Beverage Manager Global - Issue September 2014 by Beverage Manager Global

Euro 2.80 ISSUE 9 | SEPTEMBER | 2014 • www.beveragemanager.net

PACKAGING Adopting and developing a more sustainable approach PET: throughout the supply chain The bottle is undoubtedly one of the biggest faced by the packaging and challenges industry. In terms of beverages, beyond there are many different materials employed, such as plastic, can, carton and glass, each with its respective advantages and disadvantages. Here, Peter Logan, Executive Vice President for Market Operations at Sidel, considers polyethylene terephthalate (PET) and its position as arguably the most sustainable package of choice. | (p.18)

There’s a beer revolution going on in Britain

UK CRAFT BREWERIES

PepsiCo to debut Pepsi True, flavored with stevi and sugar

Almost 19,000 different cask ales are now brewed in Britain as a surge in demand for the beers has led to three new breweries opening every week, according to a new report. | (p.10)

NEW DRINKS NEW MARKETING

By using sugar and stevia, the new drink contains 30 percent less sugar than a regular Pepsi, but no artificial sweeteners or high-fructose corn syrup. It’s also the first cola under the flagship Pepsi brand since Pepsi Next 2½ years ago, and it will be among the first colas in the U.S. to use stevia, a plant native to Paraguay, as its primary sweetener. | (p.10)

(p. 21)

nBev (ABI), the world’s biggest brewer is also the most frugal. There are no company cars for senior executives. Carlos Brito, the boss, flies economy class. That is one reason why, with 18% of global beer sales, ABI has a third of the profits. Brito has overseen nearly $120bn of acquisitions, earning the nickname “La Maquina” – Portuguese for “the machine” – because of a reputation for ruthless costcutting at the companies swallowed by his bulging empire. | (p.12)

Global Player The game of a merger F. Salvadori

M. Celli

The INNOVATORS Sales Outsourcing in Europe Your business partner in 28 countries. combera-group.com

Raymond Sahm CEO, Rastal Glass

“Rastal is a global player, supporting clients with exclusive branding glasses and promotion glasses. We are partners for glassdesign as well as for logistic services all over the world, which makes us highly interested in international contacts. Because for sure exclusive glasses for beverage brands, glassdesigns for special mixed drinks or cocktails or special glasses for the upcoming world soccer championship are global topics - and great chances to differenciate from their competitors for beverage brands everywhere in the world.”

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“Our biggest areas of innovation are the new charging stations with the more ecological gases CO2 and Propane, the improvement of new energy saving systems and the research of more ecofriendly materials for our towers, which all are successful steps for protecting the environment.”

Pierluigi Garuti General Director Pelliconi

“As always, our company invests in research to offer new solutions and create “value” for the customer. The research of recent years has been directed both to new products such as, for example, the pull cap Maxi P-26, but also to the development of solutions with reduced environmental impact Smart Crown 0.18 mm - or with a 3-D visual and tactile perception Embossed Crown.”

China Huiyuan Juice to expand overseas to boost sales China Huiyuan Juice Group plans to expand its business to markets outside mainland China and subsequently to Southeast Asia.

Flavio Salvadori Sales Director GEA, Procomac “Our new 12 g PET bottle under the Light & Safe concept, it is probably the lightest PET bottle on the market for aseptic filling. A glimpse into the future: we are fully focused on the filling of liquid dairy products, and we are developing a range of filling machines suitable for both PET and HDPE bottles with and without aluminum foil.”

Mike Jamieson | VP Marketing & Sales, ProLeiT AG “As a leader in Process Control and Information systems we recognize that to maintain and grow our position we must continue to innovate. Our platforms Plant iT & brewmaxx and our next generations v9 have achieved their success by being intuitive and integrated but most of all customer facing.”

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ISSUE 9 SEPTEMBER 2014

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Comment

OverVie w 04

Convenience and onlineare the focus for grocers!

pwards cost pressures for commodities and oil continue to fuel high inflation in the food & grocery sector, according to new research from Verdict. While supermarkets are able to absorb some price increases, inflation is inevitable. Shoppers are continuing to feel squeezed, and volume growth is expected to remain worryingly low. Expenditure growth of 3.1% from the food & grocery sector in 2015 is commendable, particularly considering that total retail expenditure is only expected to increase 1.8% as a recovery in UK retail slowly begins to pick up pace. However, on closer inspection, the majority of the growth in Verdict’s food & grocery sector forecasts for 2015 comes from stubbornly high inflation.

“Suppliers have long been at the mercy of larger supermarkets, which have been able to negotiate hard so as to not pass increased costs onto shoppers.” Global food prices look set to continue to rise in next year. Increases in grain prices are having a knock on effect on wheat, meat and dairy, while rising fuel prices will continue to exert an upward pressure on supply chain and logistics costs. Not only will 2015 be a difficult year for suppliers, retailers and consumers will continue to feel increased inflationary pressures, and with the global food supply set to remain volatile, we expect this to continue in the future,” says Andrew Stevens, Retail Analyst at Verdict Research. This year the food & grocery sector has seen saw a considerable amount of publicity surrounding the price paid to dairy farmers. Exposures surrounding the difference in the cost of production, the purchase price, and the retail price leaving farmers out of pocket brought the issue of food prices to the fore. Suppliers have long been at the mercy of larger supermarkets, which have been able to negotiate hard so as to not pass increased costs onto shoppers. However, with a heightened focus on fair payments to suppliers and increasing global food prices, even those retailers better equipped to absorb price rises into margins will struggle not to pass inflation onto shoppers. (bmg)

Vassilios A. Stergiou

vs@beveragemanager.net

BREWING

COMPANY

Francis Brewing to establish new brewery

Dogfish Head to build new distillery

St. Francis Brewing has announced plans to establish a new brewery and bottling plant in St. Francis and Milwaukee, a move that will expand its production capacity to cater to the increasing consumer demand.

Dogfish Head Craft Brewery will build a new distillery in Milton, in the US state of Delaware. The distillery will be located in the brewery’s warehouse. The brewery’s bottling operations and storage will be shifted to a new warehouse as part of a $52m expansion.

INGREDIENTS

Glanbia to acquire Isopure for $153m Ireland-based ingredients company Glanbia has agreed to acquire protein powders and drinks producer Isopure, in a deal worth $153m. Headquartered in New York, Isopure offers sports nutrition products. It focuses on powders and ready-to-drink formats, and distributes them through the specialty, internet and direct channels.

SPIRITS

Bourbon exports are much more focused on developed markets Export sales of American bourbon whiskey have outperformed Scotch so far in 2014. BME expect this to continue over the rest of the year and into 2014, as Scotch battles weakness in China particularly following the government clampdown on luxury spirits.

INDUSTRY

Carlsberg halts production at Russian brewery as demand declines Danish brewer Carlsberg’s Russian arm Baltika has suspended beer production at one of its breweries citing slump in demand. Baltika said that the Russian beer market declined by 24% between 2008 and 2013 and an additional 7% in the first half of this year.

PACKAGING DESIGN

“Beverage container often rises to the level of art” If you take a longer look at the beverage industry and you’ll see the same thing we’re seeing: Suddenly the most interesting, most creative, and most competitive part of the business is packaging design.

COMPANY

Constellation Brands to expand production in Mexico Constellation Brands, the owner of local wineries Ravenswood, Simi Winery and Robert Mondavi, announced further expansion of its profitable Mexican beer portfolio while predicting continued growth for its wine brands.

BEVERAGE

PepsiCo to debut Pepsi True, flavored with stevia and sugar Stevia was approved by the Food and Drug Administration nearly six years ago, and since it comes from the leaves of a plant and has no calories, it has led the charge in the search for more

natural alternatives to sugar.

SUPPLIER

PET: The bottle and beyond Adopting and developing a more sustainable approach throughout the supply chain is undoubtedly one of the biggest challenges faced by the packaging industry. In terms of beverages, there are many different materials employed, such as plastic, can, carton and glass, each with its respective advantages and disadvantages. Here, Peter Logan, Executive Vice President for Market Operations at Sidel, considers polyethylene terephthalate (PET) and its position as arguably the most sustainable package of choice.

OnLine & Mobile ImPrint Publication-Subscription: 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) 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) Subscription: 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: October 21 , 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.

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ISSUE 9 SEPTEMBER START UP 2014

ISSUE 07-08 / JULY-AUGUST 2014

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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.

