Thursday, 17 January 2008

Scottish & Newcastle heads east?

Crunch time – 24 January – is fast approaching. It's the day when the takeover authorities will demand a decision over the future of Britain's biggest brewer, Scottish & Newcastle (S&N), which is the subject of a hostile and protracted bid from Carlsberg and Heineken.

The bid has little to do with the British market and everything to do with the fast-growing markets in Russia and the Baltic states. Carlsberg and S&N jointly own Baltic Beverages Holding (BBH), which is far and away the biggest brewer in that vast region, where it owns the Baltika brands and breweries. While beer sales are stagnant or falling in western countries, most of the post-Soviet nations are seeing an explosion of demand for beer. Young drinkers in particular see beer as a “cool”, western drink compared to wine and vodka. As a result, all the global brewers are anxious to move into these burgeoning markets.

Heineken has recently bought a major brewery in St Petersburg, Stepan Raizin, and wants to expand its influence in Russia. Rather than investing heavily in modern equipment, it would prefer to work with Carlsberg on the existing Baltika plants. For its part, Carlsberg, which is seeing falling sales of its own brands, would dearly love to own Kronenbourg, currently an S&N brand, which is far and away the biggest seller in France.

The dispiriting aspect of the battle is that Carlsberg and Heineken openly admit their aim is to “break up” S&N. That's bad news for consumers. The two brewers don't want to improve the S&N product range or introduce new beers. They simply want to smash the company and run off with the swag.

Should we care? After all, Scottish & Newcastle is a bit of a joke. In spite of its name, it no longer owns breweries in either Scotland or Newcastle, and has hived off production of the cask-conditioned version of John Smith's Bitter to Burtonwood Brewery near Warrington. But better the devil you know than the devil you only half know. Carlsberg may own Tetley in Britain but it has little interest in the ale sector. Heineken has even less interest in ale. At least consumers can put pressure on the British-based S&N, whereas the Danes and the Dutch are out of sight and out of touch.

Perhaps some good will come out of this, with the Tetley brewery sold to people with a genuine interest in ale. But don't hold your breath. Rumours suggest S&N is talking to Anheuser-Busch, American owner of Budweiser, with a view to a merger to thwart Carlsberg and Heineken. Suicide pill, anyone?

BREAKING NEWS: 17 January -- S&N has announced it has agreed to talks with Carlsberg and Heineken. It seems serious talks about a takeover will start soon.

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5 Comments:

Blogger Tom Cannavan said...

Roger,

Thought-provoking stuff. Just an idle thought from me, but is there any downside to us just forgeting about the huge multinational brewers altogether, letting them get on with making thier product, whilst we support altogether more worthwhile beers from smaller producers by buying, drinking and talking about them?

In other words does what happens to S&N make any more difference to the quality beer and brewing sector than what happens to coca cola or pepsi? Aren't the two sectors that far apart?

Obviously there are breweries and a workforce that may suffer in a break up of S&N, but their portfolio of beers disappearing off UK shelves wouldn't cause me to lose much sleep...

17 January 2008 at 17:12  
Blogger Zak said...

I think it's healthy that bigger breweries create friction for one another - more interesting than a bloated, over-consolidated beer giant entering the stagnant endgame.

And just imagine if Tetleys was sold to someone interested in brewing quality ales - that would be a revolution!

18 January 2008 at 14:12  
Anonymous Albert_campion said...

Whatever happens, it'll be the end of the line for Tetley in Leeds. Their brewery must be on one of the most valuable bits of land in the country. You can be sure the bean counters will be selling it off for (sigh) An Exciting New Housing Development. Tetley, let's not forget, still make a fine beer (and they even make a mild!) in the traditional way alongside their disgusting 'smoothflow'.

24 January 2008 at 12:28  
Blogger Moonraker said...

I guess that multi-nationals have to be discussed as they control so much of the market. As we all know, they buy up and close down breweries and brands to increase their profits. I guess the only downside of ignoring them might be to discover, as I did, my pint of Gales Best had been replaced by Pride. Mind you, I suppose nothing could have prevented that anyway.

24 January 2008 at 15:12  
Blogger THOMAS 'Tom' CIZAUSKAS said...

Congratulations on your blog, Roger. I look forward to reading it regularly.

27 January 2008 at 01:23  

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