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Local brands grow more in Latin America With the 2014 Brand Footprint study, for the second year running Kantar Worldpanel has revealed the most chosen global and regional FMCG brands. 06 ISSUE 07-08 / JULY-AUGUST 2014

Boosts advertising rather than move from sugary drinks For 13 years running, Americans have been drinking less Coke. Now Diet Coke sales are falling off a cliff. Globally, sales growth of soda is slowing amid concerns about sugar intake and obesity. 09

CRAFT BREWING

American craft beer production has risen steeply in the past two decades Craft beer makers have experienced huge jumps in market share while the overall beer market size has shrunk. 22 EURO 2,80 / US $ 3,60

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BEVERAGE

TECHNOLOGY

PEOPLE

Investment fund buys Saudi juice maker

Packaging for beverages should be both economically and ecologically sensible

Diageo announces appointment to its board of directors

Saudi Arabia-based Olayan Financing Co (OFC) has taken a majority stake in Gulf Union Foods Co (GUFC) from a group of investors, including private equity firm Jadwa Investment. The purchase price of the 51% stake is undisclosed. Jadwa itself owned 30% of GUFC, and has sold its entire shareholding, which it bought in 2009. l (bmg)

Beer and barrels – for centuries there has been no better way of transporting this noble brew from the brewery to the restaurant or inn. In the beginning the barrels were primary made of wood. This also had an important advantage to the environment: for the production an environmentally friendly and renewable resource was used. It is questionable though that this environmental awareness was a decisive decision-making factor back then. With our knowledge nowadays however nobody can and should be indifferent towards the necessity to treat the environment in a way that energy and resources are saved.

Diageo announces the appointment of Nicola Mendelsohn as a Non-Executive Director effective 1 September 2014. She will also join the Audit, the Nomination and the Remuneration Committees on appointment.

WINE BUSINESS

Italian wine exports gather momentum Italy achieved a strong gain in its exports of sparkling wine between January-March this year and a marginal rise For breweries, a reliable and sustainable packaging of stainless in its shipments of still wine over the steel is both a long-term and safe investment into the future, as same period. For the past three years, well as a commitment to environmentally responsible behavior. Italy has been the number one wine producer on the planet. In 2012, it beat historic rival France once again with oth social values and consumer behavior have been 40.8 million hectoliters produced comchanging – that´s particularly clear in Europe. For Eupared to France’s 40.5 million, accordropean brewers it is worth taking a look at new lucraing to Coldiretti, the Italian farmers’ tive markets. Australia and the USA are booming markets – lobby. and Africa and Asia have become more important. Moreover, especially in the USA, the range of products has been changItaly’s is also the world’s largest exporter ing because of the increasing amount of craft-brewers. Also in of wine, and the number one exporter to the United States, both in terms of volume and value. Its global exports rose 42.7% in volume and 52.7% in value from 2007 to 2011, according to data compiled by Vinexpo. l (bmg)

Europe the supply of craft beers has been rising in the last years. All these developments lead to fierce competition. Especially sustainability, the taste quality, flavor stability and constant product quality will be the decisive factors to lead to success in the future. This applies to the entire process chain in brewing – also and especially on the “last kilometers” to the customer. 12

MARKETS

Beer trends in South Africa

      

By Amin Alkhatib Euromonitor International

Concoction beers, or opaque beers, are growing in popularity as the tipple of choice for many low-income sub-Saharan African consumers. These products are relatively affordable, partly due to the use of low-cost and locally grown fermentable starches such as  sorghum, cassava and millet.



 



hese concoctions, however, are increasingly becoming a modern business, involving major global brewers such as SABMiller and Diageo. Such companies are using factory lines, thus replacing homemade traditional wooden drums with Tetra Pak-type packaging and focusing on rural-centric distribution networks. 10

SABMiller is trying to target consumers of these concoctions by countering the short shelf life problem via innovation whilst also keeping costs down.

Nicola Mendelsohn is currently Vice President, EMEA of Facebook Inc., responsible for operations in the diverse region. Since joining Facebook in July 2013, Ms Mendelsohn has focused on increasing revenues through developing digital marketing solutions and strengthening relationships with the marketing community. Prior to her appointment to Facebook, Ms Mendelsohn was Executive Chairman of Karmarama advertising agency and held senior roles at Grey Communications and BBH. Diageo Chairman Dr Franz Humer said: “I am delighted Nicola is joining Diageo’s Board. Her senior experience at the forefront of digital marketing and communications will be of great benefit to Diageo and its brands, as we seek to pursue long term profitable growth through innovation in all areas of our business. Additionally her reputation as one of the UK’s leading businesswomen and her track record in championing women in business will be an inspiration to our people and the way that we work. I look forward to welcoming her.” l (bmg)

SOFT DRINKS

Coke breaks ground on new Chinese factory The USD100 million factory in Harbin, province of Heilongjiang, will produce carbonated soft drinks as well as Coke’s Minute Maid juice drink. The 200,000 sq.m. plant will hold nine production lines with an annual production capacity of 1.2 million tonnes. l (bmg)

QUICKSCAN

COMMENT

Craft beer revolution!

Is it the flavour profile, ingredients, branding and word-of-mouth promotional strategy? Or does it come down to the brewer’s ultimately independent nature and small

Vassilios A. Stergiou vs@beveragemanager.net

scale production? However, even accepting that last and marginally more consensus-driven definition, what constitutes independence and small scale? Is it set in stone? Can a successful craft brewer fall victim to the momentum of its own success, raising volumes and revenues at the expense of its integrity and authenticity? Do consumers really care? The days that the nascent craft revolution was only relevant to bearded aspiring alchemists experimenting with exotic hop varieties in their backyard shed are long gone. Homebrewing will not stop gaining acolytes, however. Nano-brewing will indeed be the next chapter in the industry’s frothy history, fostering irreverent experimentation, stretching definitional limitations and forcing the hand of bigger players. Their hand, after all, has already been forced.

“The brave new world of craft and specialty beer surely needs its own ambassadors, experts.” “Craft inspired” or “faux craft,” depending on one’s perspective, offerings from the industry’s behemoths have already began making waves. As an initial incubation period now comes to an end, 2015 will see big beer players invest in more complex and stratified specialty portfolios at the same time that price competition inevitably intensifies further. The explosive expansion of microstart ups across the US and EU will plateau. Many of these will either scale production back, be acquired or close altogether. Distribution issues and the potential for inflationary pressures on production will only accelerate such developments as craft will finally come of age. Facebook “Likes”, viral videos and a solid presence in the ever expanding blogosphere will eventually become as important as once totemic television and print-focused promotional campaigns. Major players will utilise the full advantages of targeted marketing and forge closer relationships with data providers, search engines and the social media. They will thus try to catch up with the bottom-up, alternative, more cost-effective and millennial targeting advertising strategies employed by micro-brewers. l (vs)

ISSUE 07-08 / JULY-AUGUST 2014

OVERVIEW COMPANIES

04 SABMiller constructs $64.6m malting plant in South Africa It will produce 130, 000 tons of malted barley each year and this capacity could be raised in the next couple of years to meet expected surge in demand from the group’s African operations.

WINE MARKETS

04 The first wine producer in the world With a production of 50.5 million hectoliters wine in 2013, Spain has become the first wine producer in the world.

BEVERAGE

06 Local brands grow more in Latin America The Latin American ranking gives an overall picture of regional strength. At the moment of truth, local brands are the winners

COMPANY

09 Boosts advertising rather than move from sugary drinks

BREWING

05 Beer Institute urges FDA to exempt american brewers from costly regulation “This regulation is onerous and expensive, but really it’s just unnecessary. There has never been a single reported negative incidence with spent grain.”

EUROPE Beverage Manager GmbH Business Media Publishing Lise-Meitner-Straße 3-5 D-86156 Augsburg / Germany Phone: ++49 (0)821 59 77 6 93 Fax: ++49 (0)821 59 96 2 46 www.beveragemanager.net net@beveragemanager.net USA Beverage Manager GmbH Business Media Publishing Sales Department 100 Church Street, 8th Floor New York, NY 10007, USA Phone: +1 646 845 - 7342 Fax: +1 646 845 - 7301 www.beveragemanager.net net@beveragemanager.net

Managing Director & Editor-In-Chief Vassilios A. Stergiou (vs@beveragemanager.net)

Advertising Director

Carsten Endrass (cendrass@beveragemanager.net)

Ad Sales & Account Coordinator

Maggie Thum (mthum@beveragemanager.net)

13 The top 4 German craft breweries With its rapidly growing craft beer scene, Germany has come a long way since the days when the “German Beer Purity Law” dominated the brewing landscape, limiting a brew’s ingredients to only water, barley, and hops.

CASE STUDY

For 13 years running, Americans have been drinking less Coke. Now Diet Coke sales are falling off a cliff. Globally, sales growth of soda is slowing amid concerns about sugar intake and obesity.

