What will InBev’s acquisition of SabMiller mean for breweries in Croatia? InBev’s Zagrebačka pivovara holds 47 percent of the market, and the government promises incentives for small and craft breweries.
Last week, a major HoReCa conference was held in organization of the HoReCa group, a Croatian cluster specialized in distribution in this channel, whose leading members include companies such as Stridon promet, Ba-Com, or Bijelić co., which, along with several large producers (Agrokor, Atlantic grupa, Franck, Heineken, Zagrebačka, Carlsberg, Vindija…) have been long-term partners and suppliers in this market, as well as a factor in improving the supply chain structure from factory to café/restaurant/hotel.
The panelists were prominent managers from the largest brewing companies present in Croatia, as well as regional producers/distributors such as the Agrokor group or Atlantic grupa. The purpose of the conference was to enhance the understanding of trends in the HoReCa channel, particularly in the beer category, in light of major global and regional mergers (InBev-SabMiller, Heineken-Laško-Union).
Croats Among the Ten Largest Consumers
Croats are among the 10 largest consumers per capita in the world, so it is interesting to view new trends in brewing in the Croatian and regional market from this perspective: what will the concentration of producers bring, the increasingly strong entry of Atlantic grupa into the HoReCa channel, and the weather fluctuations that affect beer consumption, as well as tourism results in Croatia. How can the de facto state of war in the EU affect Croatia’s visitation and will the European Football Championship next year pass without the challenges currently faced (terrorism, state of emergency)?!
Thus, the largest concentration in the brewing industry is currently underway; InBev has acquired SabMiller for £71 billion and paid £44 per share. This brewing giant holds 30 percent of the global market and collects 50 percent of the total profit in the brewing industry. Brands such as Budweiser, Becks, and Corona will be under the same umbrella as brands such as Foster’s, Grolsch, or Peroni.
The main reasons for this M&A concentration are likely a response to the growing trend of craft beer production worldwide, as well as retailer brands and greater company strength in a complex geopolitical/climatic environment.
Expectations are that such concentration will bring higher product prices (due to a larger market share) and a significant cleansing of brands, of which both companies have dozens, and entry into the premium segment will be even more pronounced.
A major challenge in the concentration is the completely different corporate cultures, and negative examples of integrations of giants such as Daimler/Chrysler or AOL/Time Warner are practically a warning. The company will also be quite indebted (4xEBITDA), but if future benefits meet expectations (focus on the strongest brands, higher prices, and efficiency) and InBev manages to impose its culture of thrift and rationality, the integration will fully achieve its purpose/goals.
Brewers Have Also Bought James Bond
Entry into the premium segment is also very important for increasing beer consumption. For example, in the latest ‘James Bond’ (Spectre), the Heineken brand is as important as Aston Martin, Omega, or Tom Ford… Ten years ago, no one expected that James Bond could drink beer instead of a vodka martini.
Furthermore, in Croatia, there are already schools for sommeliers (Beer Academy) that curate beer lists for Michelin-starred restaurants (unfortunately, not yet in Croatia, but in the world). Serious beer lists are probably the best way, along with food and beer pairings on the menu, for stronger penetration into the premium segment. There is a completely different trend of small family-owned craft breweries that, along with locally organized beer festivals, are entering the ‘meat’ of large brewers.
In Croatia, 47 percent of the market is held by Zagrebačka pivovara (InBev), Heineken 33 percent, Carlsberg 13 percent, and the remaining players share seven percent. The government promises to strongly encourage smaller breweries (craft and local ones like Daruvarska or Velebitsko, Zmajsko…), and high consumption (80 liters per capita) can be boosted by quality supply to tourist destinations and serious entry into restaurants with beer lists…
Next year is particularly challenging as the European Football Championship brings about ten percent higher consumption compared to a normal year. Managing peak loads in distribution without major defects is the most important task in the sales part of the overall supply chain.
