Heineken buys FEMSA's beer business

Heineken announced today that they have agreed to purchase FEMSA's beer business in the Americas. FEMSA ("Fomento Económico Mexicano, S.A.B. de C.V.") was founded in 1890, and is Mexico's #2 brewer after Corona-maker Grupo Modelo (the two are pretty much the only brewers in the country, other than a handful of microbrewers).  FEMSA as such is largely unknown among American beer drinkers, but is the brewer of beers like Dos Equis and Tecate, and Heineken USA has been their importer lately.

The purchase was an all-stock deal worth $5.5 billion, and leaves FEMSA owning 20% of Heineken. The only other serious bidder was SABMiller, and their stockholders are breathing a sigh of relief that there wasn't a bidding war. It appears to be a much better fit for Heineken anyway, getting them into the Americas in a big way.

What's this mean for you? Mostly nothing. I think it will have a net negative effect on consumers; prices will go up to pay for these purchases, and the closer we move to an oligopoly of beer -- mainstream beer, of course -- the easier it is to bump up prices. The more mainstream prices go up, the more room there is for craft prices to go up. However, SABMiller head Graham Mackay says it's a net positive, because consumers have more choice (a point I still don't get; more choice because more global brands that taste almost exactly alike have come to their country and are busily crushing the regional brewer?) and better quality (okay, that I can go along with in a strict sense). I'll freely admit that Mackay has much more experience in the biz (HA! Yeah, just a bit...) and is, by all evidence, head and shoulders smarter than I am, so he may have something there...but I suspect it's largely a matter of perspective.

Anyway...again, what's this mean for you? Almost nothing, especially in America. Heineken USA was importing the beers, they'll still be importing them; it's just that they'll also be exporting them at the same time. And, of course, the number of big brewers at the top grows smaller. Which is why I predicted in Ale Street News that within ten years ABIB would be spinning off and breaking up. I wasn't wholly serious about that, but to some extent I am. I don't think these behemoths are going to survive. Government anti-trust units should be poking at them (how much of the U.S. market is controlled by ABIB and MillerCoors?), special brewing units should spin off to run on their own in this new market, and eventually the bankers involved at the top will start acquiring other stuff because there are no more breweries to buy, and the company's identity will be lost -- like Bass -- and they'll start thinking about selling off the beer -- like Bass -- to focus on other operations. At least, that's what I think may happen.

In any case...Heineken USA is now in the import-export business.

Affligem Noël

I'm drinking with an old friend tonight: Affligem Noël. I remember drinking Affligem a lot back in the early 1990s; it was a solid abbey-style beer, and the Noël was a seasonal I looked forward to each year. Then Heineken bought the brand, and distribution/import got iffsy-chancey. Affligem came and went, and it dropped off my radar.

Then a month ago I got an e-mail: Affligem Noël was available from a new importer, Total Beverage Solution (Mount Pleasant, SC). Would I like a sample? Hell yes, I would. (Interesting that it's not coming in through Heineken USA, which makes me wonder if it is still a Heineken brand; I'm working on that.)

So here I am, finishing up a beer that has just gotten better and better as it warms up. 9%, and my lips agree: this is a big boy beer. The nose is full of a pleasantly sweet-tart mix of pit fruit -- plum, sour cherry -- and a dark chocolate background. The beer itself matches that, with an intensely fizzy carbonation that is not unpleasant at all. What surprises me is the degree of attenuation; if you don't like Chimay Red/Blue for their sweet thickness, this is your beer. The Noël has a very light and drinkable body for that 9% ABV, and the fruit really cleans up the end.

Welcome back, Affligem. I guess I didn't realize how much I missed you until you came back.

FEMSA Follow-up

Hey, remember we were talking about how well Dos Equis is doing for Heineken USA? Keep in mind that Heineken USA is just the importer; the beer is brewed and owned by Mexican brewer/drinks conglomerate FEMSA (Fomento Económico Mexicano, S.A. de C.V.). But I see in the Financial Times today that they are "in talks" to sell off their beer business, to either SABMiller or Heineken, in order to focus on their profitable Coca-Cola business. Here's why I posted, in light of the previous post:

Heineken USA has distributed Femsa's beer in the US since 2005, after Femsa's decision to extract itself from a distribution deal in 2004 with former partner Interbrew. Femsa and Heineken USA, a unit of the Dutch beermaker, signed a deal in April 2007 to extend their relationship for another 10 years.
But the US partnership with Heineken has underperformed, industry insiders say, as Femsa's beers have struggled to compete against fellow Mexican brewer Modelo and its ubiquitous top beer, Corona.
[...]
But the need for consolidation in the Latin American brewing arena has taken on a new level of urgency in the wake of InBev's $52bn deal to buy Anheuser-Busch. As part of that transaction, InBev, the world's largest brewer, gained a 50 per cent stake in family-run Modelo.

In other words...the strong growth FEMSA's Dos Equis and Tecate have shown in the U.S. isn't enough, because they aren't Corona. They have "underperformed." Sounds to me more like FEMSA doesn't have the stomach for the fight.

What it really sounds to me is that the "need for consolidation" is lemming-like, brewers rushing to buy other brewers so they get big enough to fight for market share, when all they're actually doing is fattening themselves for the kill.

And who gets rich? Bankers. Who gets screwed? Brewers, and you, my friends, because huge brewers can and will throw their weight around and have an effect on the entire beer market, including crafts, just like Wal-Mart does in retail.