IMPRINT Publication/ Subscription

START UP

17 It all started with the Silver Springs Bottled Water Company In 2012 a new bottled water company was opened in the US state of Pennsylvania: the Crossroads Beverage Group. The first bottle of water rolled off the conveyor belt on April 16, 2012, and since then Crossroads has spiraled to success at what seems like the speed of light.

ONLINE & MOBILE Editorial - Europe

(editorial@beveragemanager.net) Roland Leblhuber, Roi Chaikou

Editorial - Asia Vu Trong Khanh

Editorial - Russia Steffan Scholl

Editorial - USA

Jennifer Fottrell, Simon Percival

Graphic design/ Illustration Walter Seiler (wseiler@beveragemanager.net)

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Europe 65,00 EUR All other countries 73,00 EUR ISSN: 1860-7772 Copyright © 2014 by Beverage Manager GmbH, Augsburg Printed in Germany Next Issue of BMG: September 15, 2014 Pictures: BMG Archive All rights reserved. The copyright, republication or redistribution of BMG content in this BMG-Issue, is expressly prohibited without the prior written consent of Beverage Manager GmbH – Business Media Publishing, Augsburg, Germany.

US CRAFT BREWING

22 American craft beer production has risen steeply in the past two decades Craft beer makers have experienced huge jumps in market share while the overall beer market size has shrunk.

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NEWS

BRAZIL

USA

Osborne acquired “Espirito De Mina” through its part owned company Natique

Pepsi remains confident

The Osborne Group acquired the brand of premium cachaça ‘Espirito de Minas’. The brand will form part of the company Natique, a Brazilian company which Osborne part owns. As part of this agreement, the old family which owns Espirito de Minas will continue to head production of this spirit, well-known for its outstanding quality, thus preserving the traditional production methods which have defined this product from the very beginning. The acquisition of Espirito de Minas strengthens Osborne’s position in Brazil’s premium cachaça market and is a superb addition to the brand Santo Grau from Natique. l (bmg)

GERMANY Project a & e Smart carrying for bottles and container for liquids

PepsiCo, Inc. reported core earnings per share of $0.83 for the first quarter, an increase of 7 percent. Core constant currency EPS increased 10 percent on organic revenue growth of 4.0 percent. “We’re pleased with our performance in the first quarter of 2014. PepsiCo delivered mid single digit organic revenue growth and double-digit core constant currency earnings per share growth, despite ongoing macroeconomic volatility, political instability and other chal-

lenging marketplace conditions in a number of our key markets,” said Chairman and CEO Indra Nooyi. “We continue to perform well, in part, because we have strong, balanced portfolios of brands, products and geographies that enable us to capture growth opportunities across multiple demand spaces while we responsibly manage through the volatility and challenges in other parts of the business. “We’re also benefiting from the in-

ISSUE 07-08 / JULY-AUGUST 2014

USA vestments we’ve recently made to strengthen our brands, innovate more effectively, and drive better execution; all while operating more efficiently by leveraging our global scale and capabilities. “We remain confident in achieving our financial goals for the full year and believe that we have the right strategies in place to create long-term value for our shareholders.” l (bmg)

MEXICO

Ground-breaking tax on sweetened drinks makes immediate cut in consumption Mexico’s beverage makers are reporting a 4% fall in sales of sweetened drinks in the first three months of this year – the first period in which prices have included a new tax on sweetened drinks. The Mexican government introduced a groundbreaking tax on sugar-sweetened beverages in late 2013. The tax became law in January 2014, meaning that the period January-March this year is the first in which the results of the tax can be seen. And the results are clear. Mexicans drink 163 litres of sweetened drinks a year (the highest consumption in the world and 40% more than Americans).

To carry or move big single bottles or containers for liquids could be very problematical. Thus, project Automation & Engineering developed a costeffective and easy solution: the singlebottle-carrier. A PROGRIP carryhandle applicator mounts a carry handle in an ergonomic angle on the container, due to the container and its attributes. The customer gets a very practical and economic carrying solution on this container with clear advantages for him and the manufacturer: Practical, costeffective carrying solution with addiIn a special report on the illegal alcotional marketing space. l (bmg) hol market for six Latin American countries, Euromonitor International reveals volume and value of illegal alcohol by country and the types of illegal alcohol and potential drivers for purchase and consumption in Colombia, Ecuador, El Salvador, Honduras, Panama and Peru. According to the research, the illegal market accounted for 25.5% of the total market in terms of volume by litres of Coca-Cola Enterprises announced alcohol equivalent (LAE) and 14.1% in the launch of Finley in France – a brand terms of value (illegal retail sales price new drink for adults, part of The CocaCola Company’s portfolio, which will be available in stores in April. The new fruit-based sparkling beverage marks the culmination of two years of research and testing and has been designed to perfectly satisfy the taste preferences of adults. SABMiller has started with the conFor Coca-Cola Enterprises, the launch struction a R700 million ($64. 6m) Joof Finley is part of the diversification hannesburg malting plant that would strategy which sets out to cover greater provide malted barley to African counconsumer needs as well as increasing tries where the world’s NO.2 brewer has our low-calorie beverage portfolio. operations. The new plant is more than three Available in large (1.5 l) and small (50 cl) bottles and (25 cl) cans, FINLEY offers a times the size of the current 48-year-old wide selection of formats. At home, at Alrode plant situated in Alberton, East work, when eating out or travelling, Fin- of Johannesburg, South Africa.It will ley is suited for every situation in the produce 130, 000 tons of malted barley each year and this capacity could be busy daily lives of adults! l (bmg)

That’s equivalent to 40.75 litres by every person, every three months – but in the first three months of 2014 that total fell by 1.65 litres, a 4% decline. Across the board individual drinks companies reported falls in sales of between 3.6% and 4.4%. The finance director of Coca-Cola Femsa – the biggest Coca-Cola bottler outside the United States – told analysts in a conference call it too, had experienced a 4.4% fall in business. The new soft drinks tax had been set at 1 Mexican peso per litre and health advocates believed that it would reduce annual consumption by 12%. With only three months sales in, it remains to be

seen whether that target will be reached. It may also be that after consumers’ initial surprise at the price increase and the attendant media attention has worn off, consumption might stabilise at a 4% decline – or go back up to where it was before. Mexico’s tax was introduced in response to the country’s crisis of obesity and diabetes – 32.8% of the population is obese, making it the fattest country in the world. This biggest-ever real-life test of whether “sugar taxes” can work will continue be the object of worldwide fascination. l (bmg)

USA

Latin American illegal alcohol market valued at US$2.4 Billion

FRANCE

“The most ambitious launch since Coca-Cola Zero”

or RSP).  On average, the retail prices of illegal products were 30.3% lower than their legal counterparts in 2012. In 2012, the market represented a total fiscal loss of US $736 million dollars, with counterfeit and contraband the main categories responsible for the loss. As counterfeit refills have very similar pricing to legal brands, many consumers do not realize that the product they are purchasing is not original.  Some formal channels such as wholesalers, retailers and on premise outlets sell illegal alcoholic beverages alongside legal

products, further misleading consumers.  However, there has been increased consumer awareness thanks to campaign efforts and local news about illegal alcohol. The key drivers of the illegal market include uncontrolled residual ethanol volumes, price gaps and weak law enforcement. The government regulations concerning legal alcohol sales and consumption also indirectly created more opportunities for the market. l (bmg)

USA

SABMiller constructs $64.6m malting plant in South Africa raised in the next couple of years to meet expected surge in demand from the group’s African operations. As Africa’s economic growth is expected to shoot the lights out in the next decade, beer consumption is expected to increase with the growth of the middle class in the continent. South Africa and neighbour Namibia need 300 000 tons of barley every year and presently the shortage is being imported at expensive prices from unsta-

ble global markets. The brewer obtains its barley from 378 Western Cape farmers, 162 commercial farmers and 97 Northern Cape emerging farmers.The construction of the new plant will certainly benefit South African commercial farmers and emerging farmers in line with the country’ black economic empowerment (BEE) policies. l (bmg)

U.S. soda sales decline worsened in 2013-Beverage Digest The decline in U.S. sales of carbonated soft drinks accelerated in 2013, according to a leading beverage industry newsletter. Total sales volume fell 3 percent in 2013 to 8.9 billion cases, the ninth straight year of decline, according to Beverage Digest. That compares with declines of 1.2 percent in 2012 and 1 percent in 2011. By company, Coca-Cola Co and Dr Pepper Snapple Group Inc each gained market share, according to Beverage Digest, while PepsiCo Inc’s lost market share. l (bmg)

SPAIN The first wine producer in the world with a production of 50.5 million hectoliters wine in 2013, Spain has become the first wine producer in the world. Compared to the 35.8 of the previous year, the country produced 14.8 million hectoliters plus (+ 41.4%) than a year earlier, according to the Ministry of Agriculture information collected by the Observatorio Español del Mercado del Vino. France and Italy, which are the main competitor countries for Spain, have had short crops due to bad weather, so the situation is even more favorable to the Spanish producers on price matters. l (bmg)