Francis Brewing to establish new brewery

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

CRAFT BREWING

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pares their cold-ones to fresh produce, Forecasting the future success of mian idea shared by Billy Wagner who crobreweries, Donald Burke predicts compares craft beer to a soup that that “Crew Republic has the lead. More should be served as freshly as possible. and more places are carrying their BKK’s beers forgo filtering, pasteurizarange.” He adds that “they are quick to Dogfish Head tion, and stabilizing in order to maxinotice new flavor trends emerging in St. Francis Brewing has announced Craft Brewery will build a mize the freshness well as the flavor the beer world.” Despite Crew Repubplans toasestablish a new brewery new distillery in Milton, experience. and The bottling breweryplant offers three lic’s aggressively branded marketing in St. Francis and in the US state of DelaIPAs: the “Amarsi, ” a personal favorite of expand strategy the brewery manages to stay Milwaukee, a move that will ware. The distillery will Peter-Wulfcapacity ’s whichtoiscater a caramel true to the ethics of crafting, delivering itsJan production to the bitincreasing ter yet malty-sweet IPA, Th e “Laguna, ” high quality artisanal brews. Th eir be located in the brewery’s consumer demand. which is a fruity-pine, caramel-malt playful tagline dares you to “Join the Crew Republic – “Join the warehouse. The brewery’s The company plans to invest around $8.5m in the American style IPA, and the “Mandari- Revolution” Revolution! Craft Beer is Not a Crime!” bottling operations and proposed brewery that will be spread over an area The distilling facility willso have a twin 500-gallon na” whose smoked malt compliments its With many emerging beerscopper joining storage will be shifted to a of around 20,000ft². St. Francis’ brewery will have a still and a 26-foot Upon completion 2015, citrus flavor. They also offer one Pale ale. Experts in microbrewing the craftstill. craze, it’s important to in keep in agree that column capacity to produce 12,000 barrels of beer annually. new warehouse as part of a the distillery will produce rum, vodka and gin including After trying the selections you’ll be like- Crew Republic has a very promising fu- mind the true values of craft, ideals The company is currently seeking financial Brown Honey Rum and Dogfish Head Jin. $52m expansion. ly to agree with Felix vom Endt who tells ture. The Munich based brewery startup which are deeply entrenched in Gerincentives in thehe’s form of grants tax incremental products frommany’s the distillery willhistory. be distributed MIXOLOGY “sure we willordrink a boasts one of the widestThe rich beer As Billy across Wagvarieties among financing from the city of St. Francis. During Delaware,include New York in other mid-Atlantic markets. Dogfish lot of more beers from BrauKunstKeller nerCity tellsand MIXOLOGY, “a beer doesn’t its2013, peers. Its seven variations the had expanded its distribution across Head Samhave Calagione said: distilling roots run deep. in company the next years”. to be an IPA“Dogfish or a Pale Head’s Ale in order both an IPA and double IPAfounder as well as Wisconsin, under a contract with Sand Creek “We’ve putting off-centered thumbprint toour be craft ”. In the end craft beeronisthe notdistilling world for over a decade, and their original “Foundation 11”been German Brewing. St. Francis Brewing had already produced I’m excited“Muthat we’re now ablelimited to takeproduction this projectand to the only about lo-next level by broadening production and pale ale, a hoppy and refreshing 1,200 barrels of beer in 2013 at its on-site brewery distribution. ” Additionally, the distillery will all testabout new spirits. cal distribution but above the nich summer” beer, an extremely hoppy through a contract with Sand Creek. The company August, Dogfishlove Head hascare relaunched which is packed in hand-made growlers. and that goesPunkin into theAle, brewand malty “RoundhouseInkick” imperial has also opened a beer garden at Humboldt stout, Park, a more laid back Founded in1995, Dogfish Head Craft Brewery offers its products through a network of distributors ing. l (bmg) “Detox” session in Bay View. (bmg) ale, and an experimental “Xwholesalers 2.0” Barley to beer stores, bars, and restaurants. (bmg) and wine.

Dogfish Head to build new 2 Us distillery

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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.

tion, and stabilizing in order to maxinotice new flavor trends emerging in mize the freshness as well as the flavor the beer world.” Despite Crew Repubexperience. The brewery offers three lic’s aggressively branded marketing IPAs: the “Amarsi,” a personal favorite of strategy the brewery manages to stay Jan Peter-Wulf ’s which is a caramel bittrue to the ethics of crafting, delivering ter yet malty-sweet IPA, The “Laguna,” high quality artisanal brews. Their which is a fruity-pine, caramel-malt Crew Republic – “Join the playful tagline dares you to “Join the American style IPA, and the “Mandari- Revolution” Revolution! Craft Beer is Not a Crime!” na” whose smoked malt compliments its With so many emerging beers joining citrus flavor. They also offer one Pale ale. Experts in microbrewing agree that the craft craze, it’s important to keep in After trying the selections you’ll be like- Crew Republic has a very promising fu- mind the true values of craft, ideals ly to agree with Felix vom Endt who tells ture. The Munich based brewery startup which are deeply entrenched in Geranish brewer Carlsberg’s Russian arm Baltika has suspended beer production at lyabinsk brewery, which is one of Baltika’s 10 breweries, has a capacity to produce 4.2 million MIXOLOGY he’s “sure we will drink a boasts one of the widest varieties among many’s rich beer history. As Billy Wagone of its breweries citing slump in demand. Baltika said that the Russian beer hectoliters of beer annually. It produces Tuborg brand and domestic brands such as Baltika. lot of more beers from BrauKunstKeller its peers. Its seven variations include ner tells MIXOLOGY, “a beer doesn’t market declined by 24% between 2008 and 2013 and an additional 7% in the first The brewing operations will resume have to improves. be an IPA or a Pale Ale in order both at anthe IPAfacility and double IPA asonce well the as market BrauKunstKeller – “Life is Too in the next years”. half of this year. A stagnating economy tighter restrictions11” on German sale of beertoin have to is not beRussia craft”. In thecontributed end craft beer theirand original “Foundation Short to Drink Bad Beer” Baltika Chelyabinsk brewery director Mairbek Sageev told Reuters: “This is connected with the fall in demand. pale Moreale, than one-third of operating profit of Carlsberg comes from Russia, a hoppy and refreshing “Mu- only about limited production and lothe end of the high summer season and the onset of autumn, when demand for the products the news agency reported. Sageev beer, said:an “The main reasons fall come but from excessive andthe calthe distribution above all about nich summer” extremely hoppy for Alexander Himburg’s BrauKunstKeller is on the decline. unnecessary state 150 regulation of the brewing industry and a deteriorating love and care macroeconomic that goes into thesitubrewand malty “Roundhouse kick” imperial has experts such as Felix vom Endt and Lavatec, Beverage Manager, x 246 mm, CC-en27-AZ004 07/14 “In addition, this factor was bolsteredgastronomy by a significant drop inand the total beer market.” The Cheation in which consumer economic are l highly stout, asentiment more laidand back “Detox” prospects session ing. journalist beverage (bmg)uncertain.” (bmg) ale, and an experimental “X 2.0” Barley consultant Jan-Peter Wulf talking about wine. it’s superior brews. BrauKustKeller com-

Russia

Carlsberg halts production at Russian brewery as demand declines

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Diageo opens €169m brewery in Dublin Diageo has opened a new €169m brewery Brewhouse No 4 at St James’s Gate in the city of Dublin, Ireland. Spread over an area of around 10,000m², the brewhouse has a capacity to produce one billion pints of beer annually.

Volume reduction

The beer produced will be exported to 130 markets across the globe. Diageo announced the construction of the brewery in 2012. The company then said that it will halt operations at breweries in Kilkenny and Dundalk, and remove100 jobs. The Kilkenny and Dundalk breweries used to produce Smithwick’s, Kilkenny ale, Budweiser and Harp Lager. Diageo CEO Ivan Menezes said: “Our decision back in late 2011 to invest in St James’s Gate represented a €169m vote of confidence by Diageo in Guinness and in our beer business. “It also represented a major vote of confidence in the Irish economy itself. “Diageo’s operations in Ireland support the employment of 20,000 people in the Irish economy, not least through our purchase of goods and services to the value of €350m a year.” Prior to the development of Brewhouse No.4, Diageo had planned to invest €650m for the restoration of its brewing operations in Ireland. However, the company has decided not to proceed with it due to global financial slowdown. Diageo offers beer under various brands such as Guinness, Tusker, Smithwick’s, Red Stripe, Keg Maintenance Harp Lager, Kilkenny, Kaliber, and Windhoek. (bmg)

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Glanbia to acquire Isopure for $153m

Ireland-based ingredients company Glanbia has agreed to acquire protein powders and drinks producer Isopure, in a deal worth $153m. Headquartered in New York, Isopure offers sports nutrition products. It focuses on powders and ready-to-drink formats, and distributes them through the specialty, internet and direct channels. Following the completion of acquisition, Isopure’s brand complements Glanbia’s Global Performance Nutrition business. The transaction, which is subject to customary completion conditions and regulatory approval, is expected to be completed in the fourth quarter. Isopure recorded $74.6m in net revenues for the year ending July, by marking a compound annual growth rate of 20% for the period between December 2011 and July 2014. Glanbia said that the acquisition will be accretive to earnings from 2015. Glanbia managing director Siobhán Talbot said: “We are delighted to announce the acquisition of Isopure. “As a premium brand, the Business is an excellent addition to our portfolio of market leading performance nutrition brands and provides an opportunity to leverage our infrastructure and capabilities to drive future growth.” (bmg)

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ISSUE 9 SEPTEMBER 2014

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• Constellation Brands, the owner of local wineries Ravenswood,

Simi Winery and Robert Mondavi, announced further expansion of its profitable Mexican beer portfolio while predicting continued growth for its wine brands.

