Will SABMiller Own Foster’s?

February 15, 2011

Will SABMiller Own Foster’s?

Dear Client:

That is the question vexing international analysts this week. On the one hand, as Foster’s has formally committed to spinning off its wine business, leaving the Carlton & United Breweries division (Fosters) ripe for an acquisition, SABMiller would be the natural suitor. On the other hand, CUB operates in a mature or declining market and perhaps SABMiller isn’t keen to put up capital for a soft business. Plus you’ve got Asahi and Coca-Cola Amatil waiting in the wings. Coke Amatil is SABMiller’s partner in Australia.

“Our conclusion is that the potential acquisition of Foster’s beer business is likely to be value and earnings accretive to SABMiller,” said Britain-based analyst Jonathan Cook to an Australian paper. “SABMiller has grown historically through a series of acquisitions and so continuing on the M&A route should be seen as consistent with the group’s long-term growth strategy,” he said, not knowing if that’s the case at all. But other analysts think it’s inevitable. It could go for $12 billion. If it does, SABMiller will have overpaid. Foster’s is a dog.

NEWCASTLE TO INTRO LIMITED EDITION BEERS IN 2011

In HUSA’s continued efforts to position Newcastle to compete with crafts, we have this: Rumors swirled around the wild n’ wooly web yesterday that Heineken USA’s Newcastle would introduce a sort of seasonal rotation with fall and winter releases building off of last year’s Summer Ale release. These rumors were likely fueled by the brand’s recent COLA Registry filings; “Werewolf” and “Winter IPA” labels were filed with the TTB earlier this month.

Heineken USA communications chief Tara Carraro set the record straight for BBD: There will be “a range of limited editions” from the brand in 2011 – not seasonals per se. “What we learned from the successful tests of Newcastle Summer Ale is that there is an opportunity for Newcastle to play in this space,” she said.

The brand is saving full announcements and details for their Las Vegas-based national distributor conference in March, but Tara describes the new offerings as “consistent with Newcastle’s tradition of drinkable and interesting brews … it will be an eclectic mix of concepts.”

“Also, no above the line support – looking to use word of mouth to get the word out. Very organic.” Very interesting.

LATEST SALES, SUDS IN NEW BELGIUM’S LIPS OF FAITH SERIES

New Belgium has announced it will release two new Lips of Faith beers each quarter starting this year. The latest two are a 9% ABV Dunkelweiss described as a “grand cru” dunkel, and Le Terroir Dry Hopped Sour Ale, finished with Amarillo hops. The dunkel has been out for a week and Le Terroir shipped Friday, Bryan Simpson told BBD.

BESTSELLERS IN THE EVER-GROWING LINE: Bryan says they’re rewarded at savvy beer bars (“Toronado, Falling Rock”) for pushing the envelope with LOF titles. Recent release Vrienden, a lacto-brett sour brewed with hibiscus and endive, did especially well, while the somewhat traditional Finnish Sahti was something of a miss comparatively. (Notably, other brands like Dogfish Head have released Sahti-style [DFH: “Sah’tea”] brews as well, so brand confusion can’t be ruled out.)

PENN COMMITTEE BEGINS PRIVATIZATION HEARINGS

Today a Pennsylvania Senate committee (Law and Justice Committee) will begin a series of hearings over the subject of privatization. Chairman Sen. John Pippy said his goal with the first hearing is to provide an overview of alcohol control policies across the US. The hearing won’t focus on a specific bill, but senators will hear testimony from supporters and opponents of privatization.

The Senate committee begins its inquiry with a privatization proposal first introduced by House Majority Leader Mike Turzai last session. If passed, the state would auction off retail stores and wholesalers to the highest bidder. Gov Tom Corbett endorsed Turzai’s legislation during his campaign.

BEER BRIEFS:

SUMMIT POPS FOR NEW TOPS. Summit Brewing will discontinue twist-off caps starting next week. The classic pry-off style better seals the beer off from oxygen, and chief Mark Strutrud says the company received some complaints about the difficulty of the former tops. The change will be applied portfolio-wide.

UBS UPGRADED AmBev’s stock to a Buy rating, while also increasing ABI’s 2011 earnings per share estimates. Why? In a word: Brazil. Plus a recent sell off has depressed the stocks, making them more attractive.

TEXAS SENATE CONSIDERING SUNDAY SALES BILL. Texas Senator Rodney Ellis has filed Senate Bill 595 to allow Sunday spirits sales. Under the proposed bill, spirits would be able to be sold from 10 a.m. to 9 p.m. seven days week. The bill was introduced after a joint committee issued a report last month suggesting various ways to raise revenue for the state.

CONN GOV MALLOY IS PROPOSING WIDE-RANGING TAX INCREASES for a number of things, including hair cuts, carwashes, and yes, alcohol. Exact figures were not released but the proposed tax increase on alcohol would amount to “a few pennies” on a six-pack of beer, said the governor’s budget director.

HAWAII CONSIDERING ALCOHOL TAX INCREASE. A Senate Health Committee advanced a bill that would increase the tax on alcohol by 50%, but removed a provision that would have created a new soda tax.

SAVOR, the BA’s annual “American Craft Beer & Food Experience,” will feature a second night this year (June 3 and 4 in Washington D.C.) due to popular demand. The event will feature beer from 72 craft brewers teamed with American chefs to present both savory and sweet pairings with each beer. About half of this year’s participating breweries are new to the event. Tickets go on sale March 3. Always popular with consumers, the event is gaining traction with retail and restaurant members looking to push beer sales via food pairings/samplings.

HEINEKEN’S NET PROFITS grew 19% for the year. Brand Heineken grew globally. “Heineken brand has once again outperformed our broader brand portfolio, the overall beer market and the international premium segment as a whole. We will continue to invest in our leadership position in this segment,” said chief Jean François van Boxmeer. Heineken also said in a statement that they would see “increased investments in existing and new higher margin brands such as Dos Equis.”

BREWPIC OF THE DAY: One of Newcastle’s new offerings, coming soon.

Until tomorrow, Harry

“The best doctor in the world is the veterinarian. He can’t ask his patients what is the matter-he’s got to just know.”
-Will Rogers

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