USA Kathy N. Waller as new Chief Financial Officer The Board of Directors of The CocaCola Company today elected Kathy N. Waller as Executive Vice President and Chief Financial Officer, effective immediately. As announced in February, Waller, 55, is replacing Gary Fayard who is retiring after 20 years with the Company. Waller, a highly respected global leader of the Finance Division, most recently served as Vice President, Finance and Controller.  She joined the Company in 1987 as a Senior Accountant in the Accounting Research Department and assumed roles of increasing responsibility including Principal Accountant for the Northeast Europe/Africa Group, Marketing Controller for the McDonald’s Group, Vice President, Chief of Internal Audit and Vice President, Controller. In addition to her role in Finance, Waller also leads The CocaCola Company’s Women’s Leadership Council and helped develop its highly successful Women in Leadership global program.  Waller also serves on the advisory board of Catalyst, the leading nonprofit organization with a mission to expand opportunities for women and business. l (bmg)

NEWS

ISSUE 07-08 / JULY-AUGUST 2014

USA

Diageo goes for gold with exclusive launch of Smirnoff Gold Apple

Beer Institute Urges FDA to Exempt American Brewers from Costly Regulation

Diageo Global Travel launch Smirnoff Gold Apple, a new apple-flavoured liqueur containing edible 23ct gold flakes. Smirnoff Gold Apple is the second release from the Smirnoff Gold collection, following the launch of Smirnoff Gold Cinnamon in 2012. It will be available exclusively in travel retail outlets worldwide from March to September, at a recommended retail price of £26 for one litre, before rolling out in domestic markets. The drink uses a natural gum that adapts to the bottle being shaken or stirred, slightly thickening to form a resting liquid in order to keep the gold flakes suspended. This key ingredient ensures that liquid consistency when pouring and drinking remains as smooth as any other Smirnoff variant, the brand explained. The bottle features a golden apple adorned with a Baroque-style pattern, said to be inspired by the orchards of European palaces during the French Renais-

The Beer Institute has filed joint comments with the American Malting Barley Association in order to protect a centuries-old and environmentallyconscious practice of brewers marketing their brewers’ grain to local animal producers. The Beer Institute has been working for more than a year with Members of Congress, regulators and allied organizations from dairy farmers to agriculture scientists in order to present a strong economic and scientific argument proving that it is completely unnecessary for the Food and Drug Administration (FDA) to add additional regulation to brewers’ spent grain and other by-products of brewing. The Beer Institute is the national trade association representing brewers of all sizes, beer importers and industry suppliers like hops farmers and can and bottle manufacturers.

sance era. The even distribution of the gold flakes is visible throughout the clear bottle, enhancing stand-out on shelf, the brand added. Diageo Global Travel and Middle East Global Marketing Director Steve White said: “White spirits is a key growth area in travel retail where we can deliver more value for Diageo and for our retail partners. Flavour differentiation is increasingly important to us in unlocking new growth opportunities. “With discerning consumers in the channel seeking out exciting new flavour experiences, we are launching Smirnoff Gold Apple as a travel retail exclusive for six months before it is introduced to domestic markets. It offers a great proposition for travellers – an exclusive offering from the world’s number one premium vodka. We are confident shoppers will love the flavour and the magic of the gold flakes and will see it as a fitting celebratory drink or an ideal gift for friend’’. l (bmg)

The National Milk Producers Federation also filed comments that expressly reference and include support for the Beer Institute’s comments. Brewers’ spent grain exist as a natural and necessary result of the brewing process. For centuries, brewers, large and small, have disposed on their spent grain by giving or selling them to farmers and ranchers. This recycling process supports community green initiatives,

but could end if this FDA rule is upheld. Instead, some brewers will be forced to throw away this valuable feed, a cheaper option than complying with the costly proposed regulations, which the Beer Institute estimates may cost a single brewery more than $13 million in onetime and reoccurring costs. Chris Thorne, Beer Institute Vice President of Communications said: “This regulation is onerous and expensive, but really it’s just unnecessary. There has never been a single reported negative incidence with spent grain.” Thorne added, “We have had very positive conversations with the FDA and other concerned stakeholders making us cautiously optimistic.” The Beer Institute will continue following all developments with the FSMA and any proposed regulations that may impact U.S. brewers. l (bmg)

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BRAZIL

MARKETS

ISSUE 07-08 / JULY-AUGUST 2014

Local brands grow more in Latin America

With the 2014 Brand Footprint study, for the second year running Kantar Worldpanel has revealed the most chosen global and regional FMCG brands.

The Latin American ranking gives an overall picture of regional strength. At the moment of truth, local brands are the winners.

mploying an innovative metric of Consumer Reach Points, the study succeeds in identifying the number of times a shopper chooses a brand.In Latin America only one of the Top 10 most chosen brands has moved up a position: Pepsi. But among the Top 50 brands there is a great deal of jostling for places. Local brands grew by 1.5% compared to only 0.7% for global brands, a trend that is particularly evident in Brazil and Venezuela.Local heroes showing outstanding performance in these countries include: Panco (bakery products) and Limpol (household care) in Brazil, Doña Gusta (stock cubes) and Ángel in Peru, Maruchan (instant noodles) in Central America, Mexico and Bolivia, Nosotras (feminine hygiene) in Ecuador, Colombia and Argentina and Alpura in Mexico. Thanks to Kantar Worldpanel’s

unique, worldwide coverage, the Brand Footprint study reveals the brands that have been purchased by the majority of shoppers the greatest number of times in 35 countries all over the world, through the food and drink, household care and health and beauty sectors.

A star duo: soft drinks and snacks Drinks is the category showing the greatest growth in Latin America, and it is also the category most purchased by households through the traditional channel as compared to other modern channels. Topping the ranking for the second year running is Coca-Cola. Not only does the brand hold onto top spot for the region, it also has a market penetration of 90%. On average, Coca-Cola is pur-

chased 32 times a year by Latin Americans – the highest frequency in any region in the world. The country contributing most to maintaining its growth is Mexico. Another drinks brand, Fanta, climbed one position, boosted by its iconic “Play Fanta” campaign. Similarly, with growth of 11% in Consumer Reach Points, Pepsi takes second place in the Top 10 brands with the greatest growth. Among the Top 10, the snack brand Ruffles shows the greatest growth, expanding its footprint by an incredible 21%. Doritos rose 6 spots in the Latin American rankings thanks its popularity in Brazil and Argentina and its worldwide “For the Bolt” campaign. Just like Coca-Cola, the Cheetos brand’s success is fuelled principally by Mexico, thanks to the “Let’s Jump Together with

Chester Cheetos” campaign which succeeded in connecting with Mexican families and positioning Cheetos as a fun and responsible brand. Sonia Bueno, CEO Latin America at Kantar Worldpanel, says, “The Latin American ranking gives an overall picture of regional strength. At the moment of truth, local brands are the winners; they are making room for themselves in the shopping baskets and households of Latin American consumers. Despite the fact that local brands are expanding their scope more rapidly than global brands, it is interesting to note that there are still a handful of global brands that are thriving. The brands in this group are experts in delivering more value to consumers, in satisfying functional needs, and in making life easier beyond mere consumption”. l (bmg)

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COMPANIES & MARKETS ISSUE 00 / MONAT 2014

PAGE

GLOBAL EDITION

COMPANY

Boosts advertising rather than move from sugary drinks

COMPANY New sales strategy for Warsteiner

For 13 years running, Americans have been drinking less Coke. Now Diet Coke sales are falling off a cliff. Globally, sales growth of soda is slowing amid concerns about sugar intake and obesity.

namesake brand. The company is boosting advertising, introducing new products, and using singer Taylor Swift as a pitchwoman. Chief Executive Muhtar Kent has said that last year, when Coke’s U.S. soda volume dropped 2%, was an “Sugar water with bubbles is not the fu- anomaly. Soda can return to healthy ture of the world. There’s an existential growth, even in the U.S., especially if it issue,’’ said Tom Pirko, an industry con- is a brand name like Coke, he said. sultant at Bevmark LLC. “Coca-Cola remains magical. We need A growing number of industry analysts to work even harder to enhance the rosuggest Coca-Cola should spend less to mance of the brand in every corner of advertise cola and more to diversify ag- the world,’’ Mr. Kent told investors in gressively through acquisitions of com- February. He regularly refers to flagship panies, like energy-drink maker Mon- Coke as the company’s “oxygen’’ and ster Beverage Corp. MNST -1.39% Sales “lifeblood.’’ of Coke’s nonsodas, including Minute Maid juice, Dasani water and Powerade For starters, he plans to increase global sports drinks, rose 5% last year by vol- advertising by $1 billion over the next ume. But that isn’t what Coke says it has three years. The company spent $3.3 in store. Instead, the Atlanta-based billion last year. Much of the increase company plans to double down on its will be devoted to soda, including the he trends are industrywide, but it is especially bad news for Coca-Cola Co., a company that derives almost 75% of its global sales volume from carbonated soft drinks.

