FT : Britain’s traditional brewers squeezed by rise of craft beer

Britain’s traditional brewers squeezed by rise of craft beer
Mid-sized brands lack tax breaks of microbreweries or efficiencies of big operations

The rise of “craft beer” and microbreweries is forcing Britain’s traditional brewers to change decades of tradition as they compete for space at the bar.

Brewers such as Shepherd Neame, Black Sheep and Camerons, many family-owned, say they are an increasingly “squeezed middle” between multinational drinks companies and trendy, but state-subsidised, microbreweries.

The number of microbreweries has risen dramatically since 2002, when Gordon Brown halved beer duty for companies that make less than 5,000 hectolitres (3,055 barrels or 880,000 imperial pints) a year. The duty rises on a sliding scale to full tax at 60,000 hectolitres.

In 1970, the UK had 140 breweries. There are now about 1,700 of them, according to accountancy group UHY Hacker Young.

Mr Brown intervened after a spate of brewery closures from Stones of Sheffield and the Brakspear brewery in Henley-on-Thames to Vaux in Sunderland.

For small brewers, the tax break can shave about a fifth off their costs and as craft beer sales have grown, the rise in competition has hit midsized brewers hard.

“We don’t have the duty benefit of the small guys or the efficiencies of the bigger ones,” said Ian Parkinson, director of Moorhouse’s Brewery in Burnley.

“Microbreweries have a 25-30 per cent price advantage. It is an unfair playing field. I am unaware of any other market where the government intervenes so directly like this.”

In response, Thwaites, founded in 1807, licensed its popular Wainwright and Lancashire bomber brands to one of the big pub and beer companies — Marston’s — in 2015. It now only brews niche ales for its pub, hotel and spa estate.

Shepherd Neame has branched out into hotels and food, while retaining brewing volume by supplying unbranded bottles to discount supermarkets.

Moorhouse’s, founded in 1865, once had a niche making Black Cat, a mild beer. In recent years it has invested £4.2m in a new brewery, added beers such as White Witch and trebled its capacity to 85,000 hectolitres (15m pints) a year. It now pays about 95 per cent of full duty.

Last year, it turned over £5.2m and made a £300,000 loss but the expansion has given it significantly more capacity, even as it pays more tax. “Forty-five per cent of our revenue goes straight to the exchequer,” said Mr Parkinson.

To compete, it has produced a beer called Stray Dog with the band New Order, following the success that another brewer, Robinson, had with Trooper beer and Iron Maiden. Camerons brewery has meanwhile launched Motörhead Road Crew beer, in collaboration with members of the band.

“There are advantages to being our size. A microbrewer could not do that. I think there are some big opportunities, especially in exports,” said Mr Parkinson.

Mr Parkinson has also led a marketing push and done deals with pub chains such as JD Wetherspoon.

There are also signs that some microbreweries are struggling. Ben Norman, director of Twickenham Fine Ales, London’s oldest microbrewery after 12 years in operation, said some rivals were giving up.

“The problem is that it’s very easy to set up a brewery and make beer — the start-up costs are low. But consistently making quality beer and selling it is tough.

“In the early days, local pubs want to support you, so you get a burst of sales, you buy more kit and brew more beer. But then, a mile down the road, someone more local than you begins brewing.

“And as you get bigger, duty goes up and your cost base rapidly rises.” He said he knew a number of brewers who were purposefully sitting just below the duty threshold.

Mr Norman added that with customers constantly wanting to try new ales, it was difficult to win customer loyalty. “We get a lot of customers saying: I’ve tried you now, I want to try someone else.”

