Focus on new plants: Murphy’s brewery, Cork, Ireland Flexibility is the key Murphy’s Brewery, Cork, goes for innovative keg technology

No question about it - every Irishman knows Murphy’s. A beer which is as Irish as the rugged countryside, the pubs and Irish hospitality. And that for over 140 years. It was that long ago that James Murphy established Murphy’s Brewery in Cork.

Production began on premises previously used as a hospital, giving a new slant to the connection between beer and health frequently referred to nowadays. Heineken took over in 1983. The result - big investment and strong growth rates. Right up to the present day.

Out into the world
Murphy’s Irish Stout, the beer of the Irish, has made a name for itself worldwide since then. It has become a household name in the US, Europe, Africa, the Middle East and even in Australia and New Zealand. A real piece of Ireland.
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Virtual deals

Once upon a time there were only good deals and bad deals. Now there are also virtual deals. Just think of Hugh Osmond, a 41 year old Briton with an eye for opportunity, who attempted to take over Six Continents, a troubled hotel and pub giant in February. For several weeks he grabbed newspaper headlines as he thought aloud what he would do if Six Continents’ shareholders decided to sell the group to him lock stock and barrel. That way he virtually tried to prevent the world’s biggest hotels and pub group from splitting into two - the proposed solution by Six C’s boss Tim Clarke and his management to produce shareholder value.
Behind Six Continents lie years of appalling performance. Compared with its peers it has done badly.6 billion.
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Exploring export markets

Baltika, Russia’s largest brewer, which is owned by Baltic Beverages Holding, is eyeing up the Chinese market. With the Russian beer market destined to flatten out in a few years’ time, Baltika decided to explore export opportunities for continued growth. In April, Baltika opened the Khabarovsk brewery, which is located in Russia’s far east, north of Vladivostok. The region itself represents a market of 10 million consumers. But the Chinese region south of Vladivostok is home to 120 million residents. The Khabarovsk brewery has a capacity of 10 million hl beer annually and cost US$ 50 million to build, it was reported.

Mixed results

It could have been a better year. When Sun Interbrew released its financial results for the year ended 31 December 2002, Russia’s number 2 brewer admitted that its results had been affected by the poor performance in Russia and a foreign currency impact. In 2002 Sun Interbrew’s average market share fell from 12.8 percent in 2001 to 12.1 percent in 2002. Following the investment in PET and cans, however, market share in the second half of 2002 grew to 12.5 percent from 11.8 percent in the first half. The early results in 2003 indicate further gains in market share. The key drivers of this growth are PET and cans, particularly PET growth in the eastern region of the market. Tolstiak and other regional brands were sold in PET as capacity became available.1 million.7 percent to EUR 74.
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Slowly but surely

In March Carlsberg Breweries increased its shareholding in Carlsberg Okocim through the acquisition of 3.5 percent of the share capital from the German brewer Bitburger. The shares cost DKK 28 million. Only in December had Carls-berg bought 9.9 percent of the shares from Bitburger at a price of DKK 86 million. Both acquisitions take Carlsberg’s stake in Okocim up to 75 percent according to company statements. These sales plus the transaction between Germany’s Radeberger group and SABMiller (we reported) in which Radeberger’s 98.8 percent equity interest in Browar Dojlidy passed into SABMiller’s hands for EUR35 million, mark the exit of German brewers from the Polish market. In 2002 Okocim’s four breweries sold 3.5 million hl of beer. Operating profit reached 7..

Because it’s good for you

There is an Irish proverb which says "good as drink is, it ends in thirst". Apparently it no longer holds true. Beer consumption in Ireland is on the decline and has been for some years. The Irish, with a per capita consumption rate of 150 litres, still drink more beer than most people in Europe - only to be beaten by the Czechs. But they are also beginning to enjoy the taste of wine and pre-mix spirits (RTDs). Despite the fact that Irish wine drinkers pay a far higher tax on wine than many Europeans, the market for table wine has more than doubled in the past decade. According to the Wine Development Board of Ireland, nearly half of the Irish adults now drink wine regularly compared to only 28 percent in 1990. These days he is more likely to drink a glass of lager than a glass of stout..

Excise revenues down

The compulsory deposit on beer cans which was introduced in January this year, is going to hurt the German Länder (the individual states) badly. At the end of the year their tax coffers will show a gaping hole of EUR67 million. Apparently consumers do not like to switch from beer in cans to beer in returnable bottles - a system favoured by the government and the small and medium-sized brewers. Instead they refuse to drink beer full stop. In January and February sales of beer declined 8.2 percent. As the president of the German brewers’ association Dr Richard Weber was quoted a saying: "The compulsory deposit on beer cans is going to cost German brewers between 8 million and 10 million hl in sales this year alone." Last year domestic beer sales were 107..

Up for grabs ...

... but will anybody go for it? HypoVereinsbank, one of Germany’s leading banks, has officially put its 55 percent stake in the beer and beverage group Brau und Brunnen on the market. Rumour had it that the bank was already holding talks with Interbrew and Scottish & Newcastle. Interbrew immediately denied the story, stating that it was not interested at all in Brau und Brunnen as it did not fit into its portfolio ... and geography one might add. Brau and Brunnen’s core market is in the northern part of Germany where Interbrew is already very well represented thanks to the acquisitions of Diebels, Beck’s and Gilde. With sales of EUR687 million in 2001, Brau und Brunnen is Germany’s number 4 brewer. Its market capitalisation was EUR 285 million at the end of March 2003.

Parting ways

At the end of March, Axel Meermann, the Chairman of the Munich brewer Paulaner, was given the sack according to German media reports. It was rumoured that Heineken would not support Meermann’s international strategy for the eponymous wheat beer brand Paulaner, which led to Meermann chucking it all in. By all accounts, Meermann had hoped to double Paulaner’s world-wide sales following Heineken’s 2001 acquisition of a 49 percent stake in Bayerische BrauHolding which in turn owns Paulaner. Meermann is succeeded by Wolfgang Salewski, who is also chairman of Bayerische Brau-Holding. Paulaner sold 2.7 million hl beer and had a turnover of EUR 275 million.

Trouble down south

There seems to be a consensus that there is little opportunity for Carlsberg to be acquired or to participate in the consolidation of the global beer market. Which may be fine by Carlsberg. Because some of the figures released for 2002 were below expectations.
Carlsberg Group reported that in the financial year 2002 its net revenue rose by 3 percent to DKK 35.5 billion. Operating profit (EBITA) was 15 percent higher and amounted to DKK 3.8 billion. Profit before amortisation and write-down of goodwill totalled DKK 2.1 billion. It was announced that adjusted for one-off items, profit was DKK 2.1 billion - an increase of 8 percent. The brewer’s share of the profit was reported as DKK 1.01 billion. Adjusted for one-off items, the share of profit amounted to DKK 1.0 billion (+10%)..