Sprite and Fanta brands. Coke says its sponsorship of this year’s World Cup soccer tournament in Brazil will be the company’s largest marketing campaign ever.

The company defends its course, noting that its global beverage volume rose 2% last year and revenue increased 3%, in currency-neutral terms, despite tough economic conditions. Coke says it has continued to win market share in the U.S. and globally from PepsiCo Inc., and other rivals in soda and noncarbonated beverages. Past investments in its core brands, including Coke, consistently have paid off, it says.

Coke is defending aspartame, the main artificial sweetener in diet soda, citing more than 200 studies affirming its safety. At the same time, it plans to roll out Coca-Cola Life, a moderate-calorie version sweetened with stevia plant extract, across more countries, after releasing the drink in Argentina and Coke said Mr. Kent wasn’t available for comment, citing the quiet period Chile last year. ahead of its earning report on April Coke in February struck a deal to sell 15. Foreign-exchange losses from a soda through Keurig Green Mountain strengthening dollar are expected to Inc’s countertop machines, inching place a significant drag on profit this closer to a former executive’s dream year. 11 that Coke one day would stream from kitchen taps.

Warsteiner USA is creating two separate leadership roles for its sales and marketing efforts to more aggressively build its U.S. brand presence. “We believe in a strong brandbuilding concept,” said Martin Hoetzel, Vice President Marketing & Sales at Warsteiner International KG. “By separating sales and marketing into two distinct positions, we have increased energy and focus toward strategic growth in the United States.” As part of the new structure, Warsteiner USA has promoted Steve Montano from Vice President Sales – Eastern Division to Vice President Sales, in which he’ll be responsible for sales efforts across the U.S. Montano has nearly 30-years experience working with and leading teams on both the supplier and distributor side. His background includes numerous positions at Holston Distributing Company (including eight years as General Manager) and various leadership roles within Miller Brewing Company, Consolidated Beverage Distributors and Anheuser-Busch, Inc. In his new role at Warsteiner USA, Montano will oversee the U.S. sales team and is charged with expanding distribution and increasing market share for Warsteiner products. “Steve’s vast industry knowledge and proven leadership are tremendous assets to our company,” said Hoetzel. “Throughout his tenure with Warsteiner USA, Steve has built a strong reputation with his high-energy, team-first approach. We’re excited to see how his efforts will continue to expand the Warsteiner brand in the United States.” Montano assumes the sales leadership role previously handled by Steve Eilers, former President of Warsteiner USA, who recently left the company. Warsteiner USA is currently conducting a national search for the Vice President Marketing role. l (bmg)

MARKETS

“One of the main problems associated with the commercialisation of concoction beers is how to make prices more affordable.”

COMPANIES

01 Although, according to Euromonitor International, volume growth of sorghum beers in South Africa began to slow towards 2% in 2013, there remains potential for further growth beyond this market in the rest of Africa. As the illegal or untaxed trade of alcohol remains prominent in many African markets, companies like SABMiller are seeking to commercialise concoctions and expand affordability to low-income consumers. Diageo’s attempt has worked well thanks to the use of transactional packaging to reduce costs; such an example can be seen in Kenya where the Senator Keg brand is sold in large returnable containers suitable only for communal consumption. SABMiller has commercialised opaque beer variant Chibuku Shake-Shake to undercut unbranded concoctions. Yet, regardless of such innovative attempts to bring illicit trade to the fore by investing in commercialising traditional concoctions, there still remain limitations to their future success.

Competition from clear beers is limiting the expansion of branded concoctions but they still may have potential as long as prices can be kept significantly lower than those of mainstream beers.

An opaque outlook for concoctions

ISSUE 07-08 / JULY-AUGUST 2014

pends on the seasonal temperature. Is the investment justifiable? Concoctions continue to ferment even after the completion of the process, and Competition from clear beers is limitFirst of all, one of the main problems as- it is the need for a stabilising process that ing the expansion of branded concoctions but they still may have potential sociated with the commercialisation of is likely to push up costs and prices. as long as prices can be kept significoncoction beers is how to make prices more affordable. Sorghum or cassava SABMiller is trying to target consumers cantly lower than those of mainstream beers are typically associated with low- of these concoctions by countering the beers. Eagle, a Ghanaian cassavaincome consumers so they have to be short shelf life problem via innovation based beer, competes with mainstream marketed and priced at a level that is in whilst also keeping costs down. In 2012, beers via lower excise duties. Eagle is line with a typical labourer’s wage. How- the company released the slightly more part of the race between SABMiller ever, various brewers are taking a gam- expensive brand Chibuku Super in Zam- and Diageo to target lower-income Afble as Africa’s fast growing middle-class bia, with a fixed ABV of 3.5% and a 21- rican drinkers. Concoction beers tend will hamper demand for commercialised day shelf life. Furthermore, in an effort to retail at only 70% of the price of concoctions as these consumers will to keep prices as low as possible, manu- clear beers, and companies are targetwant to trade up and away from such facturers are utilising low-cost PET or ing people who make as little as US$2Tetra Pak-style packaging to reduce dis- 3 a day. However, in many African low-value products. tribution and storage costs. countries the incomes of these people are rising rapidly, and they are being Secondly, sorghum homebrews can have variable manufacturing output, result- It would be wrong to assume that Afri- pursued by multinational companies ing in lumpy parts that have distinctively can consumers would snub branded as population and income growth sour tastes when compared to clear concoctions. On the contrary, for many stagnate in more developed countries beers. This is mostly due to the low-cost low-income consumers these would rep- outside Africa. manufacturing process that is used to resent a step up from the lumpier and keep prices low enough for low-income unhygienic concoctions that they recog- Despite the aforementioned limitaconsumers. Variable quality output and nise. Moreover, the low-value offering of tions, there is scope for these beers to flavour acceptance will be the key issues this drink will deter low-income con- capture volume sales at the low end of to consider when developing more com- sumers from illicit trade concoctions the market. And it would be beneficial for companies to achieve this before mercial versions of these branded con- which can endanger health. further competition leads to saturacoctions. tion in the fast growing African market. l (bmg) Thirdly, one of the most inconvenient aspects of commercialising sorghum concoctions is their short shelf life (Chibuku Shake-Shake has a shelf life of just 3-5 days), which de-

ISSUE 07-08 / JULY-AUGUST 2014

COMPANY 09 Skepticism is growing—even inside the company—about whether Coke can still meet its target for 3% to 4% annual volume growth in a world in which soda volume rose only 0.9% last year, according to Euromonitor.

BEVERAGE ents are being scrutinized by regulators, complicating any deals. Mr. Kent has said that Coke is always looking at acquisitions, but the company declines to comment on any possible targets.

Coke already has 11 nonsoda brands with more than $1 billion each in retail sales and an unrivaled distribution network, and operates in every country except Cuba and North Korea. In Eurasia and Africa, Coke’s beverage volume Coke still has plenty of supporters, in- rose 7% last year. At a global planning meeting late last cluding Berkshire Hathaway Inc., long year, Steve Cahillane, who then was president of Coca-Cola Americas, said growth targets were unrealistic, according to people familiar with the matter. Coca-Cola plans to increase globHe had been viewed as a potential sucal advertising by $1 billion over cessor to Mr. Kent. A few weeks later, the next three years. Mr. Cahillane left the company in an organizational shake-up. John Faucher, a beverage analyst at J.P. Morgan, said Coke should diversify more aggressively through acquisitions. Coke already is the world’s biggest juice company but could bulk up in areas like tea, coffee and dairy, where it is a much smaller player. “Interest rates are low and they have a ton of cash,’’ Mr. Faucher said.

The pace of Coke’s global soda volume growth slowed to 1% last year from 3% in 2012 as concerns about health and obesity spread. Last month the World Health Organization suggested that individuals limit consumption of added sugars in food and drinks to 6 teaspoons a day—less than the 9 teaspoons in a 12-ounce can of Coke. Soda volume in Mexico, Coke’s second-largest market, have fallen an estimated 5% or more since the country introduced a tax on sugary beverages in January.

Coke’s cash and short-term investments totaled $17.12 billion at the end of December, up from $13.46 billion a year earlier. Industry trackers say potential U.S. candidates could include Arizona Beverage Co., with an estimated market share of 25% in ready-to drink teas, and Monster, the country’s biggest energy drink maker by volume. But Arizona’s owners are locked in a protracted court dispute, and Monster’s marketing and ingredi-

Still, investors have cooled on Coke. The company’s share price has fallen 2.7% over the past year, while the S&P 500 has climbed 21%. Last month, Budweiser maker Anheuser-Busch InBev, the world’s largest brewer, supplanted Coke as the biggest beverage company by stock-market capitalization.

the beverage maker’s largest shareholder. “I’m 100% in accord with Coca-Cola’s business strategy and regard Muhtar Kent as the ideal CEO for Coca-Cola,’’ Berkshire Chairman Warren Buffett said by email.

