E-Malt.com Flash 08b. February 24

Denmark: Denmark's second-largest brewer, the Danish Brewery Group A/S, announced on Thursday, February 24, it would seek new growth internationally through acquisitions, alliances and partnerships in Northern Europe and Italy and will change its name to Royal UNIBREW. On February 24 The Danish Brewery Group published its New Strategic Plan to ensure profitable revenue growth from some DKK 3 billion today to at least DKK 4.5 billion ($801.8 million) over 3 years. The company communicated that after it has successfully achieved the targets, which were part of V8 and V8 Next, the Group now launches its new Strategic Plan, MACH II, which is titled ”value creation through profitable, international growth”. Under its plan, The Danish Brewery Group expects to see annual organic growth of some 3 %, and therefore the remaining growth is to be created through acquisitions, alliances and partnerships, the company said. It is the Group’s intention that the existing shareholders’ position with the Company should not be diluted as a result of new acquisitions. Consequently, the objective is to ensure long-term growth in the market value of The Danish Brewery Group while enabling a current return to shareholders by way of dividend and share repurchases. Profitable revenue growth from some DKK 3 billion (2004) to at least DKK 4.5 billion (2007) is to be ensured through 3% organic growth in The Danish Brewery Group’s focus markets: the Nordic countries, the Baltic countries, Germany, Italy, Canada; and in the international malt drinks markets: the Caribbean, Africa and the UK. Additional growth is to be achieved through acquisitions, alliances and partnerships in the following areas: Northern Europe, Italy and the international malt drinks markets. Within 3 years of being acquired, acquisitions must show two-digit ROIC and profit margin. "The Group has healthy financial resources to enable the acquisition strategy. Acquisitions will primarily be financed by own funds and borrowing," it said in a statement. As part of a new strategic plan the Brewery Group said it would change its name to Royal UNIBREW and introduction of new slogan: ”All your favourites” signalling The Danish Brewery Group’s wide range of quality products. The group is dwarfed in its home market by Carlsberg, the world's sixth-largest brewer, but owns several well-known domestic beer brands, including Faxe and Ceres, Reuters commented. European brewers, including Carlsberg with a domestic market share of 64 percent, have been seeking growth outside mature western European markets through ventures into eastern Europe and Asia. The Danish Brewery Group A/S is Scandinavia's second-largest brewery group comprising four Danish and two Lithuanian breweries, a Latvian soft drinks producer and a Latvian brewery. The Danish breweries are Albani Bryggerierne, Ceres Bryggerierne, Faxe Bryggeri and Maribo Bryghus. The Lithuanian breweries are Tauras and Kalnapilis and in Latvia the Group owns the soft drinks producer Cido and the Lacplesa brewery. In Norway, The Danish Brewery Group holds 25% of Hansa Borg Bryggerierne, which also produces some of the Group's products under licence. Furthermore, the Group's products are produced under licence in the Caribbean and Africa. The Danish Brewery Group has approx. 2,100 employees worldwide. The Danish Brewery Group exports to approx. 65 countries throughout the world.

Colombia, Bogota: The president of Colombian brewer, Grupo Empresarial Bavaria, confirmed on February 24 that the company is interested in a possible merger or a strategic partnership with a major world competitor....more info

China, Beijing: China maintained its ranking as the world's biggest beer producer in 2004 with about 29.1 million metric tonnes of beer (32 million short tons) produced. China’s beer production increased by 15.2% in 2004 compared to the previous year, according to the state-run newspaper People's Daily, citing China Beer Industry Association. However, average per capita beer consumption was about 18.9 litres (5 gallons) in 2004, remaining well behind developed countries where per capita beer consumption is about 200.6 litres (53 gallons) per year. China has more than 400 breweries and more than 2,000 companies linked to the brewing industry across the country, the report said. China's top ten breweries accounted for 55 % of total annual output, as compared to only 22 % in 1996, and 53% in 2003.

