The beverage business blog from Olly Wehring
If you would like to offer your comments, opinions, suggest topics or just have a good rant, please feel free to email: Olly Wehring.
Times are a-changing
04 Apr 2006 16:14
Well, it’s the end of week one of the new-look just-drinks.com, and – bar a few technical glitches – the rebirth has gone startlingly smoothly. Many thanks to all of you who gave me your feedback on the new design and layout – the majority gave us a resounding thumbs-up, and the glitches brought to our attention should be ironed out within the next few days.
A couple of interesting issues caught my eye last week, meanwhile. The first were the results of a UK consumer survey, which concluded that less than half of the UK population trusts the nutritional claims made by food and drinks companies.
The survey drew similar conclusions about European and US consumers, so no-one appears safe in the trust-stakes. Naturally, this situation should worry everyone in the drinks industry – consumer perception is something that takes years to cultivate, and just as long to get back. And, more’s the point – if consumers don’t trust nutritional claims, does that not stretch to all other claims made by companies?
Secondly, I was in London last Tuesday (28 March) for a briefing by premium soft drinks brand Shloer. The company, bought by the SHS Group last year, has spent time looking at its target consumers and how best to get more of them drinking its product (sound familiar to any of you, by any chance?).
Recent research told Shloer that the use of celebrity to market a product was no longer believable. This could have worrying repercussions for some drinks companies out there, who pour millions of dollars in the direction of the famous and fabulous.
Are the times a-changing? Or has our new look just made me obsessed with change?
A quick shout out too for our Hot Topics this week, which have looked at the Britvic Soft Drinks Report (http://just-drinks.com/topic.aspx?ID=14), the perils, pitfalls and potential of trading in China (http://just-drinks.com/topic.aspx?ID=15) and what lies ahead for Foster’s in Asia (http://just-drinks.com/topic.aspx?ID=16).
Now, you’ll forgive me for leaving you in the capable hands of news editor Dean Best, while I nip to Argentina to see how they make wine. Updates as and when I can get away.
A new born just-drinks, a new born Brook Carter
29 Mar 2006 13:25
It gives me tremendous pleasure to announce a new addition to the just-drinks family... of sorts.
This morning, at 0800 our esteemed former editor - and now group news editor - Chris Brook Carter, and his wife, Abby, welcomed baby Jack into the world.
At 8lb 15oz, Jack is probably set to follow his father on the rugby field, although if someone can make a laptop small enough, there's nothing to say he couldn't help out on this esteemed organ some time soon.
Congratulations to you both, Abby & Chris, from the just-drinks team.
A new dawn
27 Mar 2006 12:08
Well, here it is, folks. The new just-drinks site has landed and I hope you'll agree that it has been worth both the wait (for you) and the effort (for us).
Feel free to take a few minutes and scout around the new site. We'd welcome your comments, both good and bad, on the redesign. Also, if we've missed anything you would like to see, then please let us know. You can email me direct at email@example.com.
Now, let the new adventure begin.
Coming Soon... to a computer screen near you
22 Mar 2006 15:56
Some of you, particularly those with functioning memories (unlike me) will remember hearing a distant fanfare being trumpeted by the former editor of just-drinks, Chris Brook-Carter, on his move upstairs last year.
CBC promised you, dear reader, so much more from just-drinks in the future, but at the time was conservative with the detail. Well, having made the hot-seat here at just-drinks well and truly mine in the last six months – I’ve even stencilled my name on the back – I am now able to give you just a little bit more info.
This month will see the unveiling of a brand new look for the Website you know and love. Our technical team have been working all hours to produce what I can safely say is a stunning looking site that will help you get to the information you need faster, easier, and happier.
The new design will still have the same quality - and quantity - of global news coverage, but with added comment and analysis from those that are in the know. Our columnists will sift through the PR spin and give you what’s what, while our run of high-up interviewees will continue to deliver the personalities you want to hear from. We’ll be introducing factsheets, a new, improved search facility and news and features by category. There’ll also be a redesigned daily newsletter, which will allow you to choose what sort of news you want to get and when you want to get it.
So, forgive the excitement here, and watch this space, as soon you will see the fruits of our labours. I’m sure that you will agree it has been worth the wait (and the fanfare).
You think YOUR lot are bad?
17 Mar 2006 15:20
The UK Government has taken quite a beating this week over its handling of the changes to the country’s licensing laws. The revisions, introduced late last year, led finally to a farewell to the UK’s antiquated drinking times (to quote a US tourist – “Is the war still on?”).
The Department for Culture, Media and Sport this week came under fire from a committee of MPs for its “reprehensible” handling of the new regime. The department was accused of letting down licencees for its lack of preparation and poor level of support.