The new drag on Coke’s U.S. business is diet soda. Diet Coke volume has been down for eight straight years, accelerating the decline in the past three. Diet Coke sales plunged 6.8%, in volume terms last year, according to Beverage Digest. Diet Pepsi sales fell 6.9%, but PepsiCo, with its enor“This is more of an emerging-markets mous snacks and foods business, is far and developing-markets story; that’s the less dependent on soda than Coke is. way we look at it,” said Kurt Havnaer, a l (Source: Mike Esterl, WSJ) portfolio manager at Jensen Quality Growth Fund. The U.S. mutual fund owns about $150 million in Coke shares.

“John Faucher, a beverage analyst at J.P. Morgan, said Coke should diversify more aggressively through acquisitions. Coke already is the world’s biggest juice company but could bulk up in areas like tea, coffee and dairy, where it is a much smaller player. “Interest rates are low and they have a ton of cash.’’

[carry handle]

TECHNOLOGY

PACKAGING

01 Particularly the keyword sustainability is and will be of great importance in the future. Various breweries already perceived this trend years ago and started different environmental protection programs. What´s new though is the increasing tendency among breweries towards reviewing the environmental awareness in previous processes. In the course of such an examination they find out which measures have to be taken in order to avoid CO2 emissions. Sustainability doesn´t end with the consideration of the origin of the raw materials used but also comprises all logistical processes, from the brewery through the distributor to the Restaurant/Pub. In this process chain the global share of tapped beer is at 9 % (Plato Logic Limited, 2013, S. 14). Usually this beer is filled into stainless steel kegs. For years alternative packaging options in the form of PET containers have been available on the market. Many times logistical advantages in export are cited as reasons. In principle, all containers (both domestic ones and the ones in the export market) have to meet the following requirements:

ISSUE 07-08 / JULY-AUGUST 2014

newly produced stainless steel, thus lowering the primary demand for energy and resources in the production. Additionally, the owner of the keg can have economic benefits from the steel kegs considering the current scrap In the LCA analysis the break-even prices. point – meaning the point when the count has turned in favor of the stain- The matter looks quite different when less steel keg – was as follows (Tab. 3). it comes to PET containers. For the same volume of 3600 liters in 30 years On average the break-even point with a total of 120 PET containers have to stainless steel kegs is at 16.66 cycles. be used. According to the study When it comes to disposable PET With four cycles per year and a useful “PLASTIC WASTE IN THE ENVIcontainers however, the end of the life life of 30 years this means: after a bit RONMENT“ (Environment, 2011, S. circle is already achieved after a single more than four years the use of a 66-74) by the European Commission use and it has to be transported to stainless steel keg is more environ- in 2011, plastic waste is recycled as waste recycling (Tab. 2). In the pro- mentally friendly than the use of a well, but: cess of collecting it from the Restau- PET container. Stainless steel kegs  only 29% are re-used as recycling material Tab. 2  41.8% of the plastic end up on landfills and take centuries to decompose and  29.2% are burnt in incinerators, emitting toxicities ses values are significantly lower than in the production of disposable PET containers. Summing up the environmental damage in the life circle becomes gradually less with each use. Even stronger is the degressive effect when the frequency of use increases. Thus it is clearly visible that both the examined values as well as the results arising from that depend very much on the usage frequency of the stainless steel keg.

manent burden on the environment through disposable PET containers, whereas the figures gradually decrease in the course of a useful life of a stainless steel keg.

sustainability application security  profitability  

“When it comes to disposable PET containers however, the end of the life circle is already achieved after a single use and it has to be transported to waste recycling.”

rant/Pub and feeding it to combustion have another advantage when it or recycling it, CO2 is emitted but this comes to recycling. A keg with the fact tends to be ignored in the overall weight of 9 kg and a volume of 30 liIn a LCA-study (Treeze, 2013) initiated view. Since it is a one-way system, ev- ters transports 3600 liters of beer in by Franke on the occasion of Drinktec ery production causes the same 30 years (Tab. 4). At the end of its life 2013, a comparison between the sustainability of stainless steel kegs and Tab. 3 disposable PET – containers was made. → 20 cycles Global Warming Potential (CO2)

Sustainability

These areas were examined: Global Warming Potential (CO2) water consumption  energy consumption 

Water consumption

→ 15 cycles

Energy consumption

→ 15 cycles



amount of CO2-emissions, energy and water consumption. With regard to Basis of this study were the follow- the life of a stainless steel keg, in the graph you can see a constant and pering assumptions (Tab.1). Tab. 1 Container

cycle the stainless steel keg is scrap and goes to 100% into the melting furnace of the steel industry. It is then a completely recycled raw material for

Stainless steel keg

Disposable PET container

1/6 bbl.(19.8l), 6 kg empty weight

20l, 1.05 kg empty weight

Delivery brewery

empty container

Destination

Europe -> USA

Distribution area around brewery Cycles per year Service life of container Recycling The essential factors in the evaluation are the manufacturing of the containers, the number of times it was used and when it comes to the stainless steel keg, the necessary return transport after having been used and the cleaning. The manufacturing of stainless steel kegs consumes a lot of resources and energy. However these values are put into perspective with a useful life of 30 years and about 120 uses in total. Every new use causes CO2 emissions and consumes water and energy when the kegs are cleaned and filled. But since it is not a new product the-

Application Security In an everyday handling of a beer barrel the application security is one of the most important factors. Both in breweries and in a Restaurant/Pub a reliable and safe container is important to protect the person and the content. Through negligence in the daily handling or technical defects on the filling machine the container can be excessively used. Here are a few examples: excessive preload pressure / excessive saturation pressure  temperature-induced increase in internal pressure  pressure build-up because of incorrect handling (e.g. falling down)  incorrect supply of CO 2 

within a radius of 800 km 4

In this example this means that 71% or 85.2 kg of the generated PET waste are either disposed of at a landfill or are thermally utilized – meaning a complete destruction of a raw material. Especially in countries with a poorly developed infrastructure where waste disposal is not publicly or privately organized, this increases the risk of environmental pollution. The long-term impairments to the environment through plastic waste becomes particularly evident in the Great Pacific garbage patch (Blawat, 2010).

30 years

one-time use

up to 100%

disposal on waste reprocessing plants

Tab. 4

Keg with opened safety burst disc Modern stainless steel kegs are best equipped for these cases. 14

ISSUE 07-08 / JULY-AUGUST 2014

RUBRIK

CRAFT BREWING

The top 4 German craft breweries

With its rapidly growing craft beer scene, Germany has come a long way since the days when the “German Beer Purity Law” dominated the brewing landscape, limiting a brew’s ingredients to only water, barley, and hops.

By Callia Amer*

Schoppe Bräu – Hops, Malt, Heart, and Soul Schoppe Bräu, a Kreuzberg “brewer with heart and soul,” was founded by Thorsten Schoppe, a brewer with 24 years of experience under his belt who has earned the respect of the likes of renowned sommelier Billy Wagner of Nobelhart und Schmutzig who calls Thorsten “a true berlin brewer” who crafts open and free beer “with a lot of drink-

ability”. The small production house sells to restaurants and pubs, supplies for events, and provides home brewers with equipment. None of their beers are filtered or heat treated, making their flavor unsurpassably fresh. The company currently offers a selection of four crafts likely to satiate those thirsting for artisanal. The “Black Forest Stout” is a colored malt and roasted barley stout with coffee and cocoa aroma. The “XPA Xberg Pale Ale,” an American hop/fruity beer will quench your thirst for a classic. The “Roggen Roll Ale” boasts eight different specialty malts including rye, and for a punch of extreme flavor enjoy the “Holy Shit Ale,” a double IPA with a 10% alcohol content.

Heidenpeters – Beerhalle in the Markthalle Another Kreuzberg brewery named after its brewer, Johannes Heidenpeters, is a distinct favorite. This young micro brewery is beloved by Billy Wagner and Felix vom Endt of Berlin Beer Academy to name a few. The latter sings Heindenpeters praises, telling MIXOLOGY, “He is a very creative guy and he brews different styles and interpretations of

beers. He also uses different ingredients to push the boundaries of the German “Reinheitsgebot“ and people like that a lot.” Felix and others are confident that Heidenpeters will continue to expand easily in order to appease the growing demand since its current home in the cellar of Markthalle IX nurtures the young brewery with both the physical and moral support required. Felix calls Heidenpeters a “definite rising star in the craft beer scene worldwide”. It’s easy to understand why if you brave through the crowded Markthalle IX to try one of his well crafted creations. 15 *) Mixology Editor

TECHNOLOGY

PACKAGING

12 According to the German ISO standard DIN 6647-1, containers up to 50 liters are expected to withstand pressure of at least 60 bar without bursting! It is even safer to equip the kegs from the outset with a safety burst disc which opens at 50 bar, allowing overpressure to be released without danger. Such a strictly standardized regimentation however is completely missing when it comes to PET containers. In the USA though, based on recent events, there has been increased awareness to define such standardization for the brewing industry. Furthermore a packaging must not influence the taste of the beer. Barrels made of stainless steel are perfectly suited for that. The material stainless steel protects the content up to 100% from ingress of oxygen or UV-rays, a leaking of CO2 is completely avoided. The taste stays the same since stainless steel is neutral to the content.