Constellation Brands to expand production in Mexico T

he company, headquartered in Victor, N.Y., said it would pay $300 million to acquire Anheuser-Busch InBev’s glass production plant in Nava, Mexico, next to its own brewery. Constellation Brands manufactures such Mexican brands as Corona, Modelo, Pacifico and Victoria. It will enter into a 50-50 joint venture with Owens-Illinois Inc. to operate and own the new glass container plant, with Owens-Illinois paying $100 million. Constellation already uses Owens-Illinois as a supplier for its wine bottles. The company also will expand its Nava brewery by 132.1 million gallons by the end of 2017 at a cost of as much as $550 million. The announcements came as Constellation Brands announced its second-quarter net income of $196 million, or 98 cents a share, compared to $1.5 billion, or $7.74 per share, from the same period last year. The lower earnings were attributed to a higher tax rate and a recall of its Corona Extra brand after the discovery that some contained small fragments of glass. The company is unique in the North Coast wine industry as most wineries are privately operated. It is more of a competitor with diversified international firms such as Anheuser-Busch InBev and SABMiller, especially as consolidation continues in the adult beverage industry. The sector is in state of a flux as sales of large domestic beer brands decline, in large part to a strong craft beer market, including many Sonoma County brands. Constellation’s net wine sales for the quarter that ended Aug. 31 was $640.7 million, up 2 percent from the same period in 2013. It predicts its wine and spirits sales for fiscal 2015 to be in low to mid single-digit range. CEO and president Rob Sands told analysts in a conference call that the California harvest

for wine grapes is running about a month ahead of last year and is now about 70 percent complete. Sands noted the California harvest is predicted to come in between 3.8 million and 4 million tons, down from 4.4 million tons last year. “The quality of this year’s harvest looks to be very good, if not excellent,” Sands said. “From a pricing perspective, we continue to expect grape pricing to be flat to down slightly compared to last year, depending on the variety and location and demand.” Still, the focus of the conference call was on its beer business. In fact, one analyst noted in the call, “believe it or not, I have a wine question.” The company targets an operating margin in the beer business in the mid 30 percent range in fiscal year 2018. Constellation Brands contends it is uniquely positioned in the U.S. beer market, where overall beer sales dropped 1.9 percent in 2013, according to the Brewer’s Association, though craft beer was up 17.2 percent. The company notes that Mexican beer remains popular product among consumers looking for a high-end product, similar those who have contributed to the craft beer boom, and has a big potential in the growing Latino market. “Our beer business has tremendous momentum in the marketplace,” said Bob Ryder, executive vice president and chief financial officer. “We kind of got the growth that the craft brewers have, coupled with the margins that the large domestic guys have. We’re almost the best of both worlds.” Brian Rosen, a Chicago-based

adult-beverage consultant, said that Constellation Brands is benefiting from increased interest by millennial consumers who are attracted to more exotic beer and are not swayed by brand loyalty. He warned, however, that millennials will mature and move on other brands and drinks, such as craft bourbon and fine wine. “I drink Modelo and I’m as Anglo as they come,” Rosen said. “I will age out of it.” He expects there will be an eventual dip in sales of the company’s Mexican beers as millennials drop off. The growing Latino market may fill some of the gap, he said.

01 “Our fiscal 2014 achievements drove our stock price to increase by nearly 85% − earning us the enviable position of best performing S&P500® Consumer Staples stock for the second year in a row.” Rob Sands, CEO, Constellation Brands

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PepsiCo to

debut Pepsi True, flavored with stevia and sugar

ival Coca-Cola is also in the process of a gradual and targeted launch of its own reduced-calorie, steviasweetened Coca-Cola Life, a cola that has 35 percent fewer calories than its flagship Coke. Like True, Coca-Cola Life mixes the stevia with sugar to achieve its sweet taste, and it also sports green-hued packaging. he stevia cola war comes as Pepsi and its peers fight a multiyear slump in U.S. soda sales and a seismic shift in consumer attitudes and tastes toward healthier and more natural beverages. Stevia was approved by the Food and Drug Administration nearly six years ago, and since it comes from the leaves of a plant and has no calories, it has led the charge in the search for more natural alternatives to sugar. It is now being used in everything from flavored water to energy bars, candy to cookies and yogurt. But stevia can be tricky to work with as it often comes with a bitter aftertaste, and it has taken beverage makers some time to nail down the right recipe to maintain a familiar and sweet cola taste. Simon Lowden, chief marketing officer at Pepsi Beverages North America, said the product captures the “true taste of the cola” and hearkens back to a time when colas used real sugar. But in a departure from the past, True will be launched in a novel way: It will be sold exclusively on Amazon.com in mid-October and Pepsi will compensate its bottlers for purchases made in their respective regions. “It’s a brand-new product proposition with a brand-new media platform, and we want to make sure the launch reflects a right-size approach,” Lowden said. Coke also is releasing its stevia cola gradually. Coca-Cola Life began to roll out in the U.S. at Fresh Market stores in the South in late August, after launching in Argentina, Chile, the U.K. and Mexico. The slow rollout signals a cautious approach by the two beverage giants, whose previous attempts to market “midcalorie” colas in the U.S. were unsuccessful. “While we do not believe that either of these new sweeteners/flavoring agents will be the natural, great-tasting and calorie-free ‘silver bullet’ that the industry has been waiting for, we believe it is possible that they will be able to drive interest, engagement and potentially sales growth because of the massive consumer/societal need to reduce sugar and enhance healthiness,” Ali Dibadj, an analyst at Sanford Bernstein, said in a note last December that previewed sweetener innovations expected this year from Coke and Pepsi.

The launch follows a nine-year decline in U.S. carbonated soft drink sales. Increased concerns about health and wellness, along with research linking sodas to obesity and health problems, have driven the drop. Making matters worse, diet sodas that use no-calorie and low-calorie artificial sweeteners like aspartame are losing fans fast. Industry newsletter Beverage Digest reported that U.S. volumes last year for Diet Coke and Diet Pepsi tumbled nearly 7 percent from the prior year, worse than the 4 percent slump in U.S. soda volumes overall. But it remains to be seen if consumers seeking natural and healthy products will find Pepsi True and Coca-Cola Life appealing. In a recent U.S. consumer survey, Jefferies analysts found that “health concerns, particularly around artificial sweeteners continue to plague the U.S. diet carbonated soft drinks industry.” However, 45 percent of those drinking less diet soft drinks suggested they would possibly consume more “if they were healthier” and 30 percent said they would do so “if they were made with a natural sweetener like stevia.” However, 34 percent of those drinking less suggested nothing would get them to boost their consumption. Consumers also will need to be convinced that the taste is worth the calories in these so-called midcalorie beverages. Pepsi thinks it’s achieved that.

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“It’s taken us three years to get to a place we feel good about,” Lowden said about the development process. “No one is willing to give up on taste. Taste is king.” But calorie-conscious consumers have found the concept of midcalorie drinks tough to swallow in the past. In 2004, when sucralose, or Splenda, was the hot sugar alternative, Coke and Pepsi launched the short-lived brands, C2 and Pepsi Edge. Pepsi Next also is a midcalorie drink, but unlike True, it contains artificial sweeteners in the U.S. market. “When it comes to soda, people want either the taste of a full-sugar product and are willing to accept 140 calories per can, or they want a zero-calorie solution and are open to a product that doesn’t taste exactly like a full-sugar soda. There really isn’t much in between,” said Paddy Spence, CEO of Zevia, which makes naturally sweetened, zero- and low-calorie sodas using stevia. Spence, formerly head of sales and marketing for Kashi, said his company adds monk fruit, another zero-calorie natural sweetener to its mix “to boost sweetness without adding aftertaste.” (* Squawk on the Street Co-Anchor, CNBC)

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www.beveragemanager.net

ISSUE 9 SEPTEMBER 2014

AUGUST 2014

ne of the Pale Ales or Saisonal, you can taste nto the concocting of may very well be Johannes himself. If mped or fall in love hich is a likely outons can be brought y sized growlers.

ler – “Life is Too k Bad Beer”

rg’s BrauKunstKeller s Felix vom Endt and nalist and beverage er Wulf talking about BrauKustKeller com-

CRAFT BREWING

ALMOST 19,000 DIFFERENT CASK ALES ARE NOW15 BREWED IN BRITAIN AS A SURGE IN DEMAND FOR THE BEERS HAS LED TO THREE NEW BREWERIES OPENING EVERY WEEK, ACCORDING TO A NEW REPORT.