And what will happen when there are but three or four mega-monster brewers left? I hope someone's standing by Carlos Brito, ready with a videocamera:

When Alexander saw the breadth of his domain, he wept, for there were no more worlds to conquer.

New Heineken USA Chief; new strategy?

I get a lot of press releases and see a lot of stories about new people in positions at a variety of booze businesses, and most of them... eh, so what? This one was an exception, and not because it's a major company unit -- Heineken USA -- but because of the way the people formerly in the position were willing to say why they left, rather than simply "to pursue other opportunities." Check it out, then go back and re-read my post about imported beer. This is from the Wall Street Journal. (I've cut a bit from the piece; this is just the nuggets.)

Dutch beer giant Heineken NV tapped company insider Dolf van den Brink as the third chief executive in about three years to run its struggling U.S. division. Mr. van Den Brink, currently commercial director and deputy general manager for Heineken's operating company in the Democratic Republic of Congo, will become president and CEO of Heineken USA effective Thursday. He succeeds Don Blaustein, who resigned in August, citing differences with the company's management in Amsterdam about how to run the unit.
Mr. van Den Brink will try to revive U.S. sales of the company's flagship beer, Heineken, which have dropped sharply amid the weak economy, ineffective marketing campaigns and tough competition from rival imports and domestic brews. Mr. van Den Brink faces a tall order. In April, Heineken said its beer volume fell 16% in the Americas on an organic basis, which strips out results from recently acquired brands, in the first three months of 2009. Heineken USA accounts for about 4% of the U.S. beer market in terms of volume.
Mr. Blaustein's predecessor, Andy Thomas, also resigned because he disagreed with Heineken's top executives over strategy.

They tap the deputy from the Congo to run the U.S.? Wow.

I would love to know what the different outlooks on strategy are. Here's a suggestion on a US strategy: figure out what you're selling, then get Heineken ads that are as good as the "World's Most Interesting Man" Dos Equis ads are (which are actually working, by the way: Dos Equis is doing well). I like John Turturro, but good God..."No destination is the destination of the undestinated... This is not a beer. This is a compass."



What the hell is that shit? If you don't even know what your beer is -- here's a hint; it ain't a compass, you buy them at REI -- what are we supposed to get out of it? What's the most interesting man in the world say? "I don't always drink beer, but when I do, I prefer Dos Equis." Notice: he drinks beer, not a compass, and he admits that there are other drinks, and that he doesn't always drink Dos Equis. I think that's the best part of the commercial.

I'd also point out to craft beer fellow travelers that even after losing that volume, Heineken USA, by itself, does the same volume as all craft beers put together. Food for thought, mobsters.

The World's Largest Brewers: ups and downs

Just saw some interesting numbers: change in stock prices over the last year on the world's largest brewers from a regular e-letter from www.e-malt.com. Rolling down from the year's best performer to the year's biggest loser:

MolsonCoors -- +4.4%
SABMiller -- -15.7%
Heineken -- -48.2%
Carlsberg -- -60.9%
Anheuser-Busch InBev -- -70.7%

MolsonCoors has been tearing up the pea patch lately, running on big margins from Blue Moon and increased volume on Coors Light, enough to offset losses from the Canadian brands side of the business. Coors has put in place a number of things that are appealing directly to their customers: the 'blue mountain' temperature sensing label, the 'air vent' pouring aid on their cans, and they've done away with the goofy "Twins" advertising and have focused on the beer and the fun.

That all seems silly to most craft drinkers, but you know what? We don't drink Coors Light anyway, so they're not aiming at us. They are aiming at us -- or people who are thinking like us -- with the very understated and smart support they're giving Blue Moon. You gotta be some kind of smart to beat the crap out of the average performance of American/European stocks last year: -42%. Hats off to MolsonCoors.

Things That Make Me Say Bad Words, Part I

"Heineken N.V. today announced that it is to close its Beamish & Crawford brewery in Cork in March 2009."

Dammit. Beamish & Crawford was the first foreign brewery I got excited about, way back in the 1980s, and we dropped by on our honeymoon in 1989. The brewery had a history, and a place, and a well. And Heineken got hold of it, and closed it, and 120 Irish jobs are lost. There are other breweries closing, of course, and pubs continue to close in the UK at a stunning rate (with surprisingly little blogger reaction that I've seen, which is puzzling...maybe), but this one hit home.

I say many bad words.

Photo of the Beamish & Crawford Brewery by kman999 on flickr.

King Opens New Brewery, Europe Still Europe

I got a press release from Heineken International today that just made me smile.

His Majesty King Don Juan Carlos I of Spain opens new Heineken brewery in Seville
Heineken International announced today the official opening of its newest brewery in Seville, by His Majesty, King Don Juan Carlos I of Spain. Located seven kilometres from where the old plant of La Cruz del Campo used to be in the centre of Seville, the brewery, nicknamed “Jumbo”, because of its scale and size, is the most modern and technologically advanced in Europe.

A king opening a brewery. Hell, here in the U.S., we're lucky if the mayor is there (which the Lord Mayor of Seville was, of course). But in Spain, they get His Majesty King Don Juan Carlos I. Can you imagine Franco showing up? Okay, sorry, I'm dating myself.

That is Heineken's fifth brewery in Spain, by the way, just in case you thought they only did wine there.