Sunday, May 04, 2003

Heineken expands eastward  Heineken, which terms itself the “global brewer,” just got more global. The Dutch company, the third  largest brewing company in the world (after Anheuser-Busch and SABMiller), just acquired Austria’s largest brewer BBAG (Brau Beteilungs Aktien Gesellschaft) in a $2 billion dollar deal. In Austria, BBAG produces the brands Zipfer, Goesser, Kaiser, and Edelweiss. The company also sells fruit juices and mineral water, primarily in Austria. This move continues a tendency of roll-ups among European breweries. Where twenty years ago each country, and almost each region of each country, had its own distinct brewing tradition with one or more independent firms, more and more that industry is being consolidated, just as in the American market. In fact Heineken’s competitors for the takeover were other beer giants: SABMiller (South Africa/US), Carlsberg (Denmark) and Scottish & Newcastle (UK). All are jockeying to end up as one of the survivors in the emerging oligopoly. Though the purchase price (over 10 times BBAG’s profits last year) was very high, analysts believe the purchase puts the company into a strong position in terms of beer sales throughout Central (ex-communist) Europe. Aside from Austria, BBAG has breweries in four Central European countries, Poland (Vanpur), the Czech Republic (Starobrno), Hungary (Soproni Aszok) and Romania (Ciuc). Heineken plans to merge its current operation with BBAG’s into a new Central European subsidiary renamed Brau Union AG. According to the company’s press release,  Brau Union AG will be responsible for all operations in 13 Central European countries, namely: Austria, Poland, the Czech Republic, Romania, Hungary, Serbia-Montenegro, Slovakia, Bulgaria, Croatia, Bosnia-Herzegovina, Slovenia, Macedonia and Albania. As with an earlier example for Kraft Foods, ex-communist countries in European of them entering the EU and all of which show major growth in consumer spending, are major targets for global oligopolies. This strategy is outlined by Heineken itself: In 8 of the 13 countries in this region (namely; Austria, Poland, Hungary, Romania, Bulgaria, Slovakia, Macedonia and Albania) Heineken will have #1 positions, which can be further optimised and extended, and to which the Heineken brand can be added. In addition, Heineken will have a number two position in Croatia, a strong regional foothold in the Czech Republic and a valuable export position in the remaining other three countries of the region (Serbia, Montenegro, Slovenia, and Bosnia-Herzegovina). So while the companies will have their local brands, they will also experience the delights of those great international brands, Heineken and Amstel. The question is whether the once vibrant European beer industry will begin to look like the American beer monoculture. Next up for acquisition in the Italian beer maker Peroni. Heineken will have to sit this out, as it already owns 35% of the Italian market and would run up against antitrust issues. However, the bidders are likely to be SABMiller, Belgian Interbrew, Britain's Scottish & Newcastle and Danish Carlsberg.   8:40:44 PM

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