There’s a beer

revolution

going on in Britain

Keg and Fitting Service

Neck Conversion

The report also said the availability of cask ale “significantly” increased the number of customers visiting a pub and argued that pubs were undervaluing cask and could be selling it for more. “Cask ale is recruiting new drinkers,” it said. “In most parts of the country and most styles of outlet, old stereotypes are fading. Women and younger drinkers continue to convert to cask – though some licensees are failing to recognise the evolving profile of drinkers, and the opportunities this presents.”

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The report’s author Pete Brown said: “There’s a beer revolution going on in Britain – and cask ale is right at its heart. Sales of cask beer, the number of people who drink it, breweries who make it, and festivals that celebrate it, are all increasing as good quality, flavoursome beer continues to gather mainstream interest and popularity. “People may be going to the pub less often, but when they do go, in increasing numbers they’re looking for something special, something different from discounted supermarket lager brands. And that’s why more of them are drinking cask ale. There are more brands, in a wider variety of style and flavours, than there has ever been before.” The Good Beer Guide 2015, published by the

Campaign for Real Ale said the UK now boasts More information more breweries per head of the population than

any other country in the world – at one brewery www.gnks.eu for around every 50,000 people it is the larg-

est number of breweries open since the 1940s. (inde)

ISSUE 07-08 / JULY-AUGUST 2014

COMPANY

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.

www.beveragemanager.net

Coke already has 11 nonsoda brands Still, investors have cooled on Coke. with more than $1 billion each in retail The company’s share price has fallen sales and an unrivaled distribution net- 2.7% over the past year, while the S&P work, and operates in every country ex- 500 has climbed 21%. Last month, cept Cuba and North Korea. In Eurasia Budweiser maker Anheuser-Busch and Africa, Coke’s beverage volume InBev, the world’s largest brewer, supCoke still has plenty of supporters, in- rose 7% last year. planted Coke as the biggest beverage company by stock-market capitalizaAt a global planning meeting late last cluding Berkshire Hathaway Inc., long tion. year, Steve Cahillane, who then was president of Coca-Cola Americas, said The pace of Coke’s global soda volume growth targets were unrealistic, accordgrowth slowed to 1% last year from ing to people familiar with the matter. Coca-Cola plans to increase glob3% in 2012 as concerns about health He had been viewed as a potential sucal advertising by $1 billion over and obesity spread. Last month the cessor to Mr. Kent. A few weeks later, the next three years. World Health Organization suggested Mr. Cahillane left the company in an orthat individuals limit consumption of ganizational shake-up. added in food and drinks to 6 Francisco, built sugars its a day—less than the 9 teaJohn Faucher, a beverage analyst at J.P. reputationteaspoons startspoons Morgan, said Coke should diversify ing in 2006 with thein a 12-ounce can of Coke. more aggressively through acquisitions. redesign of Diet Coke volume in Mexico, Coke’s secCoke already is the world’s biggest juice and a full refreshSoda of Coke ond-largest market, have fallen an escompany but could bulk up in areas like packaging. timated 5% or more the country tea, coffee and dairy, where it is a much But since technology gets the most interesting when it leads to introduced on sugary beveragesthat “do” something, like Heineken’s coldsmaller player. “Interest rates are low Interestingly, Leo Burnett’s de- a taxbeverage containers January. and they have a ton of cash,’’ Mr. Faucision to buy the design in geniuses activated cans, which reveal graphical images of ice when the cher said.rink companies of all sorts — soda makers, juice combehind Coke comes roughly a year can is chilled, and are based, of course, on the breakthrough The new Coke’s U.S. business after Pepsi hired a design genius of itsdrag oncold-activated panies, distillers, and brewers — are pouring resources cans from Coors in 2011. is diet soda. Diet Coke volume has Coke’s cash short-term investments own: the legendary Mauro Porcini. andand talent into making cans and bottles in a way that’s been down for eight straight totaled $17.12 billion end of Deas unprecedented as itatisthe fascinating. If there was years, a timeacwhen cans and bottles were mere pedestrian celerating the decline in the past cember, up from $13.46 billion a year The technology boom Innovation used to come slowly in beveritems, that time has ended. Today a beverage container often three. Diet Coke sales plunged 6.8%, earlier. age packaging. The flip-top bottle first appeared in 1874, and We’re not sure what is driving the surge in creativity, but it’s rises to the level of art. in volume terms last year, according nearly a century later the twist-off cap became popular. clear that the craze has three distinct components. Earlier this to Beverage Digest. Diet Pepsi sales Industry trackers say potential U.S. canmonth, Publicis Group bought a design firm called Turner Sometimes this is because the designer is recognized as one fell 6.9%, but PepsiCo, with its enordidates could include Arizona Beverage But nowadays, there are breakthroughs in beverage-container Duckworth. Publicis said it planned to move Turner Duckworth with an artistic level of talent, like when Coke unveiled limited Co., with an estimated market share of the beverage maker’s largest sharehold- “This is more of an emerging-markets mous snacks and foods business, is far technology seemingly every day. Sometimes it’s just a variation into its Leo Burnett ad agency. That alone would be worth notedition bottles by Jean-Paul Gaultier. 25% in ready-to drink teas, and Mon- er. “I’m 100% in accord with Coca-Co- and developing-markets story; that’s the less dependent on soda than Coke is. of those twist-off tops. Coke, for example, created a version that ing, if only because it seems to be part of a larger movement in ster, the country’s biggest energy drink la’s business strategy and regard Muhtar way we look at it,” said Kurt Havnaer, a l (Source: Mike Esterl, WSJ) requires two bottles tomanager work (it’s at supposed promote friendwhichby advertising agencies are investing heavily in design. But truly great art comes only from truly great artists. Later this Kent as the ideal CEO for Coca-Cola, ’’ portfolio maker volume. But Arizona’s owners more Jensen toQuality ship), while Vittel has unveiled a cap that reminds year, for the first time in history, a vodka bottle designed by arguare locked in a protracted court dispute, Berkshire Chairman Warren Buffett Growth Fund. The U.S. mutual fundyou when you need to hydrate. Sometimes the new technology is just But what made this particular deal so noteworthy is that Turner ably one of the greatest artists of the past century will appear on and Monster’s marketing and ingredi- said by email. owns about $150 million in Coke shares. lighter and stronger versions of the materials already widely in Duckworth is probably the best-known designer of beverstore shelves. Of course, that’s not such a big deal anymore. Beauuse, like when Bud Light created its new “platinum” bottles. age containers. The firm, with offices in both London and San tiful, artsy vodka bottles are commonplace these days. (co)

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.

“John Faucher, a beverage analyst at J.P. Morgan, If you take a longer look atsaid the Coke should diverbeverage industry and you’ll sify more aggressee the same thing we’re seeing: sively through acSuddenly thequisitions. most interesting, Coke most creative,already and most is the competitive part of the business world’s biggest is packaging juice design. 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.’’

“Beverage container often rises to the level of art”

[carry handle]

ISSUE 9 SEPTEMBER 2014

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”

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”.

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 Repubwww.beveragemanager.net lic’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 Crew Republic – “Join the Revolution! Craft Beer is Not a Crime!” Revolution” With so many emerging beers joining Experts in microbrewing agree that the craft craze, it’s important to keep in Crew Republic has a very promising fu- mind the true values of craft, ideals ture. The Munich based brewery startup which are deeply entrenched in Gerboasts one of the widest varieties among many’s rich beer history. As Billy Wagits peers. Its seven variations include ner tells MIXOLOGY, “a beer doesn’t both an IPA and double IPA as well as have to be an IPA or a Pale Ale in order their original “Foundation 11” German to be craft”. In the end craft beer is not pale ale, a hoppy and refreshing “Mu- only about limited production and lonich summer” beer, an extremely hoppy cal distribution but above all about the and malty “Roundhouse kick” imperial love and care that goes into the brewstout, a more laid back “Detox” session ing. l (bmg) ale, and an experimental “X 2.0” Barley wine.

