Friday, September 23, 2011

What the XXXX?

Global brewing giant, SABMiller, has finally won approval from the Foster's board for a $12.3 billion takeover of the Australian Brewery. SABMiller is one of the world's leading brewers, headquartered in London, United Kingdom and operating across six continents. It is the world's second-largest brewing company measured by revenues. Its brands include Grolsch, Miller Genuine Draft, Peroni Nastro Azzurro and Pilsner Urquell. It has operations in 75 countries across Africa, Asia, Australasia, Europe, North America and South America and sells 213 million hectolitres of lager per year. It also is a major bottler of Coca-Cola.

There had long been speculation among those familiar with the industry that either the beer sector or all of Foster's Group was a candidate for a takeover by a larger firm. Interest has been expressed by the In 1990, Asahi Breweries acquired a 19.9% stake in the company when it was known as Elders IXL. Additionally, Foster's had been seen as attractive with its high profit margins due to its virtual duopoly with Kirin-owned Lion Nathan despite beer sale volumes sagging recently with a poor summer and a consumer downturn. The announcement by SABMiller of the takeover deal was no surprise to those inside the industry.

The Foster's Brewery was founded in Melbourne in 1888 by two American brothers, William and Ralph Foster of New York, who happened to own a refrigeration plant, which was necessary to brew beer in Australia's hot climate. They sold the brewery the following year and returned to the United States. The company eventually became Carlton and United Breweries/Beverages or CUB when Carlton, Fosters, Victoria, Shamrock, Castlemaine and McCracken breweries formed into a cartel known as the Society of Melbourne Brewers in 1903. CUB has been producing beer since 1904 at Abbotsford, Victoria.

Over time it has bought out many other brewers, such as Abbotsford Co-operative Brewery in 1924, a company set up by independent hoteliers to combat the anti-competitive nature of the Society of Melbourne Brewers. Their first interstate acquisition was Northern Australian Breweries and the Cairns Brewery in 1931. Further acquisitions were the Ballarat Brewing Company, Queensland Brewery Ltd, Thos McLauchlin & Co Pty Ltd, Richmond Brewery and Tooth & Co. CUB was wholly bought by Elders IXL, a giant Australian diversified conglomerate with Pastoral, Financial, Materials and Food interests, in 1983. Elders Brewing Group continued to acquire brewing companies in the United Kingdom, Canada and the United States. Finally, in 1990 Elders Brewing Group changed its name to Foster's Group, to reflect the name of their most internationally recognised product.

It will be interesting to see how this merger shakes out since this Foster's was a brand with a serious national identification. Jess Walsh, Secretary of United Voice in Victoria (formerly the Liquor Hospitality and Miscellaneous Union), said the brewery was "critical" to Foster's for production and its unique cultural identity. "We've been producing beer at Abbotsford in Victoria since 1904, for over 100 years," she said. "Australians expect brands like Victoria Bitter to be made in Victoria."

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  1. A friend, returning from a trip to Australia, brought me a T-shirt for Coopers. I asked him how good it was. He said it's what people in Australia, who like beer, drink--instead of Fosters'.

  2. The real point of this is the conglomeration of industries into monopolies. In this case, we have one megaBrewer swallowing up another smaller brewery. I would like to think that they won't devestate the brand too badly, but I am not terribly optimistic.

    There is also an impeding commentary on how some smaller British Breweries have been gobbled up: Watneys, Whitbread, Double Diamond Burton Ale, and so on.

    The real issue for me is that the monopolies take over and destroy the local character of the product. I would also add that it reduces competition. And the consumer never sees the benefits of the "economy of scale".

  3. I couldn't get the dialogue. Could you transcribe the two lines for us?

  4. Ah, you don't speak 'Strine.

    wife: I reckon we'll be all right if we lose some weight off the back
    man: She's a good sport your missus.

  5. That is absolutely hilarious. I needed your help to understand it, and then I laughed out loud.