Hello, stranger

It was only a matter of time. After the German Radeberger Group (formerly Binding AG) and its parent the food conglomerate Dr. Oetker had sold their stake in the Austrian brewer Brau-Beteiligungs-Aktiengesellschaft (BBAG) last year, the path was cleared for BBAG to pursue its own happiness - which seems to lie in finding a new partner. As was announced, BBAG is actively seeking a buyer (or "strategic partner" in modern terminology) to expand further into the beer and beverage markets of central and eastern Europe. Already, BBAG operates in Austria, Hungary, Rumania, Poland and the Czech Republic. As was also announced, BBAG has set its stakes high: it wants to become the number one brewer in these markets. BBAG operates in three different areas: beer, beverages, real estate.6 million..

Desperately seeking ... a buyer

All’s well that ends well. That’s how the saying goes. But not in the case of Diageo and its sale of Burger King. After two years of uncertainty - would there be a flotation, a management buy-out of a trade sale "Diageo’s CEO Paul Walsh declared in July this year that he had clinched a US$2.26 billion deal with a private-equity consortium led by Texas Pacific. However, at the end of November, the sale still had not materialised. The consortium now only wants to pay about US$1.6 billion in cash with Diageo retaining a stake.
The news must have filled WestLB Panmure’s analyst Stuart Price with some satisfaction. For almost a year he has maintained that Diageo could improve the exit value of Burger King through securitisation and - eventually - a partial flotation.68 billion (£1.7bn)..

They were not amused

When Scottish & Newcastle (S&N) posted its interim results at the beginning of December, analysts were not happy. Although the brewer and pub retailer managed to raise turnover 19 percent to £2.6 billion and its pre-tax profit 28 percent to £309.8 million, the positive result was mainly due to mainland European beer and Baltic Beverages Holdings doing well and a lower than expected interest payable line while UK beer had remained stable and contributed £108 million. As in the past, analysts expressed concern over management and the payment of debt. Irrespective of the fact that S&N has finally announced a date for the appointment of a new CEO - early 2003 - analysts worried that the candidate would not change the culture within S&N too much. Then there remains the pressing issue of debt..

New malthouse in Kharkiv

Sun Interbrew Ukraine has begun the construction of a EUR14 million malthouse with a capacity of 45,000 t of malt. If needed, capacity will be increased to 90,000 t of malt per year. Construction is expected to end in 2004. Sun Interbrew Ukraine hopes that the new maltings will meet their malt consumption needs at all the breweries it runs in the Ukraine (Rogan, Desna and Yantar). Excess malt may be sold to other Ukrainian breweries. Sun Interbrew Ukraine is the country’s biggest brewing group, with a market share of 34 percent, which produced 3.7 million hl in 2001, an increase of 21.4 percent year-on-year it was reported.

He’s putting Kazan on the map

The man may only be in this thirties but his ambition will probably get him far. Airat Khairullin, the General Director of the Russian brewery Krasny Vostok hopes to make his plant one of the world’s 10 largest breweries. The what? Indeed. Just because few people outside Russia know that Krasny Vostok is based in Kazan, the capital of the Volga Republic of Tatarstan, a country slightly larger than Switzerland, inhabited by 3.6 million Tartars and Russians and located 1,000 km to the east of Moscow, does not mean that there cannot be a 10 million hl brewery in a city of one million people. Well, there is one.
Khairullin was put in charge of the 100-year-old company in 1996, when the brewery had an output of only 2 million hl of beer per year. In 2001 Krasny Vostok produced 4.

Genie ... in a can

Russia’s largest brewery, Baltika, reported weaknesses in its results for the third quarter ending 30 September 2002. Baltika is 58 percent held by Scottish & Newcastle and Carls-berg’s Baltic Beverage Holdings with a further 16.9 percent held by Aktiebolaget Grundstenen, a 100 percent owned subsidiary of BBH. Its sales increased from US$397.3 million to US$560.9 million and net income grew from US$97.5 million to US$114.9 million. However, due to the growth in canned beer, selling expenses almost tripled from US$39.8 million to US$111.8 million, which translates to margins (before costs of goods) falling from 90 percent to 80 percent. After costs of goods, EBIT margins declined from 35.2 percent to 29.8 percent and net income margins fell from 24.5 percent to 20.5 percent.

Interbrew sells Rostock Brewery to Brau + Brunnen

At the end of November, Interbrew announced the sale of Rostock Brewery to Germany’s troubled beer concern Brau + Brunnen. Rostock Brewery, located near the Baltic coast of former Eastern Germany, which employs 120 people and brews 400 000 hl of beer annually, had come to Interbrew as part and parcel of Beck’s. However, its brands (Rostocker, Freibeuter and Roter Oktober) never fitted into Interbrew’s brand portfolio. No mention of the price was made. Brau + Brunnen claimed that Rostock Brewery allowed it to increase its presence in Northern Germany. The deal will only come into effect once regulatory approval has been given.
With the sale of Rostock Brewery, Interbrew has completed its divestment of non-core businesses in Germany..

Do good but keep shtoom

Krombacher, Germany’s top brewer, got slapped on the wrists by German judges for having disobeyed the rules of emotional advertising. The case in question was Krombacher’s May-to-July 2002-campaign to contribute a percentage of the sale of each crate of beer towards the protection of the African rain forest. The judges argued that Krombacher’s advertising had not made clear what was the connection between the purchase of a crate of beer and environmentalism. The campaign had been supported by the WWF. Consumer watchdogs criticised the campaign for putting consumers under psychological pressure and took Krombacher to court. Krombacher, however, has announced that it would continue the campaign albeit in a modified version.

Deposit on cans

In an effort to stem the tide of non-returnable beverage containers, the German government has introduced a compulsory deposit on beer, mineral water and soft drink cans. The deposit is a consequence of German packaging regulations which are in favour of refillable bottles and which read that the quota of returnable containers must not drop below 72 percent. Unfortunately, it has. By April 2001 it had dropped to 64,81 percent. The compulsory deposit is to come into effect on 1 January 2003. 25 cents per can will be charged. The deposit has been met with massive resistance from the retailers, especially the large discount chains, that have for a long time supported non-returnable beverage containers..

Wet on the inside

Zenith International’s market analysts may not have got their geopolitics right (there is central (!) and eastern (!) Europe and not just East (!) Europe), but their figures indicate a trend towards a growth in bottled water consumption. Bottled water sales in central and eastern Europe have seen double digit growth in each of the past five years, reaching more than 6,300 million litres in 2001. Despite the economic difficulties experienced by the region in the late 1990s, volume has jumped by almost 90 percent since 1996.
Consumption has nearly doubled from 10 litres per person in 1996 to just short of 20 litres per person in 2001, but remains a long way behind the west European average which is set to pass 100 litres per person in 2002..