“Global Player - The game 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-

INBEV (ABI), THE WORLD’S BIGGEST BREWER IS ALSO THE MOST FRUGAL. Keg and Fitting Service THERE ARE NO COMPANY CARS FOR SENIOR EXECUTIVES. CARLOS BRITO, THE BOSS, FLIES ECONOMY CLASS. THAT IS ONE REASON WHY, WITH 18% OF GLOBAL BEER SALES, ABI HAS A THIRD OF THE PROFITS. BRITO HAS OVERSEEN NEARLY $120BN OF ACQUISITIONS, EARNING Volume reduction THE NICKNAME “LA MAQUINA” – PORTUGUESE FOR “THE MACHINE” – BECAUSE OF A REPUTATION FOR RUTHLESS COST-CUTTING AT THE COMPANIES SWALLOWED BY HIS BULGING EMPIRE.

his will matter in the wary manoeuvres now taking place among the giants of global brewing. On September 14th Heineken, the number three by volume, said it had rejected a takeover proposal from SABMiller, the number two. SAB seems to have been trying to defend itself against a possible takeover by ABI, which was said to be talking to bankers about raising $121 billion to buy its rival. That was little more than a rumour, but industry-watchers suspect something big is indeed brewing, in brewing. And the chances are that ever-thirsty ABI, maker of Budweiser and Stella Artois, will swallow SAB.

Neck Conversion

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The beer behemoth has few other ways to grow. In rich countries, consumption of beer has stopped rising. In America, ABI’s Anheuser-Busch division is suffering growing competition from small makers of “craft beer”. The number of American breweries Keg has jumped from fewer than 100 in 1983 to more than 3,000 Maintenance today. ABI has its roots in Brazil, but there drinkers are suffering from a sluggish economy and post-World Cup blues. This leaves ABI with two options, says Andrew Holland, an analyst at Société Générale: give its cash back to shareholders or buy something.

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& Life Cycle Management

SAB is a tempting target. Though based in London, its origins are in South Africa; it has breweries and bottling plants in 15 African countries, where people still mainly GNKS powered by: guzzle moonshine. It has stakes in 21 others through an allianceis with Castel, a French drinks company. Nearly 70% of SAB’s sales are in emerging markets, many of which are still developing a taste for beer. Last year its sales by volume expanded by 3% (not counting growth from acquisitions). ABI’s, in contrast, dropped 2%. If ABI gets hold of SAB it will no doubt try to repeat tricks that have worked well since AmBev of Brazil merged with Interbrew of Belgium a decade ago and then pushed out its American boss: squeeze costs and use the new acquisition as a platform to spread its brands. That was the formula after the merged group bought Anheuser-Busch, the maker of Budweiser, in 2008. Grupo Modelo, a Mexican brewer which makes Corona and has been part of ABI since last year, is now undergoing the same rigours. SAB would be a more difficult undertaking. For one thing, notes Mr Holland, it is more tightly managed than “fat and lazy” Anheuser-Busch was, so there is less scope for cutting costs. SAB is bigger and more complex than anything else ABI has taken on. A knack for cost-cutting may not serve it as well in fast-growing markets. Another problem is that in some countries the two giants’ combined businesses would be too big. In America Anheuser-Busch and SAB’s joint venture with Molson Coors, another rival, would together have three-quarters of the beer market. In China the two would have more than a third. These are not insurmountable problems. In America, for example, the stake in the joint venture could be sold to Molson Coors. BR14_150x246_BeverageManager_M1.indd 1

21.07.14 09:38

of a merger” CEO Jean-Francois van Boxmeer, Heineken International. Heineken, which is controlled by the Heineken family even though it owns just 23% of the company’s equity, has given notice that it does not want to be bought (though that could change if SABMiller boosted its offer).

Despite the obstacles, a merger of the leading two beer companies looks the likeliest of the potential huge deals.

“The dance of the elephants may have finally started,” one City analyst commented.

Dutch counterpart

Ask seasoned beer-drinkers to guess what the best-selling brand in the world is and most would probably say Budweiser or, maybe, Heineken. They would be wrong.

They are one of the most influential couples in Europe. One is a Dutch heiress to a famous centuries-old business empire, the other a flamboyant former child actor and Olympic skier and today among the Square Mile’s top financiers. Charlene de Carvalho-Heineken and her husband Michel de Carvalho head one of the richest families in Britain, with a combined fortune estimated at more than £6bn — putting them above other illustrious dynasties such as the Rausings and the Oppenheimers in the wealth rankings. Despite their significant influence, the pair prefer to lead a private life in London where they have quietly raised five children. Since inheriting control of the famous Heineken brewing concern more than a decade ago Charlene de Carvalho-Heineken has made very few public appearances. However, in the coming months, the couple may find themselves reluctantly thrust into the spotlight as the unwitting kingmakers in a fierce race for dominance among the beer industry’s titans. Weeks ago the Heineken family received a surprise proposal from one of its biggest rivals, SABMiller. The Anglo-South African beer giant, which makes Peroni and is the second-largest brewer in the world, tabled a takeover bid for its Dutch counterpart, the world’s number three player. The family controls just over 50pc of the brewer. The response, however, was swift and unequivocal. In a statement the family, led by Charlene, said it rejected the approach and intended to “preserve the heritage and identity of Heineken as an independent company”. The rebuttal dealt a blow to SAB’s ambitions. The company is unlikely to return with a sweetened bid after Heineken indicated so strongly that it is determined to remain independent. “There isn’t much point in banging your head against the wall when the family’s rejection isn’t motivated by money,” a source close to the talks said. But sources believe the aborted approach could trigger a round of consolidation that could envelop every major name in brewing and lead to the industry map being completely redrawn. The question is: were that to happen, how would that map eventually look?

The number one selling beer on the planet is a pale, frothy variety that most in the West have never even heard of and connoisseurs say has an unremarkable taste: Snow Beer, a brand sold almost exclusively in China. Created just two decades ago by SAB, Snow is the country’s most popular beer by a long distance and, such is the size of the Chinese market, it wrestled the number one spot from Bud Light six years ago. Today, 80 breweries are needed just to quench demand for Snow. The brand’s extraordinary rise illustrates the commercial forces shaping the global beer market today. As consumption across Europe and in the US falls, demand for beer in less developed countries in Latin America, Asia and Africa is rising quickly and the industry’s giants are desperate to crack these markets quickly. China is forecast to be the most valuable market in the world by 2017, according to Euromonitor. It is this desire for a slice of the big growth markets that is fuelling expectations of a land-grab by the big names. Deals have long helped to shape the brewing landscape but one buccaneering company has led the way when it comes to large-scale expansion: Anheuser-Busch InBev. Now known simply as ABI, it started just 25 years ago when a group of former bankers bought a tired Brazilian brewery for $50m (£30m). Under Carlos Brito, the 54 year-old deal junkie at the helm, it has become the largest brewer in the world. The first big move came in 2004 when the company, then called Ambev agreed a tie-up with Interbrew, a Belgian brewer whose roots went back to the 14th century. Four years later came the real game-changer – an audacious $52bn hostile takeover of Anheuser-Busch in the US. Brito had created the first brewing behemoth, with more than 200 brands — including famous names Budweiser, Beck’s and Stella Artois — across five continents under one roof. Annual revenue leapt more than fivefold in one giant swoop. Investors were spooked by the mountain of debt taken on to fund the takeover just as the financial crisis was unfolding, but a traditional family-run firm like Anheuser provided huge opportunities for savings. Brito unleashed a brutal cost-cutting plan; thousands were laid off and fringe assets sold to help repay the loans quickly. ➢

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ISSUE 07-08 / JULY-AUGUST 2014

tions stretching into every corner of the globe. The company name “Megabrew” has been jokingly suggested if it ever happens.

USA

➢ The deal looked like a masterstroke but, despite

Diageo goes for gold with exclusive launch of producing in 25 countries, the company is still overly reliant on a handful of large, mature marSmirnoff Gold Apple kets. In 2013, about 80pc of the brewer’s earnings

For some analysts, Africa, where it has no presence, would be ABI’s main prize. However, others believe ABI would be more interested in SAB’s Latin American assets, which cover countries where ABI does not operate.

can continent, where an additional 65m people are 5 expected to reach the legal drinking age by 2023. Heineken is also strong in big Latin American markets such as Mexico and Brazil. SAB by contrast is the dominant player in Colombia and Peru.