Profitability With respect to sustainability and application security the stainless steel keg is at a clear advantage. The last point to be considered in the overall view is profitability and economic efficiency. The following aspects have to be taken into consideration:

use. When calculating the CAPEX value for a 0.33l glass of beer of both containers, with regard to the following assumptions, one can come to this result (Tab. 5).

Tab. 5

Stainless steel keg

PET container

Durability

30 years

one-time use

Cycles per year

Cycles in 30 years

120

Transported volume during use

3600 l

30 l

Acquisition costs 30 l keg

73 €

10 €

Scrap value

20 €

Total costs

55 €

10 €

CAPEX

0.005 €

0.11 €

Tab. 6 Assumptions

Value

Service costs stainless steel keg

7.00 €

Amount of keg service during useful life

Theft / loss of stainless steel keg in %

Cost for collection per stainless steel kegs in euro

1.00 €

Cleaning costs stainless steel keg in euro

1.00 €

Costs stainless steel keg in euro

720.35 €

Costs PET container in euro

1,215.39 € Tab. 7

The CAPEX value of 0.005 € for each tapped glass of beer is a strong argument for the stainless steel keg. For an overall view costs for logistics and handling have to be considered as well. For this evaluation the assumption is that a total of 3600 liters of beer have to be exported business. The breweries don´t have to over a distance of 800 km with one single care about the collection and the recontainer (Tab. 6). turn transport anymore. This service is done by CBR (Tab. 7). When exporting to countries with a modern infrastructure one has to take The process is as follows: a brewery into account that there are well-devel- orders the desired amount of EKEGoped logistics and the rate of theft is STM with CBR. For every EKEG a fee relatively low. In countries having to is charged for the receipt and use of deal with a high rate of theft, PET the EKEGSTM. After filling the kegs containers are a possible alternative. they are then sent to the customers But as mentioned before, also PET via the usual distribution channel. containers have to be transported in Subsequent to that the empty kegs are order to be disposed, which involves collected by the distributor and are additional costs. A sole PET one-way sent to the nearest exporter for the container therefore only exists in the next use. This is where the ecological consideration from the brewery to the assessment comes full circle, since customer, however completely ig- there are hardly any empty transports anymore and there is a potential for nores the waste disposal. future economic advantages. For From an economic perspective the more information about the EKEGTMstainless steel keg has, as a result, a Program please visit http://www.clolower CAPEX value and lower han- sebreweryrentals.co.uk/our-services/ dling costs of about 500 €. Taking the exportkegs/. A worthwhile and ecoadvantages of “application security” logically friendly alternative for the and “sustainability“ into account, export business. there is no better container than a returnable and reusable container made of stainless steel. Conclusion

How high are the acquisition costs?  How high are costs for logistics?  How high are the handling costs EKEGTM – the economic and eco(cleaning, keg-service) during nomically friendly solution useful life?  How high is the loss rate? Since 2013 breweries don´t have to do without a safe, sustainable and ecoThe acquisition costs must be seen in nomic stainless steel packaging for relation to working life. A stainless their export business anymore. Close steel keg is expected to have a service Brewery Rentals (CBR), a partner in life of 30 years. In this period of time the GNKS-network of Franke Beverwith 4 uses per year the stainless steel age Systems, offers the EKEGTM for keg can be used 120 times. With a the export business in its “Fill-andPET container however the acquisi- Forget-Program”. These kegs are intion costs are 100% for every new tended for a single use in the export 

ISSUE 07-08 / JULY-AUGUST 2014

For more information about the EKEGTM-Program please visit http://www.closebreweryrentals.co. uk/our-services/exportkegs/

For breweries, a reliable and sustainable packaging of stainless steel is both a long-term and safe investment into the future, as well as a commitment to environmentally responsible behavior. The stainless steel keg has established itself in the last years and has proven that the brewed beer arrives at the customer in the same quality as it left the brewery. Moreover, it meets safety standards already today and protects the user from possible injuries, even in case of improp- For more information www.gnks.info) er handling. l (bmg)

CRAFT BREWING

ISSUE 07-08 / JULY-AUGUST 2014

RUBRIK 13 Whether its one of the Pale Ales or a flowery Belgian Saisonal, you can taste the care that goes into the concocting of the beers, which may very well be poured for you by Johannes himself. If you’re feeling cramped or fall in love with the flavor, which is a likely outcome, his creations can be brought home in generously sized growlers.

BrauKunstKeller – “Life is Too Short to Drink Bad Beer”

pares their cold-ones to fresh produce, an idea shared by Billy Wagner who compares craft beer to a soup that should be served as freshly as possible. BKK’s beers forgo filtering, pasteurization, and stabilizing in order to maximize the freshness as well as the flavor experience. The brewery offers three IPAs: the “Amarsi,” a personal favorite of Jan Peter-Wulf ’s which is a caramel bitter yet malty-sweet IPA, The “Laguna,” which is a fruity-pine, caramel-malt American style IPA, and the “Mandarina” whose smoked malt compliments its citrus flavor. They also offer one Pale ale. After trying the selections you’ll be likely to agree with Felix vom Endt who tells MIXOLOGY he’s “sure we will drink a lot of more beers from BrauKunstKeller in the next years”.

Alexander Himburg’s BrauKunstKeller has experts such as Felix vom Endt and gastronomy journalist and beverage consultant Jan-Peter Wulf talking about it’s superior brews. BrauKustKeller com-

Crew Republic – “Join the Revolution” Experts in microbrewing agree that Crew Republic has a very promising future. The Munich based brewery startup boasts one of the widest varieties among its peers. Its seven variations include both an IPA and double IPA as well as their original “Foundation 11” German pale ale, a hoppy and refreshing “Munich summer” beer, an extremely hoppy and malty “Roundhouse kick” imperial stout, a more laid back “Detox” session ale, and an experimental “X 2.0” Barley wine.

Forecasting the future success of microbreweries, Donald Burke predicts that “Crew Republic has the lead. More and more places are carrying their range.” He adds that “they are quick to notice new flavor trends emerging in the beer world.” Despite Crew Republic’s aggressively branded marketing strategy the brewery manages to stay true to the ethics of crafting, delivering high quality artisanal brews. Their playful tagline dares you to “Join the Revolution! Craft Beer is Not a Crime!” With so many emerging beers joining the craft craze, it’s important to keep in mind the true values of craft, ideals which are deeply entrenched in Germany’s rich beer history. As Billy Wagner tells MIXOLOGY, “a beer doesn’t have to be an IPA or a Pale Ale in order to be craft”. In the end craft beer is not only about limited production and local distribution but above all about the love and care that goes into the brewing. l (bmg)

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If we hadnâ&#x20AC;&#x2122;t gone so far, we wouldnâ&#x20AC;&#x2122;t be so near. Your future, seen from near

Beverage Manager _ November 2012.indd 1

17/10/2012 12.42.32

INDUSTRY & BUSINESS ISSUE 00 / MONAT 2014

PAGE 17

GLOBAL EDITION

SUPPLIER

CASE STUDY

It all started with the Silver Springs Bottled Water Company

By Georg Zuzok & Jon Elward

In 2012 a new bottled water company was opened in the US state of Pennsylvania: the Crossroads Beverage Group. The first bottle of water rolled off the conveyor belt on April 16, 2012, and since then Crossroads has spiraled to success at what seems like the speed of light. For 2013 Kirk Richmond, the Chief Operating Officer of Crossroads, is planning on selling an incredible 500 million bottles of water. Says Richmond, “We greatly benefit from the expertise of Silver Springs Bottled Water Company which is based in Florida and also owned by our family.” At the root of these many benefits is Crossroads’ plant engineering for which there was no option when it came to choosing the equipment. Right from the start Richmond wanted turnkey lines from KHS. The company therefore started its operations with two KHS PET systems, one a multifunctional line outputting 36,000 bottles per hour and the second solely reserved for the processing of 0.5-liter bottles at a rate of 72,000 bottles per hour. Richmond continues, “We assumed that these two lines would initially do us for one or two years. However, as the market wants much more of our quality water than first expected and as our two KHS lines were running at almost maximum capacity only six months after they were commissioned, The Crossroads Beverage Group was in 2012 we ordered a second 72,000-bph, KHS turnkey line to fill 0.5-lifounded in Reading, Pennsylvania in ter bottles. This was absolutely the right thing to do. This now oper2012. The company has since blazed a ates 24/7 and is already running at half of its full capacity.” trail to success.

uccess has been strong and steady for the Richmond family since they established the Silver Springs Bottled Water Company in 1991 at a time when the bottled water business was still in its infancy in the United States of America. Kirk Richmond’s parents Karl and Margaret saw great potential for this segment of the beverage industry and were to prove correct in their assumptions. They began bottling with just six employees, filling 5-liter gallons with spring water (an American gallon is the equivalent of 3.758 liters). Silver Springs in Florida is now a fixed feature on the water market, filling an ever smaller percentage of its total output into 5-liter gallons and dealing chiefly in water in PET bottles. The President and CEO of Silver Springs and Crossroads Beverage Group is Kane Richmond, the founders’ son and Kirk’s brother. Keith Rich-

mond, another brother, acts as CIO of Silver Springs. Kirk Richmond smiles. “My son Kiel represents the next generation at Crossroads and will carry on the family tradition. in all respects, right from the word go.”