Spare a thought, however, for alcoholic drinks companies importing into Russia, who appear to be at the end of even worse government mishandling. In January, the government introduced new legislation requiring all imported alcohol be sold with new excise duty stamps. Bottles with the old duty stamps are permitted until 1 April, and must be sold by 1 July.
The importers haven’t received the new stamps yet. Today is 17 March.
Foster's develops Asian beer-fear
14 Mar 2006 20:27
Foster’s Group CEO Trevor O’Hoy appears ready to sanction the next significant move in his so-far short tenure at the Australian drinks company, as exclusively revealed by just-drinks on Monday (13 March).
Just a year after creating a global premium wine business with the acquisition of Southcorp, just-drinks understands he has turned his attention to beer, specifically in Asia.
Foster’s brewing operations in China, India, Vietnam and Fiji have improved in recent years but it appears that returns have not been high enough to justify the company holding onto them. A strong presence is vital for generating long-term sustained growth in the emerging beer markets of China and India and though Foster’s has enjoyed some success, notably in India, the company has not been able to compete with the world’s dedicated beer giants.
Foster’s has found it tough to expand its brewing footprint in India, given the dominance of United Breweries and SABMiller, while the company has been left behind in the consolidating Chinese beer market by the likes of InBev and SABMiller.
However, Foster’s remains committed to growing its flagship lager brand in Asia, where beer consumption is among the fastest-growing in the world. The company has enjoyed successful licencing deals on the Foster’s brand in Europe and the US, and analysts believe that a sale of its assets in Asia would include similar arrangements for the region.
So, who would the potential bidders be? Just-drinks understands that a number of global brewers have declared their interest – with the obvious front-runners being SABMiller and Scottish & Newcastle.
SABMiller is keen to build its footprint in India and is understood to be attracted to Foster’s Chinese assets while, earlier this year, it entered the buoyant Vietnamese beer market for the first time. SABMiller also holds the licence to Foster’s in the US. S&N, meanwhile, has driven Foster’s sales in the UK under a similar licencing agreement and would be attracted by the growth of the Foster’s brand in India, where it holds a stake in the country’s largest brewer.
And let’s not discount brewers like Heineken and InBev, who are said to be keen to enter the Indian market and who would also be eyeing Foster’s assets in China closely.
No matter who the buyer, Foster’s O’Hoy knows a sale of the company’s Asian brewing assets is sure to bring in much needed cash, which the company could look to invest behind its burgeoning wine business.
Soft drinks firms face hard choices
08 Mar 2006 16:10
Who’d be a CSD CEO this month? It’s not been easy of late for the carbonated soft drinks companies of the world, but those operating here in the UK are having a rare old time in March.
In spite of trying to make a half empty glass look half full, Britvic last week pointed to the first two months of this year as evidence that soft drinks are struggling in the country.
“Since Christmas, there has been a weakening in the total soft drinks market in the UK,” the company said. “If the soft drinks market shows recovery over the balance of the year as we anticipate, we remain confident of delivering earnings within market expectations, albeit at the lower end.”
Looks like a big if, if the start of 2006 is anything to go by - Britvic also noted that, for the 12 weeks to 25 December, revenue was up by only 1% and operating profit pre-exceptionals rose by 5% compared to the same period last year.
Add to this the recent testing in the country of soft drinks for the cancer-causing chemical benzene, and the alarm bells just get louder.
The Food Standards Agency has been testing 230 soft drinks available in the UK, and found benzene levels of up to eight parts per billion in some brands, eight times the level permitted in drinking water. Naturally, some of the UK press had a field day, in spite of the FSA noting that the levels of benzene were very low and not a concern for public health. Indeed, the British Soft Drinks Association highlighted the comments, adding that there was nothing to worry about.
But something still worries me. Here in the UK, a legal limit has been set for the amount of benzene found in drinking water, but no legal limit exists for the amount of benzene in soft drinks. Oh, and the word ‘cancer’ is in the news stories.
This one needs handling with kid gloves, otherwise the CSD market will turn yet more unpalatable than it currently is.
If you can't beat 'em... buy 'em!
01 Mar 2006 14:23
Characterised by power struggles, legal battles and the odd out-and-out gunfight, the Russian vodka industry is the source of some of the stranger tales to come from the modern drinks industry. My favourite is the one about how, at one point during the Communist era, the proceeds made from the Soviet vodka machine were set aside to single-handedly finance the might of the Red Army.
True or not, this tale demonstrates the sheer size of the industry and why the companies and personalities involved in the country’s vodka market continue to fight so hard for every advantage they can get.
It also shows why Diageo was happy to see the end to one of Russian vodka’s more significant tussles this week - the battle between its Smirnoff brand and the domestic giant Smirnov.