Beer Institute Urges FDA to ExemptWyn American Brewers Ellis, analyst at Numis Securities, said: “A combination of SAB and ABI could make life very from Costly Regulation difficult for the other major players. If it is look-

ing like a real possibility, Heineken and Carlsberg came from the US, Canada, Brazil and Mexico. but could if thisbeFDA ruleoff is upheld. Diageo Global launch sance The Beer Institute has filed joint comBut SAB wants to forge its own path rather than might decide theyend would better joining With ABI’s debtTravel finally closeSmirnoff to returning to era. a The even distribution of the Instead, some brewers will be to Gold Apple, a new apple-flavoured ligold flakes is visible throughout the clear ments with the American Malting Barbecome the latest target to be eaten up by the ABI forces with someone else to make a clearforced and very manageable level, speculation is rife that it is gearthrow away this valuable feed, a cheaper queur containing edible 23ct gold flakes. bottle, enhancing stand-out on shelf, the ley Association in order to protect a machine. It is this fear of a looming approach from strong number two.” ing up for another deal. option than complying with the costly Smirnoff Gold Apple is the second release brand added. Diageo Global Travel and centuries-old and its environmentallybigger rival that many believe prompted SAB’s regulations, which from the Smirnoff Gold collection, folMiddle East Global Marketing Director conscious practice of brewers marketsurprise move on Heineken. The battleproposed of the brewers may also spillthe intoBeer the “Net debt to Ebidta will reach two times by the end Institute estimates may cost a single lowing the launch of Smirnoff Gold Cin- Steve White said: “White spirits is a key ing their brewers’ grain to local animal soft drinks industry. A bottling deal between of this year,” Simon Hales, drinks analyst at Barmore million in onenamon in 2012. It will be available exclugrowth area in travel retail where we can producers. However, sources close to SAB dismiss that theory. SAB and brewery Coca-Cola hasthan been$13 rumoured. Several clays, said. “Once they get below two times that’s time and reoccurring costs. sively in travel retail outlets worldwide deliver more value for Diageo and for our The Beer Institute has been working They say the rationale is simple: a tie-up with Heinek- analysts believe ABI could pursue either Pepsi’s when they will look at starting to return cash to Chris Thorne, Beer Institute Vice from March to September, at a recomretail partners. Flavour differentiation is for more than a year with Members of en is far more attractive than merging with ABI. drinks business or also take a look at Coca-Cola. shareholders, hence the debate as to whether they President of Communications said: mended retail price of £26 for one litre, increasingly important to us in unlocking Congress, regulators and allied organireturn cash or do a deal.” “This regulation is onerous and expenbefore rolling out in domestic markets. new growth opportunities. “With diszations from dairy farmers to agriculOne source said: “It’s nonsense to think they Edward Mundy, an analyst at Nomura, said in a sive, but really it’s just unnecessary. The drink uses a natural gum that cerning consumers in the channel seek- ture scientists in order to present a attempt a deal ofThe that size justMilk as a Producers defence. Federanote: “WeThere continue to believe the Coca-Cola SAB itself is nobottle stranger to growth has never beenthat a single reported out exciting new flavour experiences, strong economic andwould scientific arguadapts to the being shakenthrough or ingtakeNational bid was motivated creating the best comCompanynegative offers theincidence kind of self-help storygrain. that ”is overs. Over thethickening past 20 years, it has gone from with spent we arebelaunching Smirnoff Gold Apple as ment proving that it isThe completely un- tionby stirred, slightly to form a restalso filed comments that expressly bination management could think of. A deal with usually attributable to the Brazilians behind ABI.” ing primarily a South African brewer – where it ing liquid in order to keep the gold flakes a travel retail exclusive for six months benecessary for the Food and Drug Ad- reference and include support for the Thorne added, “We have had very posiHeineken would have created the best industry was founded largely to supply ale to thirsty gold tive conversations with the FDA and suspended. This key ingredient ensures fore it is introduced to domestic markets. ministration (FDA) to add additional Beer Institute’s comments. Alan Clark, Chief a mile.” Althoughother no oneconcerned quite knows what the next move miners in the 19th century – topouring the world’s No. 2a great proposition stakeholders making It offers for travellers regulation to brewers’leader spentby grain and that liquid consistency when Brewers’ spent grain exist as a natural Executive, SABMiller plc. will be, the beer industry looks to” be on the verge via drinking acquisitions of Miller in theasUS, us cautiously optimistic. – an exclusive offering from the world’s other by-products of brewing. The Beer and remains as smooth anyColombia’s and necessary result of the brewing proA combination of SAB Heineken has built up a strong presence in Africa, large of its arms race —will andcontinue a somewhat Bavaria and Australia’s The Beer Institute folaremake Institute is the national trade associaother Smirnoff variant, Foster’s. the brand ex- number one premium vodka. cess. For centuries, brewers, andbiggest-ever and ABIWe could life particularly in countries such as Nigeria which SAB secretive family that rarely speaks out could end lowing all developments with the FSMA the flavour tion representing brewers of all sizes, plained. The bottle features a golden ap- confident shoppers will love small, have disposed on their spent very difficult for the other has fought to break grain into. Buying Heineken would having theany final say. (globalmedia/bmg/afx/ Combined, ABI aand SAB wouldpattern, be colossal, and proposed regulations that may andwith the magic of the gold major flakes players. and will beer importers and industry suppliers by giving or selling them toup farmple adorned with Baroque-style as theersfirm across the Afri- process reuters) impact U.S. brewers. l (bmg) a stockmarket value $250bn, operait as a fitting celebratory drink or an like hops farmers andestablish can andSAB bottle andleader ranchers. This recycling said to be inspired by of thearound orchards of Eu-andsee manufacturers. supports community green initiatives, ropean palaces during the French Renais- ideal gift for friend’’. l (bmg)

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ISSUE 9 SEPTEMBER 2014

arlier in 2014 the export growth prospects for bourbon whiskey - the dominant whiskey category in the US - would be stronger than scotch (from Scotland) in 2014. Scotch as an industry should benefit from the stability brought upon by the No vote since the referendum was a major source of uncertainty, particularly with regard to the impact Scottish independence would have had on the pound.

is growing from a much lower base than scotch in terms of its export value: about USD1.5bn in 2013, according to the US’s Distilled Spirits Council. Exports are also much more focused on developed markets, with key markets including Japan, Germany and the UK. Having made far fewer inroads into China than scotch and Irish whisky, bourbon is much less exposed to China’s crackdown.

According to the Scotch Whisky Association (SWA), export sales were down 11% year-on-year (y-o-y) to GBP1.77bn in the six month period to June 2014. The US is the biggest export market for Scotch globally and it did not fare well either, possibly due in part to the ongoing boom in bourbon. Bourbon has been at the forefront of the latest wave of consolidation in global alcohol in 2014, highlighted by Japan’s Suntory buying the US bourbon producer Beam earlier in 2014 for USD16bn in the biggest ever spirits deal by value.

Like other types of exporters, bourbon producers are dependent on inland and ocean shipping transportation reliability to make sure their corn-based spirits get to market on-time. Brown-Forman, best-known for producing Jack Daniel’s, a whiskey but not a bourbon, has had to look beyond its core group of small and midsize trucking companies to ensure over-the-road capacity to the ports of Charleston, Norfolk and Savannah, said Greg Newbern, vice president of supply chain integration. Rising freight demand, coupled with the trucking industry’s inability to bring on capacity at the same pace, is pushing up truck rates and sending some shippers scrambling for drivers in some lanes.

The other major producer in the US is Brown Forman (BF), owner of the Jack Daniel’s brand. The rising export potential of the category, the renewed popularity of spirits in the US (helped along by an improving economy), and the potential for BF to be targeted for an acquisition are factors that are largely priced into its share price and explain why the latter has performed particularly well since February 2014. On the export front, bourbon can accomplish so much more. It

With peak season further testing ocean shipping reliability, Brown-Forman stays in carriers’ “good graces” by making sure its exports are at the terminal on time and by bringing the pledged amount of volume. Newbern said Brown-Forman’s consistency has helped it insure that the liners prioritize its high-value shipments.

