The Challenges Facing the Global Brewing Industry. Kevin Baker Account Director, Alcoholic Beverages

Transcription

1 The Challenges Facing the Global Brewing Industry Kevin Baker Account Director, Alcoholic Beverages

2 Canadean Founded in 1973 Dedicated to Beverage & Allied Industries More than 140 Employees Worldwide The Leading Global Beverage Research Company

3 Agenda The Context The Global Beer Market Consolidation in Global Brewing After S&N and A-B The New Competitive Landscape PET Opportunity or Threat? Easy-To-Drink Targeting the Coke & Pepsi Generation The Credit Crunch

4 Global Overview

5 Global Beer Market Steady Growth World Beer Market Growth, P 2000 MHLS P CAGR = 3.3%

6 Asia & Eastern Europe Drive Growth Incremental Volume by Region, P Africa Asia Australasia Latin America East Europe MENA North America West Europe MHLS

7 Driven by China and Russia CAGR 5.2% 15.5% 7.0% 19.2% 2.0% 9.1% 7.6% 3.9% 1.1% 22.8% China Russia Brazil Ukraine Mexico Thailand Poland Spain USA Nigeria Leading Growth Markets (>1mhl), Incremental Volume, P China & Russia account for 60% of all incremental volume growth MHLS

8 Major Markets in Decline CAGR Leading Declining Markets (>1mhl), Incremental Volume Loss, P -1.0% -0.9% -0.2% -2.3% -2.3% -0.3% -5.2% -0.4% -1.4% -0.8% Germany UK Japan France Denmark Belgium Zimbabw e Sw eden New Zealand Netherlands MHLS

9 CONSOLIDATION IN GLOBAL BREWING

10 Global Consolidation Top 10 Brewers All Others 66% % % 59%

11 The World s Top 10 Brewers in 1998 Rank 1. Company Anheuser-Busch Volume (mhls) Heineken Miller Brewing SAB AmBev Interbrew Modelo Kirin Coors Asahi 27.5

12 The World s Top 10 Brewers 2008P Rank 1. Company Anheuser-Busch InBev Volume (mhls) SABMiller Heineken Carlsberg China Resources Breweries Modelo Tsingtao MolsonCoors FEMSA Yanjing

13 Major Mergers & Acquisitions

14 Breweries Acquired by Global Brewers since 1998 Note: Selected Companies Only - not comprehensive!!

15 Heineken In an Acquisitive Mood! Heineken Investor Presentation, June 2008

16 The Big Four

17 AFTER S&N + A-B THE NEW COMPETITIVE LANDSCAPE

18 Carlsberg/Heineken acquisition of S&N Value of Deal was 7.8 billion, split between Carlsberg (54%) and Heineken (46%) Heineken now have the distribution and the revenue stream to return the Heineken brand to the upper echelon of UK beer brands Heineken have a powerful addition to the portfolio in the shape of Foster s in Europe Heineken also have a major stake in the Indian beer market (but potential issues re: APB?) Unresolved questions over Beamish & Crawford - monopoly implications re: Murphy s and Hartwall - do Heineken want/need it?

19 Carlsberg/Heineken acquisition of S&N What will Carlsberg do with Kronenbourg? Are they over-fixated on BBH? Deal is a perfect fit, but therefore limited scope for cost reductions/plant closures etc Carlsberg could be in trouble if Russian bubble bursts!

20 S&N Who Got What! Heineken Carlsberg

21 S&N Who Got What Brands Carlsberg Heineken

22 InBev acquisition of A-B Value of Deal was $52 billion, the largest ever acquisition in the beer industry Combined volume is more than double SABMiller s (even if CRE volumes are included volume is still 150 mhl greater!) InBev gain an iconic brand in Bud, but can they succeed in the global market where A-B failed? Acquisition of A-B s china operations will put InBev within a whisker of market leadership Modelo are claiming veto rights and will probably seek a way to buy back A-B s 50% stake at a low price

23 Global Consolidation Top 10 Brewers All Others 47% Before 41% After 53% 59%

24 The World s Top 10 Brewers - Before Rank 1. Company InBev Volume (mhls) SABMiller Anheuser-Busch Heineken China Resources Breweries Modelo Tsingtao Carlsberg MolsonCoors BBH 44.6

25 The World s Top 10 Brewers - After Rank 1. Company Anheuser-Busch InBev Volume (mhls) SABMiller Heineken Carlsberg China Resources Breweries Modelo Tsingtao MolsonCoors FEMSA Yanjing

26 BEER IN PET OPPORTUNITY OR THREAT?

27 Beer in PET PET accounted for 90% of all incremental beverage volume over the last 5 years PET dominates the Water, Carbonates, Iced Tea and Sports Drinks markets Beer in plastic is a reality