Mexico: Fomento Economico Mexicano, S.A. de C.V. ("FEMSA"), the largest beverage company in Latin America, announced on February 25 its operational and financial results for the fourth quarter and year ended December 31, 2004. In the forth quarter domestic beer volumes increased 3.1% and export beer volumes increased 7.0%, as the transition to their new US importer. Femsa said its net profit for the October-December period was 1.866 billion pesos ($167 million). For 2004 Full Year Femsa’s slid performance in all businesses drove a 17.2% increase in consolidated total revenues and an 8.7% increase in operating income. Profitable share gains in domestic and US beer markets. Femsa’s domestic beer volume growth outpaced the industry while operating margin expanded 50 basis points; export beer volumes increased 13.0%. Jose Antonio Fernandez, Chairman and CEO of FEMSA, commented, "Despite significant competitive and raw material cost pressure, the FEMSA team was able to successfully navigate the challenges of 2004. I am pleased to report our 10th consecutive year of operating income growth. "Beyond our positive results, we also made great strategic strides. At Coca-Cola FEMSA, we finalized the integration of the new soft-drink territories, which include operations in seven new countries. While there is still much work to do, we are quickly seeing the benefits of our initiatives and continuing to raise our expectations. At FEMSA Cerveza, 2004 was a remarkable year, as we recovered 100% ownership of our beer operations, gained profitable market share in Mexico, established an alliance with Heineken to distribute our beers in the US, and began importing Coors Light into Mexico. For the first time, our return on invested capital at FEMSA Cerveza exceeded 11%. Finally, Oxxo continued consolidating its position as the leading convenience store chain in Mexico, becoming a powerful distribution channel for many consumer products and by far the largest client of The Coca-Cola Company in Mexico and one of its top clients in Latin America." Mr. Fernandez added, "At FEMSA our good results are a product of a great team, doing the right things with the best technology. In 2004, we underscored our ability to operate successfully in complex market environments such as Brazil, Venezuela, and Colombia; to serve customers in a differentiated way through improved execution at the point of sale; and to manage a broad portfolio of strong brands in a precise and effective way. "In 2005, we will remain focused on delivering high-quality growth and building long-term value for our shareholders." FEMSA is the leading beverage company in Latin America. It controls an integrated beverage platform that comprises the largest Coca-Cola bottler in the region, Coca-Cola FEMSA; the second largest brewer in Mexico and important beer exporter to the United States, FEMSA Cerveza; and Oxxo, the largest and fastest growing convenience store chain in Mexico with over 3,000 stores.

Germany: The East German brewer, Brandenburg-based Klosterbrauerei, won a court battle allowing its sugar-infused frothy beverages to retain the name "beer" even if they violate the strict 16th century purity laws governing the industry....more info

Russia, Moscow: The Upper House of the Russian Parliament approved on Friday, February 25, without any deliberations the law “On Restrictions of Retail Sales and Consumption in Public Places of Beer and Beverages Produced on its Basis"....more info

Malt News

Lithuania: Svencioneliai-based Company, Maltosa, is to start up malt production in several weeks, the Verslo Zinios business daily reported at the beginning of the week. Maltosa is to become the second player on Lithuania's malt market....more info

Canada: The forecast of IGC for malt (grain equivalent) exports from Canada is unchanged at 0.62 million tonnes....more info

United Kingdom: Muntons plc, the British malt and malted ingredients producer for over 80 years, announced on February 24 it has decided to cease production at their maltings in Kirkcaldy, Fife, Scotland. The plant, which was constructed in the 1950’s, will cease production early in 2006. “We deeply regret having to make this decision” said Alan Ridealgh, Divisional Managing Director of Muntons Malt. “However the increasing adverse cost differential between this and the company’s other maltings has made this decision inevitable. This is particularly so given the very low profit levels in the malting industry which makes it impossible to attract finance for further investments.” Muntons grain trading operations in Fife will also cease with immediate effect. Muntons are making this announcement now in order that farmers can take this into account when making their cropping decisions. The maltings will continue to operate until the barley stocks are used and it is anticipated that the site will close in March 2006. The company will be working with all staff to find the best way forward but potentially 29 people are at risk of redundancy. Muntons will now concentrate on production at their Bridlington and Stowmarket maltings. Tim Stonehouse, Muntons Malt’s Sales Director said “supplies of malt to distillery customers will continue from our Bridlington maltings, a modern cost effective plant that was originally built in partnership with two Scottish distillers”. Muntons will now operate out of two sites: Stowmarket (head office), which produces 80,000 tonnes per annum, and Bridlington which produces 92,000 tonnes of malt. Muntons Malt remains a significant producer of malt and still one of the largest independent UK maltsters. Muntons Malted Ingredients also operate out of the head office at Stowmarket, which includes a 28,000 tonne per annum malt extract plant, a total of 6,000 tonnes per annum spray drying and band drying facility, a 3,000 tonne per annum homebrew production line plus malt flour mill and malted wheat flaking plants. The decision to close the Kirkcaldy maltings was not taken lightly and was with much regret. With concentration at the existing maltings and continued reduction in costs, Muntons Malt look forward to working closely with customers to meet the demanding commercial standards of today’s market.