The company exports about 4,000 TEUs annually of its bourbon brands, including Early Times 354, Old Forester and Woodford Reserve, to more than 90 global markets. A market can be a country as a whole or a state or territory within a country. BrownForman ships about 80 percent of its full-strength products via container, with the remaining transported via bulk shipments. How a country receives the alcohol depends on their bottling requirement and whether the whiskey is mixed with cola or ginger ale. Jack Daniels, the company’s most popular brand, is mainly shipped in bulk because of the huge volume transported and that it’s often combined with mixers. The majority of bulk shipments are contracted to distribution companies, while pre-bottled containerized loads are handling by Brown-Forman directly, as in the U.K., Germany and France. Sales of bourbon — which is differentiated from other American whiskeys through its aging in white oak barrel and not going through charcoal mellowing — are growing faster than other whiskeys, albeit from a lower base, Newbern said. Domestic and global demand has driven the number of bourbon barrels in Kentucky to more than 5 million, outnumbering the state’s population. “Our historic warehouses are brimming with plenty of Kentucky bourbon to satisfy the growing global thirst for our mellow amber nectar,” Eric Gregory, president of the Kentucky Distillers’ Association, said in a statement. Kentucky filled 1.2 million barrels last year, the largest production since 1970. The U.K. is the largest importer of containerized bourbon, having increased the value of its shipments in the first half of this year by 24.9 percent year-over-year to $52 million. Australia, France, Germany, Spain and Japan followed the U.K. as the largest bourbon importers in the first six months of this year.(bmi/bmg)

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ISSUE 9 SEPTEMBER 2014

PET: The bottle and beyond ET (sometimes also abbreviated as PETE) is a form of polyester and is one of the most widely used consumer plastics. Its importance to the beverage industry is highlighted by the fact that bottle production represents some 30% of its total use. The major benefits of PET as a packaging material are numerous: it is strong, shatterproof, lightweight, transparent, safe, and, importantly, recyclable, with an inherent barrier which makes it particularly suited to a wide range of food and beverage applications. It also offers significant design flexibility for brands that want to stand out on the supermarket shelf. In discussing what is meant by a sustainable package it is important to understand that its primary function must be to protect the food or beverage it contains, and deliver it safely to the consumer, surviving all the challenges of the supply chain. Beyond that, sustainability considerations include how the environmental footprint of the package can be minimised through reducing the use of raw materials and other resources; reducing energy use or employing renewable energy sources, especially during production and transportation; building recycling principles into the design stage; incorporating recycled content in the packaging; and adopting end-of-life options, including recycling. At the same time, for that product to remain sustainable it needs to be attractive to the consumer and so brand, design and consumer experience considerations are important also.

Rightweighting As a lightweight material, PET already provides significant environmental advantages in terms of lower transportation costs and reduced fuel emissions. Its unique geometric properties and inherent barrier qualities, combined with innovative designs, have increasingly allowed

manufacturers to use less plastic resin in the packaging process. There has been much research and development into how this can be further improved through lightweighting, a prime focus for the beverage packaging industry, whereby the amount of raw material required to produce a bottle is reduced through the bottle design process. At Sidel we have taken this a step further with RightWeight™, a new concept bottle which weighs just 7.95 grams (the average weight for a commercial 0.5 litre water bottle is 12 grams) yet maintains the all-important quality and bottle performance. We have used the ‘RightWeight’ name to highlight that lightweighting a bottle should not compromise the integrity of the bottle performance or the consumer experience, with a design which prevents the ‘over squeeze’ issue that can result in the spilling of contents

unintentionally when using ultra-light bottles. By reducing the packaging content, it offers environmental advantages on two fronts: firstly, the savings achieved in the PET resin raw material itself and, secondly, further reducing the impact of transporting the bottles throughout the supply chain.

Reducing water and chemical usage during production When a beverage producer is looking into a sustainable approach to production, there are other elements to take into consideration. Sterilisation is an important part of the bottling process but

can use up precious resources, including water. Sidel was the first company to introduce a fully dry decontamination system that is still unique today: Predis™, for bottle preforms, and Capdis™, for caps. These provide 100% decontamination of the bottles and caps using hydrogen peroxide mist, without the need for any water and using very little chemicals. Traditional aseptic filling systems that require wet bottle rinsing consume approximately 180 cubic metres of water and 220 litres of chemicals per day, for example. Reducing or removing this resource use is a clear sustainability benefit.

Optimising energy Recognising that sustainability in beverage production is influenced by a number of dif-

ADOPTING AND DEVELOPING A MORE SUSTAINABLE APPROACH THROUGHOUT THE SUPPLY CHAIN IS UNDOUBTEDLY ONE OF THE BIGGEST CHALLENGES FACED BY THE PACKAGING INDUSTRY. IN TERMS OF BEVERAGES, THERE ARE MANY DIFFERENT MATERIALS EMPLOYED, SUCH AS PLASTIC, CAN, CARTON AND GLASS, EACH WITH ITS RESPECTIVE ADVANTAGES AND DISADVANTAGES. HERE, PETER LOGAN, EXECUTIVE VICE PRESIDENT FOR MARKET OPERATIONS AT SIDEL, CONSIDERS POLYETHYLENE TEREPHTHALATE (PET) AND ITS POSITION AS ARGUABLY THE MOST SUSTAINABLE PACKAGE OF CHOICE.

ferent factors, one focus that is common to so many industries is how energy use can be optimised. In terms of energy inefficiency, the blow moulder is often the biggest consumer given that it accounts for as much as 70% of electricity consumption on a PET production line. A proportion of this is attributable to compressed air. Programmes are now available which provide an initial audit to measure electricity consumption, along with influencing factors such as air pressure and leaks, with mechanical testing on all the blow moulder’s sub-assemblies. The process and technical qualities of the package and the overall production environment in which the machine operates can then be measured to provide a comprehensive analysis from which a personalised action plan is developed. Through this, energy- and cost-saving targets can be identified, with ongoing monitoring of

energy and utilities consumption put in place to see if those targets are being met. It also offers the opportunity for continuous improvement initiatives to be adopted, based on the strategic information supplied, to reduce waste and improve sustainability measures. Audits can often also highlight the potential for new technologies to be employed which can improve the energy performance of an existing line. Lamps can consume as much as 90-95% of the electrical power used by a PET blower so any focus here can bring substantial benefits. Eco ovens, which require fewer heating modules and lamps, can be installed on a blow moulder to reduce preform heating time and to ensure more efficient use of energy. Eco lamps are also available which themselves can offer significant savings: an example is a project

that Sidel worked on with PepsiCo Deutschland in which energy savings of 19% were achieved, with a return on investment in just 12 months.

Recycling rates good but not good enough

Sales Outsourcing in Europe

The recycling of PET is certainly crucial in enhancing its position as a sustainable material. Producing virgin PET requires the use of resources which are finite so adopting processes which allow it be 100% recycled are key. Analysis has shown that recycling of PET uses two-thirds less energy than that required to manufacture virgin PET, demonstrating ➢

From analysis to concept to fieldforce. combera-group.com

10827_ANZ_Sales_Outsourcing_Europe_RZ.indd 2 19.08.14 18:16

building on the new filtration processes being adopted to generate PET flakes in a way which is both more eco-friendly and more cost effective. This will enable the production of more new bottles from R-PET, and also allow the recycled PET flakes to be used in a wide range of other applications. Despite the challenges of sourcing R-PET, many of the major beverage brand owners are committed to increasingly adopting it in their bottling processes, with some already achieving usage levels in excess of 50% for certain product lines.

Clothing, construction, art…

Peter Logan, Executive Vice President for Market Operations at Sidel, considers polyethylene terephthalate (PET) and its position as arguably the most sustainable package of choice.

➢ the clear environmental benefits of the process.

In principle, all PET bottles could be manufactured using recycled PET (R-PET). This is because, as long as the resulting R-PET is approved for food contact, which it easily can be through the regulatory environment that is in place, then it can be used for this purpose. However there are sometimes issues in the take-up of R-PET. This is largely in terms of marketing since the slight discolouration that can result from employing R-PET does not impact in any way on the bottle’s performance. By far a greater barrier to the adoption of RPET is the lack of availability of quality R-PET. Currently the demand for R-PET outstrips supply. This is due in part to the traditional mechanical methods of recycling PET bottles in which it was previously difficult to efficiently separate the contaminants, particularly dyes, from the plastic. Collection rates of recycled bottles are also an issue, with highly fluctuating rates across different regions. While global recycling rates continue to improve, there is still much work to be done

in post-consumer PET packaging. In Europe more than 60 billion bottles were recycled in 2012, representing an overall collection rate of more than 52%. In the United States, the gross recycling rate for 2012 was 30.8%, an improvement of 1.5% on the 2011 figure, certainly helped by a surge in the recycling of singleserve PET water bottles of almost 20%. Leading the way in terms of recycling is Asia with a rate of almost 80%, whereas in Eastern Europe only 12% of bottles are collected and recycled. However, it is important to qualify those figures and recognise that in many developing countries, a discarded PET bottle has a greater intrinsic value. For those living in poverty, the collection of discarded bottles from households or open landfill sites provides a revenue stream and this is one contributory factor in the high recycling rates of certain regions. The emphasis on collecting bottles needs to continue, with commitments to further improving collection rates. The technological advances being made to optimise the use of those bottles also needs to be encouraged,

