UNITED STATES – Beam Global Spirits & Wine, a division for Fortune Brands, has announced that Knob Creek Bourbon supplies will dry up over the summer due to increased demand that exceeded forecasts. The company stated that their distributors have stock, but that it will most likely run out in the August to September time frame. Knob Creek undergoes a nine year maturing process and the new batch of the popular bourbon won’t be ready for release until November. Beam Global sells approximately 15,000 cases of Knob Creek each year.
ARKANSAS – In early July, Arkansas State Legislature passed Act 294 which in addition to bumping up alcohol permit fees, which is expected to raise about $1.6 million in extra revenue each year, also includes a clause that allows permit holders for beer and light wine to sell certain types of alcohol on Sundays between 10am and midnight. The increase in permit fees goes into effect July 2010, so the 37 or so establishments that hold beer and light wine permits have nearly a year to take advantage of the new Sunday opportunity before the actual fee increase kicks in.
UNITED KINGDOM – After it was announced that Diageo was planning on cutting 900 jobs in Kilmarnock and Glasgow, members of the Union Unite are meeting in London to plan their campaign to prevent the cuts from taking place. Jim Winter from Unite said he could not rule out strike action. Winter told BBC Radio’s Good Morning Scotland, “We don’t think the company’s arguments stack up.” Diageo made a profit of £1.64bn in the six months to the end of December. Winter also stated, “We believe Kilmarnock in particular is one of the most profitable areas with the iconic blends of red and black label whisky.”
The company stated that there would be no compulsory job losses in the next 12 months, and that they planned to offset the job losses by creating up to 400 new posts at its packaging plant at Leven in Fife. This is of little comfort for the folks in Kilmarnock. It is felt that if Diageo goes through with the cuts, it will be devastating for the town. Diageo continues to claim that restructuring is needed to expand the business and ensure long-term profit.
RALEIGH, NC – The North Carolina Senate gave a preliminary vote earlier this month on a bill which will eliminate the three day waiting period required before a consumer can go into a bar or nightclub. The current law classifies establishments that sell liquor as “private clubs”. These private clubs are only allowed to admit members and their guests inside. If you apply for a membership, you would still have to wait the required three days before actually getting in. Restaurants selling liquor where at least 30% of gross revenue comes from food and non-alcoholic drinks don’t have the membership requirement. If the bill passes, a customer would still have to purchase an annual membership, but they would no longer have to wait the three days for the membership to become active. It effectively eliminates a competitive advantage that liquor-serving restaurants enjoy over traditional bars. Tourism executives from Raleigh and Charlotte have sought hard to eliminate the three-day wait because it often frustrates tourists who want to visit bars while in town to attend conventions, Carolina Panthers football games, Carolina Hurricanes hockey games and other such events.
JAPAN – On July 14th, Japanese top brewer, Kirin Holdings Company Ltd, confirmed it is in beginning stages of merger negotiations with number three Japanese brewer, Suntory Holdings Ltd. Both companies have posted fairly strong earnings in the recent years despite the slowing domestic beer and beverage market. Both companies have also been pushing to increase their overseas presence, and analysts say a merger could give them the funds needed to succeed in their international merger and acquisition efforts as well as the ability to deal with the tough competition posed byAnheuser-Busch InBev, the world’s leading brewer.
Kirin currently holds a 46% stake in Australia’s Lion Nathan Ltd and a 48% stake in Philippines’ San Miguel Brewery. The company is also trying to increase presence in Asia and the South Pacific. Kirin’s goal is to have 30% of its revenue come from outside Japan by the year 2015. Suntory, which bottles and distributes PepsiCo Inc. products in Japan, has already established a presence in China.
No agreements have been reached at this point and time, stated Kirin.
HARTFORD, CT – The Connecticut Attorney General, Richard Blumenthal, wants to crack down on the marketing of the alcoholic energy drink, Wide Eye. He feels the marketing targets young drinkers, and states it is deceptive because it falsely promotes the claim that it will keep consumers alert despite the alcoholic content. The attorney general is calling on the FTC to prohibit marketing practices, or to require new warnings for this drink.
UNITED KINGDOM – Molson Coors is launching its largest ever marketing campaign for its Coors Light brand. The cost is projected to be £3.5m. The tagline -“The world’s most refreshing beer”. The campaign will begin on July 17th with a new 30 second UK television and cinema advertisement. There will also be an outdoor campaign that will include 5,000 posters and moving digital image screens in city center locations. Steve Mitchell, senior marketing manager for Molson Coors UK, says the campaign is a “significant investment” that aims to “to build awareness and trial with consumers”.
BELGIUM – AB-InBev has extended its deadline for bids in the sale of its Central and Eastern European operations to late July. Originally the bids were due by the middle of July in order to facilitate a quick sale – possibly by the end of the month. Due to the complexity of the deal, which affects operations reaching across seven regions, the timeframe has been pushed back.
Recall that AB-InBev initiated the bidding process after it was approached by CVC Capital Partners. Analysts are saying that a sales price of EUR2 billion for AB-InBev’s Central European business, excluding Russia and Ukraine, would be considered reasonable. Roughly 15 million hectoliters of beer are sold annually across the seven countries involved in the sale. Other potential buyout bidders include Kohlberg Kravis Roberts and TPG. Cinven Group Limited is also interested.
LONDON – In the first half of July, SABMiller Plc cut its forecast for European sales growth from a 4-6 percent increase through 2013 down to a 2-4 percent increase. The change in the forecast was due to slowing consumption in markets like Russia and Hungary as well as a recession related decline of consumer demand. The company, however, feels that its sales growth will still outpace the growth of the overall market.
SABMiller states that per capita beer consumption for Western and Eastern European markets is approaching the levels of mature markets. As markets mature, brewers can only maintain revenue growth by increasing prices, cutting the cost of production, or gaining a greater share. Alan Clark, the brewer’s managing director for Europe, said, “For years we have been outperforming our 4 to 6 percent volume targets. When markets mature, then the focus has to be on share. If we do not gain share this year we won’t achieve flat volumes.”
Europe accounts for 18 percent of SABMiller’s beer volumes and 22 percent of its earnings before interest, tax and amortization. In order to gain market share, SABMiller said it plans to increase the value of sales in Russia and mature European markets by pushing more-profitable premium brands including Grolsch and Peroni. The company aims to make manufacturing more efficient in Poland, Romania and The Czech Republic, while cutting costs in the Grolsch operations.
SOUTH KOREA – Kohlberg Kravis Roberts (KKR) has offloaded half of their equity in South Korea’s Oriental Brewery. KKR made a $400 million deal with Affinity Equity Partners, an Asia focused private equity firm, which gives them a 50% stake in Oriental Brewery. Oriental Brewery owns one of only two beer licenses in South Korea and has a 40% market share. The deal is expected to close later this month.
Remember, KKR acquired the brewery from AB-InBev in May to seal its first deal in the country. This takeover marked the biggest leveraged buy-out in Asia for two years. InBev acquired Anheuser-Busch for $52bn last year and decided to sell its non-core Korean business to repay debt.