No sooner said than done – Crossroads is born The idea of setting up a second bottled water company alongside Silver Springs arose about three years ago. Kirk Richmond tells us more. “We’d known for quite a while that the market in the northeast of the US was undersupplied with bottled water, especially as far as distribution through the retail trade was concerned. We had lots of inquiries at Silver Springs from this region and when this number became considerable we decided to open a sec-

ond bottling plant in the Northeast.” The search for a suitable building and site began in the middle of 2011, and at the same time – in another unusual move for the Richmonds – the KHS lines were ordered – before a site had been found. Kirk Richmond explains. “We wanted to start bottling as soon as possible and were convinced that we’d quickly find the right premises. And we were right!” The family was looking for sizable buildings on a site measuring between 20,000 and 40,000 m2 and found just that in the City of Reading, Pennsylvania. Here they hired 30,000 m2 of premises with buildings which used to house a packaging company. The buildings were refurbished to suit the bottling plant’s requirements, giving it ample space for its present activities and also room to expand should the need arise.

Focus on the customer As at Silver Springs, Crossroads has one main motto, namely “We focus on the customer.” Crossroads’ core area of business is to supply retailers and casino operations with their own private label bottled water. If required, the company also assists in the creation of bottle designs, labels and shrink packs. At present Crossroads distributes the majority of its product within a radius of roughly 300 miles, the main sales areas being big cities like New York, Philadelphia, Baltimore and Boston. Approximately 130 trucks loaded up with freshly bottled water currently leave the company every day, with around 40 trucks delivering water from various springs in the region on a daily basis. Crossroads bottles spring water and also treated municipal water. 18

CASE STUDY 17 With about 30 retail chains and casino operators, Crossroads has built up a broad customer base within a very short time indeed. All told, the company makes 80% of its sales with approximately 20% of its customers. Kirk Richmond says, “Be that as it may, Every single customer is extremely important to us. We came here with a promise to always supply each and every one of our customers on time. Before, reliable delivery was

On all three of its KHS turnkey lines Crossroads has opted for the InnoPET BloFill monoblock which consists of an InnoPET Blomax Series IV stretch blow molder monoblocked with the Innofill NV filling system ...

TECH KHS turnkey lines offer a full range of extra benefits When Crossroads came to place its order for bottling lines, it’s significant that only KHS turnkey lines were considered. “At Silver Springs we’ve seen that KHS turnkey lines run very fast at full capacity and are very economical and efficient,” states Kirk Richmond. “We definitely didn’t want to miss benefits like these at Crossroads. The lines’ out-

ISSUE 07-08 / JULY-AUGUST 2014

Within the Bottles & Shapes program KHS acts a constant partner to beverage companies throughout the entire development of a plastic container – from the initial idea to its industrial manufacture. The aim of this program is always to create a container that fully meets the visual demands of the company and is of the highest quality, while keeping costs to a minimum and ensuring sustainability throughout the production process. Before the design process for

InnoPET BloFill monoblock an essential component On all three of its KHS turnkey lines Crossroads has opted for the InnoPET BloFill monoblock which consists of an InnoPET Blomax Series IV stretch blow molder monoblocked with the Innofill NV filling system. This choice is also the result of the good experience Silver Springs has had; back in 2008 Silver

a sticking point here in the northeast standing performance had us con- ... for the Innopack Kisters SP Advanced shrink packer ... of the US. We’re now clearly seeing vinced from day one here, too.” the results from the good reputation the customer’s perfect PET bottle gets Springs was the first beverage company we’ve earned with a steady increase in underway KHS clarifies precisely which in the world to invest in the then newly our sales figures.” Bottles & Shapes program for very lightweight PET bot- products are to be bottled and thus launched monoblock system which was which filling technologies are to be uti- kitted out with an InnoPET Blomax Setles and plenty of lized. KHS also investigates the stress ries III stretch blow molder. Silver Great flexibility a given security the bottles will be subjected to in practi- Springs also ordered the world’s first Incal operation, for instance while being noPET BloFill monoblock fitted with Another competitive advantage in the eyes of Kirk Richmond is that unlike Something else Crossroads didn’t want conveyed through the line, during the the InnoPET Blomax Series IV generamany of its rivals, Crossroads fills a to miss were the extremely lightweight palletizing process and shipment to re- tion of stretch blow molders. Says Kirk diverse range of bottles and packs PET bottles Silver Springs had opti- tailers and at the points of sale. Using Richmond, “Besides all the general adthese into all kinds of shrink packs mized together with KHS. For example, finite element analysis all known influ- vantages monoblocking gives us, the for retailers and casinos. Kirk Rich- the 0.5-liter PET bottle for Silver ences are simulated and applied to the KHS system also provides us with a mond says, “We’re able to react ex- Springs and Crossroads currently virtual packaging. The next stage in the whole range of additional benefits, tremely flexibly thanks to our multi- weighs just 9.1 grams. At Silver Springs Bottles & Shapes program is to manu- among them even better efficiency, confunctional KHS line which can output the weight of the 13.2-gram bottle was facture bottle prototypes. If these are siderable savings in materials and ener36,000 bottles per hour. On it we pro- cut down to 9.1 grams in two stages on approved, the first bottles are made on a gy and great ease of operation.” duce and fill 8, 10, 20 and 24-ounce application of KHS’ service and consul- lab machine that works just like the and 0.5, 1.0 and 1.5-liter bottles, pro- tancy program for the design and devel- stretch blow molder later used in praccessing the 0.5-liter size only on the opment of plastic bottles which is tice. Only when lab test results have The InnoPET Blomax Series higher capacity lines. We make 90% unique worldwide: Bottles & Shapes. confirmed all given specifications are IV has many advantages over of our sales with the latter. We can According to Kirk and Kane Richmond the bottles released for production. the previous generation also take action as required on our the next benchmark regarding PET Kirk Richmond is pleased. “We’re in multifunctional line when it comes to weight is 8 grams, with the two brothers good hands with the Bottles & Shapes shrink packs; on the 72,000-bph sys- aiming for a maximum weight of concept because it means that all of our Many of the named advantages are featems, however, we only program larg- around 7.5 grams for their 0.5-liter PET lightweights are perfectly able to cope tures of the InnoPET Blomax Series IV. with the various demands they’re likely On the newest line at Crossroads, which er shrink pack units holding 24, 28, bottle in the long term. to face in practice. This lets us sleep outputs up to 72,000 bottles per hour, 32, 35 or 40 containers.” easy.” the InnoPET Blomax has 36 cavities, each of which can produce up to 2,250

TECH

ISSUE 07-08 / JULY-AUGUST 2014

CASE STUDY bottles per hour. Compared to the previous Series III generation, the Series IV has a heater which halves the preform heating time. Accordingly, the heating module takes up much less space and only about 50% of the usual number of preforms has to be rejected on an emergency stop. This is because the preforms are heated in the new heater area by near infrared or NIR. Two more important factors which result in the total heat penetration of the

molder is always able to adjust itself to the filling system’s mode of operation with perfect precision. This allows preforms to be used which have been optimized down to the last tenth of a gram of PET material. Other especially beneficial aspects of the InnoPET Blomax Series IV include the extremely compact blow stations, which are easily opened and closed by a toggle mechanism, and very fast changeover times. The monoblock of the InnoPET Blomax

tering. Non-contact filling through a free-flow filling valve ensures microbiological and hygienic safety. All passages are smooth-surfaced throughout the Innofill NV, from the ring bowl to the filling valves. As in all other productconducting channels and passages, aseptic membrane and sealing technology is used within the filling valves on the Innofill NV. The filling process in

brief is as follows: the filling phase is initiated after the bottle has been guided by the neck ring and positioned under the filling valve. The bottle is then filled with the exact quantity of product and the filling process subsequently stopped. A simple and microbiologically extremely safe filling process takes place. 20

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This servomotor-controlled stretching process ensures that the stretching motion can still be carried out at the same rate as at the high machine speed should the rotation of the blow molder be temporarily reduced for any reason. High process stability is a given and the blow

Series IV and the Innofill NV filler has been kept as simple as possible. Removing bottles from the blow station and adjusting the distance of finished PET bottles to one another according to the configuration of the filling system is handled by just one modular transfer wheel. An airlock ensures that the dry area of the blow molder is kept consistently separate from the wet area of the filler, thereby eliminating the risk of corrosion in the blow molder. The logical consequence of extremely gentle PET bottle handling is that bottles can be used which are lighter than those conveyed by an air conveyor.