The emphasis on collecting bottles – the so called ‘post-consumer PET’, which has been discarded by the end-user – needs to continue, with commitments to further improving collection rates. The technological advances being made to optimise the use of those bottles also needs to be encouraged, building on the new filtration processes being adopted to generate PET flakes in a way which is both more eco-friendly and more cost effective. This will enable the production of more new bottles from R-PET, and also allow the recycled PET flakes to be used in a wide range of other applications. PET can be recycled multiple times and perhaps its most common use is to generate polyester fibre which is employed as the insulating filling for duvets, clothing and similar fabric items. One of the most recent and highest profile examples of R-PET use was at the recent 2014 FIFA World Cup where a number of teams, including host nation Brazil, played in kits manufactured from the recycled material. Since 2010 sportswear manufacturer Nike has recycled almost 2 billion bottles in producing football shirts, enough to cover over 2,800 full-sized football pitches 6. While these are impressive figures, when you start to consider just how widespread are the applications in which R-PET can be employed, the sheer scale of the recycling operation can be better appreciated. The imaginative uses to which R-PET is put is seemingly almost endless. As an exercise at Sidel we conducted some research into the possibilities of a ‘recycled office’ and just how many elements could be generated from R-PET. Even though we operate as a provider of PET packaging solutions for liquid products and are therefore in a better position than many to appreciate the potential for recycling PET bottles, we were genuinely surprised at the range and diversity of products we discovered. From lighting and seating, to desks, partitions, carpeting, protective mats and window blinds, companies are now offering options manufactured from R-PET. There are also a number of initiatives where PET bottles are being used in construction, perhaps most notably to create eco-bricks to erect new buildings. The Pollibrick™ is a self-interlocking ‘brick’ made from recycled PET bottles. The PET bottles can be sourced locally, with the manufacturing process carried out close to the construction site, reducing the need for carbon-costly transportation

of construction materials. Arthur Huang, Managing Director of Pollibrick developer Miniwiz, was responsible for the EcoARK, the main exhibition hall for the Taipei International Floral Exhibition which employed some 1.5 million PET bottles in its construction. There is also a project in the Philippines called ‘IsangLitrongLiwanag’ (meaning A Litre of Light), which is a sustainable lighting project developed by the My Shelter Foundation. A simple but effective technology sees a plastic bottle filled with water, some salt and a few drops of bleach to prevent algae. It is then placed in a hole in the ceiling, with the light refracted through the bottle producing illumination equivalent to a 50-watt electric bulb. Artists are also increasingly recognising the potential recycled PET bottles provide. Fabrice Peltier is a designer who specialises in creative packaging. In a recent interview for Sidel’s ‘InLine’ magazine he said “I recover packaging waste, clean it, take it apart and choose the interesting parts to make installations, sculptures and objects, whether useful or purely artistic. By turning packaging waste into art, I want to change how the public views this noble raw material to which we absolutely have to give a second life.”7

Meeting future demand The focus on sustainable methods of production is a feature in many industries and in packaging it is particularly acute. This is highlighted by a comment from Dr. James Bellini, a contributor to KNOWLEDGEshare (www.knowledgeshare.com), a neutral platform for key players in the beverage industry to discuss where the market is heading. Dr. Bellini is a futurologist and said at a recent KNOWLEDGEshare event: “Food and beverage is very much at the top of the agenda. There are probably three big issues that we have to crack this century: one of them is health and wellbeing, one is sustainability and the third one is food and beverage.”8 Forecasts for 2030 suggest that demands for energy will have increased by 50 percent, food by 50 percent and water by 30 percent, alongside the additional pressures brought about by an increasingly urban population9. This means that finding ways to optimise the planet’s resources in meeting those demands will only intensify and with it the need to ensure that the packaging we employ can contribute to that sustainability agenda. PET has a vital role to play. The responsible use of virgin PET across the supply chain can bring immediate and significant sustainability benefits. Extending that beyond the virgin resin, in its recycled form PET can be reused time and time again, reducing consumption of what is a finite resource. Already the most widely recycled plastic in the world, through initiatives to further improve collection rates and the methods of recycling, PET can further strengthen its position as the sustainable package of choice. It is about taking what is currently in the waste stream and putting it in the resource stream, reaching for the ultimate objective of a closed-loop sustainable packaging supply chain. (si)

www.beveragemanager.net

21 ISSUE 07-08 / JULY-AUGUST 2014 ISSUE 07-08 / JULY-AUGUST 2014

UK UK goes for gold with exclusive launch of Diageo ChinaGold Huiyuan plans to Smirnoff Diageo goes forApple goldJuice withGroup exclusive launch of expand its business to markets outside mainland Smirnoff Gold Apple Diageo Global Travel launch Smirnoff sance era. The even distribution of the

•

NEWS NEWS

USA USA Institute Urges FDA to Exempt American Brewers Beer

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Beer Urges FDA to Exempt American Brewers from Institute Costly Regulation but could end if this FDA rule is upheld. The Beer Costly Institute has filed joint comfrom Regulation Instead, some brewers will be forced to ments with the American Malting Bar-

China Huiyuan Juice to expand overseas to boost sales

China and subsequently to Southeast Asia. Gold Apple, a new apple-flavoured ligold flakes is visible throughout the clear

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ISSUE 9 SEPTEMBER 2014

Central European PMIs show manufacturing fighting hard to stay afloat Central European manufacturing is fighting hard to keep its head above water, even while activity in the Eurozone continues to dwindle, PMI readings released on October 1 revealed. Extending the trend of recent months, Central European Purchasing Manager Index readings came in either side of the 50-point threshold that separates contraction from expansion. Leading the way was the Czech Republic, which came in at 55.6; Polish manufacturing continued to fall with 49.5. The Hungarian reading rose to 52.6 after having dropped to 51 in August. However, the data for that country is compiled locally, tends to be erratic and is not seen as a reliable indicator of actual activity. Manufacturing in the Eurozone area edged closer to stagnation in September, with the PMI reading falling to a 14-month low of 50.3. Chris Williamson, Chief Economist at compiler Markit, said: “September’s Eurozone PMI makes for gloomy reading. The euro area’s manufacturing economy has lost the growth momentum seen earlier in the year, lurching closer to stagnation. The near-term outlook also looks worrying.” Of particular concern for Central Europe is the fact that Germany is now succumbing to the Eurozone weakness. German manufacturing - the major driver for surrounding economies because of their roles in its supply chain - dropped into contraction for the first time in 15 months at 49.9. The reading suggests “the region’s northern industrial heartland has succumbed to the various headwinds of weak demand within the euro area, falling business and consumer confidence, waning exports due to the Ukraine crisis and Russian sanctions,” wrote Williamson. That will bring more pressure to bear on the likes of Hungary, whose PMI has been above the 50-point mark for 14 months straight. “The key question is how long the extra capacities of vehicle production can keep nudging the sector forward and how drastically

Hungary’s exports will be hit by a general deflating of the European business cycle,” suggested analysts at Portfolio.hu. The Czech Republic, the star PMI performer in Central Europe so far this year, faces similar uncertainty over its stamina, amid concerns over how long the central bank’s (CNB) loose monetary policy can keep the country’s manufacturers afloat. For the moment, however, strong export demand helped push September’s PMI to a four- month high. “For now export growth remains good, averaging 8.7% y-o-y in January-July, up from 0.2% y-o-y in 2013. Looser fiscal policy is another support factor,” wrote Agata UrbanskaGiner, Economist for Central & Eastern Europe at HSBC, which jointly compiles the PMI report. “This should support the current policy stance of the CNB - zero bound interest rates and a cap on FX appreciation.” Poland’s September reading made it a clean sweep in the third quarter, with all three months showing a contraction. However, the slowdown moderated after having dropped to 49.0 in August.

Still, after the strong start to the year, the third quarter downturn in PMI is just the latest in a raft of disappointing macro releases out of Poland. Industrial production data has “surprised to the downside in recent releases, including a 1.9% y-o-y contraction in August,” said Urbanska-Giner. Analysts have been at pains to explain Poland’s struggles, with few accepting that the country’s exposure to Russia and Ukraine are sufficient causes. Certainly, the National Bank of Poland appears unclear over where the pressure is coming from for an economy far less exposed to the Eurozone than its neighbours. However, the market is now convinced there will be a rate cut, and it is pricing in a 50 basis point reduction in interest rates to 2% for the monetary policy meeting later this month. The PMI figure is only “likely to provide further ammunition to the doves on the central bank’s MPC,” pointed out William Jackson at Capital Economics. That said, his expectations remain somewhat hawkish: “We expect a 25bp cut in the benchmark interest rate next week, bringing it to 2.25%.” (bne/bmg)

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