Happy New Year? Fat chance! – Comment
As we enter 2010, the brewers’ grapevine is abuzz with predictions that this year will be rough for many yet rewarding for a few. Bankers are already rubbing their hands anticipating a resurgence in deal activity after a disappointing year in which mergers and acquisitions activity plummeted by almost half. The total value of deals in Europe fell to USD 682.5 billion in 2009 and a return to the heady, debt-fuelled days of 2007 is not expected for some time, if ever. During that year, Europe’s dealmakers worked themselves into a frenzy, registering USD 1,857 billion-worth of mergers and acquisitions, the best year on record since 1995, it was reported.
Of course, what nourishes the bankers’ optimism is the USD 16.5 billion hostile bid for chocolate and gum maker Cadbury by Kraft Foods. Kraft first moved in on Cadbury in September 2009 but its offer has repeatedly been deemed too low by Cadbury’s management.
Cadbury’s shareholders have until 2nd February 2010 to decide whether to accept the USD 16.5 billion offer by Kraft or back Cadbury management’s determination to remain independent.
Despite signs of interest from Hershey, the U.S. chocolate maker, and Italy’s Ferrero, Kraft remains the only bidder for Cadbury. If Kraft cannot win support from a majority of Cadbury shareholders by 2nd February 2010, it will be barred from making another offer for six months.
Looks like Kraft’s hostile takeover will keep readers entertained until February.
In the meantime, they may keep their fingers crossed that consumer confidence in central and eastern Europe will pick up quickly or Europe’s brewers will find themselves in a spot of real trouble. Many market observers say that beer consumption across Europe declined last year, albeit to varying degrees. Rumour has it that Italy’s was down by 8 percent, Germany’s 5 percent or so. The UK may have registering a smaller decline than Germany, but for Europe’s second largest beer market that ain’t good.
More troubling is the news issued by SABMiller that Polish beer consumption dropped by 9.4 percent between April and September 2009, which does not bode too well for the full year. Poland is Europe’s number three beer market. And if Poland is in a state, beer-wise, whose economy grew 2 percent in 2009, what about the other central and eastern European economies?
Russia is planning to triple excise duty on beer from 6 percent of the average retail price to 19 percent by 2012. Excise on beer was raised by 200 percent on 1 January 2010 and will be followed by a 10 percent hike in 2011 and a 20 percent rise in 2012. It is taken for granted that the Russian beer market will drop by 10 percent in 2010.
Before the recession, central and eastern European beer sales helped compensate consumption declines in western Europe.
So hopefully, most central and eastern European markets will return to their pre-crisis growth rates quickly, or brewers will lean even more heavily on their suppliers to cut costs in an effort to prevent “Europe” from getting a bad name with beer investors.
Thankfully, market analysts at Canadean, a beverage industry consultancy, believe that the recession is a) more marked in the West than in many eastern European countries; and b) will only cause a temporary slowdown in central and eastern Europe.