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preforms being very efficient is that the preforms are conveyed through an enclosed heating chamber with all-round reflection and the mandrels are very tightly spaced at just 37.7 mm (minimum pitch). All of these measures together generate an energy saving of up to 40% as opposed to the traditional heating method. “We can confirm this improvement in our energy balance,” says Kirk Richmond, “as at Silver Springs we have monoblocks with both the Series III and the Series IV machine in operation. As far as Crossroads is concerned, we’re extremely pleased with all three of our InnoPET Blomax Series IV blow molders – also because they’re very reliable and we can save on materials during production with the utmost accuracy thanks to the servomotor-controlled stretching process.”

« I love SIAL »

... and the Innopal PB1HS palletizer with an upstream, inline robot grouping.

By years G R O U P

of innovation

www.sial-group.com

14/04/14 17:48

RUBRIK

TECH

ISSUE 07-08 / JULY-AUGUST 2014

19 The PET bottles are sealed by the classic Innofill SV screw capper.

“Innopack Kisters packers are the best” One of the established lines at Silver Springs doesn’t have an Innopack Kisters packer – which is how the Richmond family have come to very much appreciate KHS packaging technology. Kirk Richmond tells us more. “We think that Innopack Kisters packers are the best on the market at the moment.” It therefore figures that Crossroads invested in not one but three innovative Innopack Kisters SP Advanced machines. As with all other packaging machines in the Advanced series, these shrink packers are cubeshape in design, giving operating personnel ample space to work with the machine and thus providing high ease of operation. Together with the new protective hood concept designed for this machine series, the cubic design also provides an excellent view of the inner workings of the packing machines. Another great advantage is the hygienic machine design.

Crossroads is reckoning on selling 500 million bottles of water in 2013

Kirk Richmond, Chief Operating Officer of Crossroads: “Our KHS turnkey lines are a success factor that’s not to be underestimated.”

Toothed belts are used in the Advanced series wherever feasible, the result being quiet operation, simple design and low maintenance. Another big plus is that identical servomotors with integrated servocontrollers are used on all packing machines in the Advanced series. This facilitates part replacement during maintenance and reduces the stock of spare parts. The amount of cabling has also been reduced and the control cabinet is much smaller. The Innopack Kisters SP Advanced can process far thinner film materials than the previous generation of machines, made possible thanks to a special film cutting and feed system. A vacuum belt of adjustable width perfectly positions the various widths of film on the conveyor belts. A sophisticated hole pattern enables the latter to discharge any static electricity automatically. In conjunction with an additional antistatic system, this offers maximum conveying stability even for extremely delicate film types. The sequences of motion in the continuously operating film station are controlled by means of an electronic cam. The length of film section and the position of the printed image are electronically set within the system by selecting the format at the operator panel. As a result the film wrapping process is adjusted to product height and length with absolute precision. The film is cut with a servo-driven cutter, yet another guarantee of maximum precision as well as minimal wear on the cutter blades. After they have been wrapped in film, the packs are directly conveyed into the shrink tunnel. The shrink tunnel is fitted with classic electrical heating and, like all KHS shrink tunnels, features hot air nozzle equipment which can be used in a variety of ways. Kirk

Richmond states, “I can only emphasize how pleased we are with this packaging system. All of our shrink packers work extremely reliably, are very operator friendly and give us top packaging quality and stability while using the absolute minimum amount of materials.”

all of which are convincing. The robot grouping enables all current and future container and layer requirements to be easily adapted by selecting the existing layer formation or programming a new container and layer formation.

start for it pays off in the end. To be more precise, to us KHS technology means product safety and reliability, delivering to deadlines and, as a result, a strong position in the market.”

On the road to further success

Shrink packs are palletized on the Crossroads lines by an Innopal PB1HS with an upstream, inline robot grouping. This machinery is exceptionally well suited for palletizing sensitive goods in particular, such as shrink packs.

The Innopal PB1HS is a single-station palletizing robot equipped with a pallet lift, elevated pack infeed and two-piece pusher plate. The lifting unit and loading station operate with servo technology and a cog belt drive, giving operators high availability with a minimum maintenance effort. Automatic allround centering before each layer is discharged ensures that perfect layers are formed while handling the product gently and ensuring a high overall stability of the pallet load.

The inline robot grouping aligns the finished shrink packs with only minimal space requirements, after which a positive-fit gripper picks up, lifts, turns and places each individual shrink pack exactly in the programmed position. This gives Crossroads top precision, exact reproducibility, precise alignment and extremely gentle pack handling –

Kirk Richmond says, “Everything, including our palletizing process, is literally running like clockwork. All told, I believe that our KHS turnkey lines are a success factor for our newly founded company that simply shouldn’t be underestimated. I can only recommend that everybody goes for high-quality technical equipment right from the

Particularly gentle palletizing

Crossroads is also planning on future success. As already mentioned, it definitely has the space, with the option to buy the hired buildings and land secured. To close, Kirk Richmond says, “Considering that there’s a huge demand for bottled water in the northeast of the US, sales at Crossroads could be even higher than at Silver Springs in the near future. Together we already rank among the top five biggest bottling plants for water in the USA. In the family we can envision becoming a national presence in the water business in the medium to long term.” Those who know the Richmonds also know that ideas like these can come true quicker than you think. And successfully so, of course – as the Richmond family has so often demonstrated. l (kh/us)

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CRAFT BREWING

OUTLOOK

ISSUE 07-08 / JULY-AUGUST 2014

American craft beer production has risen steeply in the past two decades

Craft beer makers have experienced huge jumps in market share while the overall beer market size has shrunk.

he Census Bureau announced that the number of breweries in the U.S. doubled in five years–an increase largely due to craft beer. On average over the past two years, 1.2 craft breweries opened each day, contributing to a total of 15.6 million barrels of beer last year.

“People are looking for fuller beer and beer that’s tied to places.”

Mr. Watson says it’s tough to say whether big beer companies’ forays into craftlike beer have affected craft beer sales but that they do represent craft beer’s popularity. “It shows the real demand that underpins it,” Mr. Watson said. “People are looking for fuller beer and beer that’s tied to places.”

While that’s only 7.8% of the U.S. beer market share, according to data Brewers Association, an American craft beer trade group, craft beer is taking an ever-increasing chunk out of noncraft beer companies’ sales. The number of liters of beer purchased per year has stayed the same and is expected to shrink slightly, according to data from research firm Euromonitor. Meanwhile the population has risen. That means people on average are consuming less beer and, if they’re consuming beer, it’s more and more likely to be craft. Craft beer has grown despite attempts by big beer companies to advertise craft-like beer, emphasizing smaller batches and trying different flavors in an effort to win back customers. Their biggest inroads have been in light wheat beers such as Blue Moon (MillerCoors) and Shock Top

After the World Wars, national beer companies like Anheuser Busch and Schlitz began to grow rapidly because of their beer’s dependability and light taste – a departure from the often idiosyncratic and sometimes heavy beers of craft breweries. These national breweries bought up smaller craft breweries, bringing their number to a historic low in the 1980s.

Anheuser-Busch InBev). While craft beers run the gamut in types of beer, its biggest sales are in India Pale Ales, which saw 50% growth in sales volume last year, after 40% growth the year before, according to Bart Watson, the chief economist for the Brewers Association. The Brewers Association de-

fines American craft breweries as small — producing under 6 million barrels a year — and independently owned — they can’t have greater than 25% investment by a noncraft-beer alcohol company. The definition also makes it easy for people to figure out how American their beer is.

Now the trends have reversed. For a look at the state — and states! — of America’s craft brewing industry, take a look at the map below, which ranks states by numbers of breweries and has data on production. l (bmg)

Read the following articles plus more in the next issue of BMG: INDUSTRY

TECH

STRATEGISTS

Profi table company growth is driven by innovation. It’s easier for large brewing and beverage companies to fi nd new ideas, either by coming up with them on their own or by buying them. Global medium sized companies have a harder time of this. A recent study shows where the potential for revenue and innovation can be found. Which breweries and beverage makers possess the inspiration needed to secure long-term success?

A relatively large amount of fi nancial resources are wasted on IT projects despite strict programs to reduce costs. Th is is, in part, due to investments being made in worthless projects. How can ompanies in the beverage industry get a grip on this phenomenon? Th e key lies in strategic demand management!

The ability to automate all business processes from day one is a strategy that certainly plays a major role in the success of any enterprise. In order to be successful, transparency in a company’s sales figures is essential, as the beverage market is characterized by its many points of sale.

The Muse of the Brewing and Beverage Industry

IT Investments Should be Based on Actual Need

Great ideas, competent partners

Next Issue of Beverage Manager Global: September 15, 2014

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Offering great packaging flexibility with ultra-fast, fully automatic changeovers from a central HMI, VersaBloc®, combination of VersaFilm® shrink-wrapper and EvoFlex® palletizer, is a value-added concept that will optimize TCO. Accumulation is reduced to a minimum thanks to its optimized conveying design, while the system provides a rational, compact working area requiring just one operator.