E-Malt.com newsletter 28a. July 11

Russia: Heineken conquers Siberia, acquiring the sixth brewer in Russia

Heineken N.V. announced on July 13 that it has signed an agreement to acquire 100% of Baikal Beer Company in Irkutsk, Russia.

The transaction will be funded from available cash resources and is subject to regulatory approval. The acquisition will be earnings enhancing in 2006 and is value enhancing in 2011. As agreed by both parties the acquisition price will not be disclosed.

As a result of this transaction, the market share of Heineken in Russia will grow to 10.6%, with volumes over 8.5 million hectolitres, further strengthening the number three position of Heineken in the world’s fifth largest and rapidly growing beer market.

Jean François van Boxmeer, member of the Executive Board of Heineken N.V. commented: "Acquisition of the Baikal brewery further strengthens Heineken's network of regional production and distribution units spread over Russia and will enable Heineken to acquire a leading position in the Eastern part of the Siberian region."

The Baikal brewery is located in Irkutsk, situated in Siberia, which accounts for 6.3% of the total beer market. The Baikal Brewery is the only significant brewery in Eastern Siberia. The brewery has a sales capacity of 1 million hectoliters, which can be upgraded to 2 million hectoliters. The portfolio consists of the regional beer brands including Zhigulevskoye, Yantarnoe, Rizhskoe, Komanda, Gubernatorskoe, and Brandmayor, which represented a total volume of 557,000 hectolitres of beer. In 2004, national market share of Baikal Brewery was 0.6% and market share in the Siberian region was 13%. ...more info

Japan: Shipments of beer, beer-like drinks drop 2.7 % in the first half

Shipments in Japan of beer and beer-like alcoholic beverages by five major domestic brewers dropped 2.7 % in the first half of 2005 from a year before for the fourth straight decline on a first-half basis, Kyodo News cited industry data released on Tuesday, July 12.

Overall shipments by Kirin Brewery Co., Asahi Breweries Ltd., Suntory Ltd., Orion Breweries Ltd. and Sapporo Breweries Ltd. totaled 228.26 million cases. All five suffered first-half falls for the first time since the data were first gathered in 1992. One case holds 12.66 liters, or the equivalent of 20 633-milliliter bottles.

Shipments of a beer-like sparkling alcoholic beverage, known as "third-category" beer, more than tripled to 32.66 million cases, reflecting its popularity for its cheap prices stemming from lower liquor taxes. It accounted for 14.3 percent of overall shipments, up sharply from 4.4 percent a year before.

But shipments of "happoshu" low-malt beer slumped 20.2 percent to 70.46 million cases with a 30.9 percent share. Those of traditional beer fell 8.0 percent to 125.13 million cases with a 54.8 percent share, dropping for the ninth consecutive first-half period. ...more info

Brazil & Belgium: InBev and AmBev announced merger of Brazilian entities

InBev announced on July 11 the proposed merger between InBev Holding Brasil and AmBev. The merger will lead to financial benefits for shareholders.

AmBev’s Board of Directors called on July 11 an extraordinary shareholders meeting to be held on July 28, 2005. The meeting will decide on the merger into AmBev of InBev Holding Brasil, the 100 % InBev Brazilian subsidiary owning a 55.5% economic stake in AmBev.

The Merger is part of a corporate structure simplification which already resulted in the merger of other Brazilian companies into AmBev and into InBev Holding Brasil.

The Merger will result in financial benefits to AmBev and InBev. The goodwill resulting from the acquisition of AmBev’s shares through (1) the Labatt contribution dated August 27, 2004 and (2) the mandatory tender offer for AmBev common shares dated March 29, 2005 will be, following the Merger, amortized by AmBev up to 10 years, according to the applicable tax legislation. The total goodwill arising from the 2 transactions detailed above, amounts to 8,5 billion BRL [3 billion EUR at an exchange rate of 1 EUR = 2.8 BRL].

According to Brazilian legislation, the goodwill tax benefits resulting from the Merger will be capitalized into AmBev to the advantage of InBev Holding Brasil’s shareholder, InBev – upon the actual obtaining of the tax benefit by AmBev. Nevertheless, all AmBev shareholders will have preemptive rights in the subscription of the capital increase resulting therefrom. ...more info

Kenya: East African Breweries invests to produce more cheap beer

East African Breweries, the region's largest company by market capitalisation, said on July 12 that it was investing in additional machinery to increase output of one of its low-cost beers.

Ken Kariuki, the director of external affairs, said on Monday that the firm was spending 1 billion shillings (R87.90 million) to raise production of Senator Keg, a year and a half after its initial launch, in response to increased demand following the deaths of at least 48 people in the Machakos district south of Nairobi last month from drinking illicit alcohol.

"What we are doing now is to up our capacity as a result of the need that we are seeing in the market whereby people have died," Kariuki said. "We know that we have to provide a credible alternative as quickly as possible. This is a brand that has already been in the market."