28 Beer in PET Beer in PET still dominated by large packs of cheap beer in Russia, Ukraine and Romania One of the key drivers behind the growth of PET as a pack for water and carbonates resealability is not an issue for beer Although many brewers have tested small PET packs, the economics have yet to add up

29 Positively PET (in Spain) PET promoted as a positive Future Unbreakable

30 Beer in PET Global Volume Growth 000 s HL Volume Growth P P Global volume now approaching 80 mhl

31 Beer in PET Key Markets Romania 11% Ukraine 10% Serbia 5% South Korea 4% Russia 57% Others 2% Germany 3% Bulgaria 3% Lithuania 1% Latvia 1% Estonia USA 1% 1% Spain 1% Russia, Romania & Ukraine alone account for almost 80% of all Beer in PET

32 Germany boosts West Europe 000 s HL West Europe PET Beer Volume Growth German packaging legislation drives PET growth in West Europe

33 But disappointing outside of Germany 000 s HL PET Volume Growth in West Europe (exc. Germany) Growth from 2005 almost entirely due to Spain

34 Germany : Has PET Failed the Test? Germany: Beer Consumption by Pack Type, % Share % 80% German Packaging Ordinance was introduced in 2002 requiring cans to be liable to a deposit 60% 40% 20% 0% Glass Cans PET As a result can sales slumped dramatically However despite the introduction of PET bottles by many brewers, consumers seemed to prefer glass and PET has only achieved minimal share

35 Fill them High and Sell Them Cheap! Typical Russian high volume PET packs in Moscow kiosk

36 EASY TO DRINK TARGETING THE COKE & PEPSI GENERATION

37 Easy To Drink Easy To Drink Mild Beers Wheat Beer FAB s Cider Lower Alcohol Flavoured Beer Beer Mixes

38 Mild Beers Many German brewers launched mild versions of their brands These beers are less bitter and easier-todrink Aimed at recruiting younger drinkers with palates more used to sweet tastes However sales peaked in 2006 and most brands are now in decline

39 Wheat Beers Weizen is traditionally a Bavarian speciality It is one of the few sectors of the German Beer market to record consistent growth despite relatively high price Main reasons for success include refreshing taste, natural image, and Bavarian heritage

40 FAB s FAB s combining alcohol delivery with sweet fruity soft flavours were the original alcohol crossover category Although the market appears to have peaked it is too early to write off FAB s The key product features of FAB s fulfil a clear consumer need for sweet, bottled alcohol at around 5%Abv

41 Have FAB s Peaked? Global Market for FAB's, F Million Litres Note : Figures exclude Chu-Hi in Japan P CAGR = 12.1%

42 Cider Cider is an established part of the UK alcohol market The sector grew by almost 12% in 2006 due to the success of the Irish Magners brand and a wave of new brands The key ingredient of success has been the serving of cider over ice

43 Lower Alcohol A number of UK brewers are actively promoting lower strength beers Key drivers are health/obesity concerns and drink driving Although the lower alcohol content is explicit to the brand message, they are not promoted as Low Alcohol

44 Flavoured Beer There is a long tradition of flavoured beers in Belgium, with products such as Kriek (Cherry beer) In an attempt to capture the same market as FAB s brewers have updated existing products (ExtraKriek) and launched a number of products flavoured either with fruit or alcohol (e.g. Desperados)

45 Beer Mixes Almost every beer market has some history of sweetening beer with other drinks Lemonade is the most popular and occurs as Shandy (UK); Panach (France) and Radler/Alsterwasser (Germany/Austria) More recent is the Biermix phenomenon in Germany which appeals to the same targets as FAB s, and now accounts for over 5% of the market

46 THE CREDIT CRUNCH

47 Discount Retailers Take Share Discount retailers benefit at expense of upmarket retailers Not just value for money improved offering in recent years In Germany all growth is driven by discounters

48 Retailers pass on pain to suppliers Across the board there is pressure on producers from retailers Retailers demand that suppliers fund price promotions and discounts

49 On-Premise suffers more than Total Market On-Premise suffering a greater slowdown than total market Particularly in markets with marked price differentials Eating & drinking out hit as consumers cut back on non-essential expenditure

50 Mainstream Squeezed in Recessions Historically the mainstream has been squeezed in times of recession Premium brands that offer a genuine added value proposition perform well While discount brands benefit from consumers trading down

51 The Double-Whammy Reduced Consumer Spending Manufacturers are suffering from the double-whammy of reduced consumer spending (the credit crunch ) and escalating costs (raw materials, transport etc.) Higher Input Costs However there are indications that, so far, they have managed to pass increased costs on to consumers

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