Diageo yesterday joined forces with A 1 Group, a subsidiary of the Russian conglomerate Alfa Group, to form a spirits joint venture, Diageo Distribution. Through the venture, the drinks giant has bought a majority stake in the Smirnov brand, which has seen sales leap more than fourfold in Russia in the last year.
There were as many as four Smirnov/Smirnoff brands on the Russian market at the turn of the century, each locked in a complex legal battle for control of the trademark and each claiming to be the true descendent of Piotr Arsenyevich Smirnov, who opened a distillery in Moscow in the 1860s and later became the official vodka supplier to the tsars.
Diageo’s deal with Alfa finally brings this chapter in Russia vodka’s colourful history to an end and Diageo will be all too happy to have buried the hatchet with such a favourable deal.
In Russia in the last half of 2005, Diageo saw net sales leap by 51% on the back of a 41% rise in volumes, albeit from a low base. The addition of Smirnov to the portfolio gives it the base to move even further forward quickly.
Andrew Morgan, president of Diageo’s European operations, said: “Combining this with Diageo’s expertise in spirits’ marketing means that this venture creates a strong foundation for our joint ambition to become the leading spirits business in this market.”
What remains unclear, is how two brands, for so long at loggerheads over trademark infringements, will be marketed together under the same portfolio.
“It is too soon to say what plans we have for the two brands,” was all a Diageo spokesperson could tell just-drinks. “Both have a significant Russian heritage. Once we get the Russian anti-monopoly regulatory clearance on the deal, we’ll develop a strategy that will allows us to take advantage of this Russian heritage.”
Churchill once said: “Russia is a riddle wrapped in a mystery inside an enigma.” Hopefully the situation with the country’s vodka industry will become clearer one day soon.
Most appropriate name for a drink - the race begins
27 Feb 2006 15:43
Since joining just-drinks, my appreciation of whisk(e)y has, naturally, gone through the roof. I love the stuff. Although, a new Scotch may have to pass me by.
The Bruichladdich distillery on Islay has produced a distilled whisky with an eye-watering alcoholic content of 92%.
Bruichladdich managing director Mark Reynier said the distillery was doing it as a bit of fun and it was unlikely to be repeated.
Bruichladdich plans to produce 5,000 bottles of ‘usquebaugh-baul’ as it is known – which is probably the sound I’d make after a dram or two of it.
InBev continues quest to go from biggest to best
24 Feb 2006 16:39
Newly-installed InBev CEO Carlos Brito faced analysts and reporters for the first time today as he outlined the brewer’s performance in 2005.
Brito, a veteran of AmBev, the brewing giant’s Latin American business, was appointed to the top job in December and tasked with taking InBev - as its oft-repeated mantra demands - “from being the biggest to the best” brewer on the planet.
Since the merger between Interbrew and AmBev in 2004, the brewer has targeted an EBITDA margin of 30% by the end of 2007. The merger created the world’s largest brewer by volume and, no sooner had the ink dried on that deal, InBev was eyeing Anheuser-Busch’s crown as the world’s most profitable brewer.
Today’s results suggest that, despite continued buoyant sales in the emerging markets of Latin America and Central and Eastern Europe, Brito has some work to do to ensure InBev hits that target.
Like a number of its rival brewers, InBev found the going tough in Western Europe last year. InBev’s volumes in the region were hit by falling sales in the UK and Germany. And, like a number of its rival brewers, InBev has moved to cut costs in Western Europe as part of its attempts to improve profitability. Jobs are to go in France, in Belgium - where the brewer is controversially closing its Hoegaarden brewery - and today it announced a fresh round of cuts in its finance, procurement and export departments across the Continent.
Brito’s rationale for the cuts makes sense. By streamlining these functions, InBev can focus more of its efforts - and crucially devote more cash - to its sales and marketing efforts in the flat beer markets of Western Europe.
Investment behind sales, marketing and, as Brito pointed out, innovation is key to enticing ever-more promiscuous drinkers to a premium beer portfolio that is fighting for share of throat with spirits and wine producers. To that end, the upcoming UK launch of Beck’s Vier and InBev’s decision to include Leffe in its stable of global flagship brands, represent decisive moves to grow sales in increasingly tough beer markets.
Nevertheless, it would be a surprise if InBev did not wield the axe in Western Europe again this year. Driving sales in mature and developed markets is one way to increase profits, but it takes time for marketing initiatives to take hold.
A quicker and easier way to boost earnings - and therefore get closer to the EBITDA target - is to cut costs. And ominously, InBev CFO Felipe Dutra did not rule out further cuts, saying the brewer would “continue to identify opportunities for greater efficiencies” across Europe.
Unlike Heineken, which earlier this week outlined its cost-cutting targets for 2006, InBev declined to put a number a precise figure on its cost cuts for the year ahead.
More jobs look set to go in the pursuit of profitability.