More than half of Kenya's 30 million population lives on less than a dollar a day and those wishing to drink alcohol struggle to afford most beers in the market, which cost between 65 shillings and 100 shillings per bottle. ...more info

Canada: Brick Brewery starts importing beer

Brick Brewing Co. Limited, founded by Jim Brickman in 1984 announced on July 12 that besides brewing beer it will now start representing imported beer as well.

Brick has entered into an agreement of understanding to team up with High Falls Brewing Company of Rochester, New York to be their exclusive import agent for Ontario. High Falls is best known for their Genesee and JW Dundee families of beers. The award winning JW Dundee Honey Brown was one of the first Honey Brown beers in North America.

"Import beers make up a considerable share of the Canadian market," said Jim Brickman, Founder and Chairman of Brick. "We want to participate in this segment of the market and are very excited to be selected as the partner to import Genesee and JW Dundee beers into Ontario. These beers are well known and well liked by beer drinkers in Canada who travel to the United States."

Genesee Lager and Ice have been available in Ontario through LCBO stores but Brick plans to expand distribution to include The Beer Store and to increase promotional efforts for the Genesee brand family.

"Brick is well respected for their beers in Canada," said John Henderson, President and COO of High Falls Brewing Company. "They understand what it takes to make brands successful in Canada. Our companies are similar in many ways in that we are each focused on offering both a variety of high quality value and premium beers. We are looking forward to working with Brick to introduce more consumers to our excellent award winning beers." he added. ...more info

Malt News

EU: Malt licence bookings in 2004/2005 decreased by 11.7% year-on-year

Malt licence bookings during the past grain year, July 01, 2004 - June 28, 2005, were of 2.22 million tonnes versus 2.48 million tonnes in 2003/04. The new member countries of the EU could only book restitutions during May/June 2004, they fixed 46,000 tonnes of certificate then, but 277,000 tonnes during their first full year of membership.

It should be taken into account that part of the former exports have changed to domestic sales after the enlargement, but nevertheless total exports of the larger EU should have increased to 2.5 – 2.55 million tonnes, to match last year’s performance. Instead EU maltsters lost 300,000 tonnes of export sales.

Germany: Bestmalz AG agrees to cooperation with two more partners

Bestmalz AG announced on July 12 that Heine Malz and Malzfabrik Langkopf have become members of the Bestmalz group of companies.

The market for brewing malt and brewing wheat has seriously changed in recent years for the malt industry, Bestmalz said. Increasing globalization and consolidation within the brewing industry has also forced the supply industry to adapt its own structures to be able to fulfill the wishes and demands of the breweries even better and with optimized logistics in the future beyond global supplying of all locations.

This is why the Palatia Malz GmbH and Malzfabrik Hoepfner GmbH & Co. KG companies founded BESTMALZ AG (www.bestmalz.com) in 2001. In addition to the entire sales activity for malt, BESTMALZ has also taken on the responsibility for the areas of quality management, logistic and technical support for the partners.

This cooperation was expanded on July 12. The Heine Malz GmbH and Malzfabrik Langkopf GmbH in Peine have joined the Bestmalz AG. Beginning January 2006, all sales activities will be performed by Bestmalz. Volker Riechers has been appointed to the management board of Bestmalz AG where he joins the current board members, Wolfgang Nusselt and Martin Goehler. ...more info

Barley News

USA: Barley harvest may slip 13% in USA

This year's barley crop in the United States is expected to reach 243 million bushels (5.29 million metric tonnes), 13% below 2004, according to the latest USDA crop report of July 11.

Based on conditions as of July 1, the average yield is forecast at 70.0 bushels (1.52 metric tonnes) per acre, up 0.6 bushel ( 0.013 metric tonnes) from last year. If realized, this would be the highest yield on record. Area for harvest, at 3.47 million acres, is down 14% from 2004 and the lowest since 1890.

Production declines are expected for all of last year's 13 largest producing States, mostly due to decreased acreage. Area harvested is expected to decrease in all of last year's 12 largest producing States.

Forecast yields are at or above 2004 in most States, and, if realized, would set new record highs in Colorado and Montana and tie record high yields in Idaho and Utah. In North Dakota, yield is forecast at 70 bushels per acre, up 1 bushel from last year, but area harvested, at 1.15 million acres, is down 22% from last year and the lowest since 1936, resulting in a 21% decrease in expected production.

Hops News

New Zealand: 2005 HOP CROP

The 2005 New Zealand hop harvest was completed in March. The 2004/05 growing season was characterised by a mild Spring followed by a cold and wet early Summer period. From mid January onwards the weather improved and plenty of sunshine ensured a good looking crop. There was an abundance of cones on the vine, with less than the usual number of leaves.

The 2005 yield is an improvement on the previous crop year, and the quality is excellent. Alpha levels were expected to be above average, but on harvest analysis showed closer to average level for the various varieties, which we attribute to the cold and wet early Summer weather.

The crop is currently being processed into pellets and a large portion will be further processed into CO2 hop extract by our JV super-critical extraction company Extract Solutions Ltd.

The majority of the crop is presold, with some surplus hops still available in New Zealand Hallertau Aroma variety and various high alpha hops.