The year that was
On 5 January 2010, AB-InBev announced a large restructuring plan that involved cutting 304 jobs at its sites in Leuven in Flanders, Jupille in Wallonia and at other sites in Wallonia, Flanders and Brussels. Management justified its decision by citing the fall in beer consumption in Belgium by some 20 percent between 2000 and 2008. Nevertheless, trade unions and workers rejected this explanation since the group seemed to have escaped the economic crisis, given the large profits achieved in 2009.
In response to AB-InBev’s planned cutbacks, Belgium’s powerful labour unions fought back. In January, workers blocked the entrances to the breweries for three weeks, preventing raw materials from entering and beer from leaving. Politicians and newspapers lambasted AB-InBev for cutting jobs during a recession while making profits. Jean-Claude Marcourt, Economy Minister for Belgium’s southern Walloon region, reportedly said he was “scandalised”.
However, tripartite negotiations finally led to the conclusion of a pre-agreement between the social partners in order to “restore confidence and organise a constructive social dialogue.”
This dialogue is on-going said AB-InBev’s press office when approached by Brauwelt, but would not be specific about when it will be concluded.
AB-InBev has been trying to reduce its presence in Belgium, where per capita beer consumption is falling at an average of 2 percent each year (2010 being no exception according to insiders), so it can focus on profits in growing markets.
Belgium’s beer market is consolidated with AB-InBev (57 percent) and Heineken’s Alken Maes (11 percent) controlling the market.
While the major brewers are straining hard to maintain market shares, smaller speciality players have managed to benefit from the growing interest in non-Pilsner beers. A good dozen breweries have increased their output several-fold over the past decade, thanks in large part to exports. Moreover, they profit from significantly higher ex-brewery prices. Try to buy the Trappist beer Orval for less than EUR 2 per litre and you will draw a blank. However, some Pilsner beers can be had for as little as EUR 0.25 per litre.
That’s a symptom of how tough the going has got in Belgium.
While we will have to wait for AB-InBev to release their full year volumes for Belgium, Alken Maes expects to grow volumes in 2010 says Theo Verfloet, the President of Belgium’s brewers and member of Alken Maes’ Board.
About 51 percent of all beer consumed in Belgium is sold by the hospitality sector (on-premise), which means that almost 4.7 million hl are sold on-premise, says Ernst & Young.
When it comes to earnings, the on-premise remains the most profitable route to market for brewers. That’s why brewer Duvel was willing to spend an estimated EUR 30 million on Antwerp brewer de Koninck and its 63 company-owned cafés in August. As de Koninck’s last reported turnover was only EUR 6 million, expect Duvel to have forked out at least three times that sum on the cafés.
Isn’t it kind of ironic that in 2007 InBev sold 90 percent of its real estate unit which had 824 Belgian cafés and restaurants on its books?
All eyes rest on AB-InBev in Belgium and the outcome of their labour dispute.
