to Greene King and Marstons. The situation will be of concern to Theakston's in North Yorkshire: its Best Bitter is brewed by John Smith's.
The big winner in the takeover is Carlsberg. It now owns the Kronenbourg end of the business in France, where the lager is the biggest brand in the market, and is now the sole owner of Baltic Beverages Holding, the biggest brewer in Russia and the Baltic States.

InBev buries Bock

InBev, the world's biggest brewer, has axed Artois Bock after just three years' production.
Back in 2005 the strong 6.2% lager was launched with a great deal of hoopla and media excitement. Several beer writers seemed to put their critical faculties into cold storage as they wrote adulatory pieces about the beer. Even the late Michael Jackson somewhat surprisingly penned an enthusiastic piece in Beers of the World. When I told another beer writer that I thought it was a poor beer, he sneered and said: "You must have got a bottle from a bad batch
-- I think it's superb". Is it conceivable that a giant company such as InBev would allow a bad batch to reach beer shops and supermarkets?
Now it's gone to the great Saloon Bar in the Sky. It's a curious decision, as only a few months ago InBev relaunched its brands as the "Artois Family". This was done to mask the fact that sales of Stella Artois are falling and that other beers from the same stable are also available -- including Bock.
InBev really is in a bit of pickle. It has made a complete mess of Hoegaarden, the delicious Belgian white beer. With astonishing insensitivity, the group closed the original brewery in Dutch-speaking Hoegaarden and moved it to the Jupiler factory in the French-speaking region of Liege. That didn't work, as Jupiler brews only lagers while Hoegaarden is warm-fermented, so it moved the white beer back to Hoegaarden.
Now it has axed Artois Bock but says it will be adding "classic Artois brews to the range from time to time." As Stella Artois is not known to have brewed a Bock in its long history, I wonder what new beer InBev will conjure from the mythical past to replace Bock.

Where will the axe fall as S&N
succumbs to a giant takeover?

Scottish & Newcastle, the only remaining British-owned national brewer, has fallen to a takeover bid worth £7.8bn from a consortium of Carlsberg and Heineken. What is the future for the S&N breweries in Britain? The Danes and the Dutch said at the outset of their bid that they would breakup S&N's British operation, so the future is bleak for breweries in Gateshead, Manchester, Reading and Tadcaster. The fact that Carlsberg, which has long experience of the British beer market, has opted to run S&N's French Kronenbourg operation, does not augur well for the British breweries. They will be run by Heineken, which has never brewed in Britain. Its beer was brewed under contract by Whitbread and now all Heineken sold in Britain is imported from the Netherlands.
Surely not all the lager brands owned by S&N -- including Foster's, Kronenbourg and McEwan's -- can survive at a time when sales of premium lagers are in decline. Of particular interest will be the fate of the Tetley brewery in Leeds. Tetley will now join a group that includes John Smith's, which means Heineken will control the two leading British keg beer brands. As Tetley has to leave its Leeds city centre site it could mean either the end of the brands or the ignominy of being brewed at John Smith's in Tadcaster.
But the takeover was never really about the British market. S&N has been a major player in the rapidly expanding Russian and Baltic States markets. In a consortium with Carlsberg, it owns Baltic Beverages Holding (BBH), which produces the top-selling Baltika beers. Heineken has been slow to move into Russia, which is why it has been keen to force through the takeover in order to outst S&N from BBH.
The takeover is a victory for global brewing, with scant regard for the interests of consumers, who are likely to see a sharp fall in the number of beer brands brewed by S&N in Britain.
Of immediate concern will the future of two independents with strong links to S&N. Theakston's in Yorkshire was owned by S&N for many years but was sold back to the Theakston family in 2003. It has flourished since then but, due to lack of capacity, the brewery's main brand, Theakston Best Bitter, is brewed under licence at John Smith's plant in Tadcaster. If Heineken consolidates ale brewing and even moves Tetley brands to Tadcaster, Theakston may have to look for a new home.
In Scotland, while the Caledonian Brewing Company owns such brands as Deuchars IPA and Caledonian 80 Shilling, the buildings and plant in Slateford Road, Edinburgh, are owned by S&N. Heineken might be keen to cash in on the potential of a site on the road to Edinburgh airport. Caledonian also owns the Harviestoun brewery near Dollar and may need to expand that site if Slateford Road falls to property developers.

Budvar records increased
sales at home and abroad

The notion that state-owned companies can't compete successfully in the private sector has been scotched by the success of Budweiser Budvar in the Czech Republic. The brewery -- the last to remain in state hands since the fall of the old communist regime -- has posted a 9% increase in domestic sales and a 3% rise in exports.
Budvar's success is all the more remarkable when you consider that the Czech beer market is dominated by two global giants. SABMiller, which owns Pilsner Urquell and Gambrinus, and InBev, the world's biggest brewing group, which owns Prague Breweries, have invested massively in their brands. They have built branded pubs and restaurants, and discounted their beers heavily.
Budvar suffered as a result for a few years but has now bounced back in the most encouraging manner. For from being hidebound or conservative -- the usual charges made against nationalised companies -- it has been innovative and has introduced new brands, including the acclaimed Budvar Dark.
And year after year it tops the poll in the annual awards -- chosen by beer lovers -- in the competition organised by the newspaper Pivni Kyry (Beer Courier).
It seems plans to privatise Budvar are on hold. The current Czech government, a right-of-centre coalitition, announced last year it would turn the brewery into a Joint Stock Company, the first step towards a sell-off. But it now says it won't be able to privatise the company until 2010, by which time there will have been a general election. The experience since the restoration of democracy is that a right-of-centre government is always followed by a left-of-centre one, which is unlikely to privatise Budvar.

Labels: baltic, beer, carlsberg, heineken, Newcastle, Scottish