Barley News

United States: Total barley use in the United States for 2004/2005 is forecast by IGC at a four-year high of 6.1 million tonnes compared to 5.0 million tonnes last year....more info

China: China imported 119,000 tonnes of barley in January 2005, about 63% more than in January 2004, of which from Canada 59,000 tonnes, Australia 61,000 tonnes. During 2003/2004 China imported 1.2 million tonnes of barley and in 2004/2005 is forecast to import 1.9 million tonnes of barley. China produced 3.4 million tonnes of barley in 2003 and its 2004 barley production is forecast by IGC to be of 3.5 million tonnes.

Australia: Grain company ABB Grain Ltd announced on February 25 it expected a net profit before goodwill amortisation of A$35-$37 million (US$27.4- $29 million) for this financial year....more info

Theoretical malt prices.

* - 70/30 = 70% Average two Rows Spring and 30% Six Rows Winter
** - 50/50 = 50% Average two Rows Spring and 50% Six Rows Winter

Theoretical malt prices for crop 2005 are available on site www.e-malt.com/MarketPrices

Malting barley prices. French barley prices.

Nominal prices.

nq - Not quoted
Prices for Danish and UK malting barley are available on site www.e-malt.com/MarketPrices

French Malting Barley Price Evolution

Table of the week

Australian Barley Supply and Disposal 2001-2005

in thousand tonnes	1999-2000	2000-2001	2001-2002	2002-2003	2003-2004	2004-2005f
Production	5 032	6 743	8 280	3 865	8 728	6 454
Domestic use	2 009	2 325	2 535	1 986	2 429	2 524
as malt and other human use	154	158	161	165	168	172
feed	1 700	2 000	2 200	1 650	2 100	2 200
seed	155	168	174	171	161	152
Exports	3 325	4 567	5 274	2 607	6 997	4 414
malting barley	1 234	1 824	1 705	1 099	2 135	1 465
malt (grain equivalent)	569	602	600	624	637	560
feed barley	1 524	2 143	2 971	885	4 239	1 948

Source: ABARE, 15 February, 2005.
Market year: November–October. This means that the 2001-02 barley crop harvested in November 2001 to January 2002 is marketed from November 2001 to October 2002.
The sum of domestic use and exports may differ from production as a result of changes in grain stock levels.

Graph of the week

Agenda

February 2005:
Pianeta Birra - Beverage & Co. International Show of Beers, Beverages etc., Italy;
Seminaire Orges brassicoles 2005 à Paris-Bagnolet;
Liqma International Beverage Industry Exhibition, Spain;
Canadian Food and Beverage Show;
GrainWorld 2005. Canada. CWB.;
Beer Business Daily's Second Annual Beer Industry Summit.;

March 2005:
Night of Great thirst, Belgium;
Zythos Beer Festival, Belgium;
Institute and Guild of Brewing Africa Section 10th Convention, South Africa;
China Drinktec China International Exhibition on Beverage, Brewery and Wine Technology;
FOODEX JAPAN 2005 / INTERNATIONAL FOOD & BEVERAGE EXH;
International Food and Drink (IFE), UK;
BLACK SEA GRAIN: A NEW ENVIRONMENT IN UKRAINE AND REGIONAL PROSPECTS FOR GROWTH;
Deltabierfestival, The Netherlands;
Spring Beer Festival "Hops on Equinox", Seattle;
Brew and Beverage Industry - Beer Auction International Trade Fair, Russia;
Siebel Institute Brewing Profitability Workshop;

April 2005:
Helsinki Beer Festival;
Concise Course in Brewing Technology;
World Barley, Malt & Beer Conference 2005;
JOINT LEGISLATIVE CONFERENCE. Washington, D.C., USA;
BEER. Exhibition Pavilion Minsk.;
Craft Brewers Conference & BrewExpo America;
Classic City Brewfest, Athens, GA;
WINES, BEERS AND DRINKS Exhibition for the Beverage Industry. Krasnoyarsk, Russia;
Excursion to West-Flanders;

More events are available on site e-malt.com