David vs Goliath 0:1
What goes best with sun and sand? A beer, by all means! In the Caribbean this is an unbeatable combo. Each part of the Caribbean has a different taste when it comes to the beers produced and consumed, which range from pale lagers to strong stouts and non-alcoholic malts. For the Caribbean countries, their beers are a source of national pride. As symbols of nationhood, these local brands are often larger than life.
The craft beer trend, which has swept across most of North America over the past decade, has also reached the Caribbean, with craft breweries setting up shop throughout the islands, thus adding variety to the beers offered by the region’s 17 established breweries. Most of the latter are independently owned, but several have had links to the world’s big brewers like Heineken and Diageo, which date back to before the onset of globalisation.
The Caribbean’s tiny island states – because of their total number – may have a big say in the United Nations General Assembly and in FIFA (a mean joke, I know). Nevertheless, in the global business world they are midgets, if you leave out the Cayman Islands, which are a major offshore financial centre, featuring more registered businesses (over 90,000 in 2011) than people (20,000).
Despite increasing Foreign Direct Investments and a growing tourism sector, poverty is still an issue in the Caribbean islands. With poverty come high levels of unemployment, leading to the ill side-effects of a bulging black economy and trafficking.
The Caribbean’s breweries could tell us a thing or two about this. Most have domestic markets that are smaller than those for U.S. microbreweries. There are minimal official exports to neighbouring islands, although you do find beers in a surprising number of places which suggests they must have fallen off the back of a boat.
Given that non-tourism jobs are scarce, breweries often provide much-needed employment. Take the twin-island country of Antigua and Barbuda, which was formerly part of the British Empire. It consists of two major inhabited islands, Antigua and Barbuda, and a number of smaller islands, whose population numbers about 82,000 people. The capital and largest port is St John's on Antigua.
In the early 1990s, Antigua’s government decided that having a brewery on the island made for a sound business and employment proposition, so the German engineering company BrewTech, with the help of some foreign investors, built a beer and soft drink plant, Antigua Brewery. Its output quickly rose to almost 70,000 hl (1998), thanks, not least to the popularity of the beer brand Wadadli.
After the turn of the century, and due to economic problems in the region, production dropped, only to rise again in 2004. By then, the original investors sought an exit and with the sale of a majority stake to the Danish brewer Royal Unibrew (Faxe beer) in 2006, the Caribbean brewery got caught in spokes of globalisation.
Royal Unibrew, a distant second in Denmark to leading brewer Carlsberg, bought 58.4 percent of Dominica Brewery on the near-by island of Dominica, 91.7 percent of Antigua Brewery and 75 percent of Antigua PET Plant Ltd. for a total enterprise value of USD 26.5 million, it said in a statement.
The following year it acquired a 52 percent stake in a third Caribbean brewery, the St Vincent Brewery, for USD 9.3 million.
Whatever plans the Danish may have had for their breweries in the Caribbean – it was announced at the time that they were an integrated part of the group's non-alcoholic Vitamalt drink strategy – their plans changed shortly afterwards. In 2009 all three breweries were sold to the Caribbean heavyweight, Cerveceria Nacional Dominicana (CND), a beer and beverage business in the Dominican Republic. The sale – officially price-tagged at USD 31 million – was to help Royal Unibrew reduce its debts.
What followed next was probably inevitable. CND had a good look at all the numbers, saw that the Antigua’s costs did not match their metrics (for example, Antigua does not have any fresh water so running the plant required a desalination unit) and decided that it was best to close it down. The closure in 2011 led to the loss of 60 direct jobs and 600 indirect jobs. Today Wadadli beer is brewed on St Vincent, which gives proud Antiguans plenty of grief.
To seal the fate of Antigua Brewery, CND in 2012 itself was sold to AmBev, the Brazilian unit of AB-InBev. AmBev paid USD 1.24 billion or 13 times annual EBITDA to indirectly own about 51 percent of CND.
After three ownership changes in six years, Antigua’s government is worried that the brewery will never be re-opened, especially as the plant has been sitting idle for four years, which is never a good thing in the Caribbean’s weather.
The original 1993 contract for Antigua brewery stipulates that the land is leased from the government for 50 years on the proviso that it is used for a brewery. Theoretically, the government could terminate the contract because neither the Dominicans nor CND’s current owners, the Brazilians, have declared an interest in re-launching it. But dragging a case like this through a court would cost the Antiguan government more than it can afford: the country was virtually bankrupt in 2014.
The government has since said that it would provide investors with a piece of land next to the defunct brewery on which to erect a new plant. But what are the chances that anybody will want to cough up the money for as long as no one knows CND’s ultimate plans, and the government is in two minds about granting exclusivity to a new consortium of investors?