Camerons: the last north-east brewer standing
At the Head of Steam pubs, “it’s about theatre”, said John Foots, finance director of Camerons brewery, which owns the brand. “It’s about the full experience.”
When Camerons was founded in 1865, its priority was slaking the thirst of Hartlepool’s working men.
Today, local shipbuilding has vanished and steelmaking is a shadow of its past self but Camerons is still prominently located in the town’s centre.
The ninth biggest single brewery by volume in the UK and the only survivor of north-east England’s clutch of historic brewers has now launched Motörhead Road Crew beer, in collaboration with members of the band of the same name.
This new brew ties in with an export strategy that Camerons will pursue in the new year. Consignments of the beer have already been sent overseas, from Sweden to Slovenia. China, India and the US are among the export markets that Camerons is eyeing.
After a stable first century, Camerons had a succession of owners, culminating in acquisition in 2002 by David Soley, a north-east businessman. He is now chairman; his son Chris is chief executive. The Soleys own about 76 per cent and Heineken the rest.
Heineken, Carlsberg and Diageo buy the majority of its near-one million hectolitres a year output of ales and lagers from Hartlepool; Camerons’ own products, including Strongarm, Tontine, A-Hop-Alypse Now and Road Crew comprise the rest. As well as brewing, Camerons’ 75 pubs are core to the business.
Customers today, Mr Foots says, are “more choosy” than they were. With this in mind, Camerons says it is training “beer sommeliers” for its pubs. Its Head of Steam pubs offer a huge range of beers and other drinks — the one in Newcastle city centre was this month selling six cask beers, 14 keg beers and 150 bottled beers. A customer drinking Wizards Sleeve cider praised the friendly atmosphere. “And there’s so much choice; something for everyone.”

FT : Oil and gas discoveries fuel Senegalese fears

Oil and gas discoveries fuel Senegalese fears
Ordinary people doubt they will benefit from the expected windfall

Graffiti on a wall near the picturesque seaside promenade in Dakar, Senegal’s capital, makes clear what some locals think of their country’s recently discovered oil and gas reserves: more likely to be a curse than a blessing.

Macky=Aliou=Timis, reads a scrawl connecting President Macky Sall, his younger brother Aliou and the latter’s business partner Frank Timis, a controversial Romania-born businessman with an imploded mining company and heroin-related convictions to his name. Degage Gaz Petrole, it adds, which roughly translates as let go of the gas and oil.

With Texas-based Kosmos Energy sitting on 50tn cubic feet of gas reserves and UK-listed Cairn Energy boasting of projected reserves of 473m barrels of oil, Senegal is set to become Africa’s newest energy producer. But many ordinary Senegalese doubt the expected windfall will improve their lives.

“As always in Africa,” says Mansour Boiro, an accountant in his 40s with a small business in a Dakar suburb. “Whenever we have wealth, the government does not share it with the poor.”

Mr Boiro says he is thinking of Nigeria, Angola, the Democratic Republic of Congo and Mozambique. Across the continent, the nations with significant amounts of hydrocarbon and mineral resources are more often than not linked with corruption and poverty, not wealth.

In Senegal, Aliou Sall, the president’s brother, led Mr Timis’s Senegal subsidiary when Dakar awarded it two offshore permits in 2012. Two years later, the company sold them to Kosmos. Aliou Sall no longer works for Mr Timis’s Senegal subsidiary, though he has taken a new job for another Timis-controlled company.

The Y’en a Marre youth movement has joined small political parties in calling for more transparency in awarding contracts and more guarantees from the government that the Senegalese, and not just the state and international companies, will benefit. The government has said it will set up institutions to ensure greater transparency and is committed to ensuring that all Senegalese benefit.

Senegal has a lot to lose. With an economy underpinned by agriculture and forecast to grow at 6 per cent this year, the fact that it has never exported commodities in significant quantities has spared it from the slowdown gripping much of the rest of Africa in the wake of the commodities price crash more than two years ago.

“An economy dependent on oil is out of control because it is governed by geopolitical force and prices,” according to oil minister Thierno Sall, no relation to the president. Senegal intends “to learn from other oil-producing countries” and to act as the “guardian of these resources for the population”, he told an energy conference recently.

“Senegal is in a better position than many other African countries in terms of governance,” says Paolo Zacchia, chief economist for the World Bank in Senegal, citing rankings such as the 2016 Mo Ibrahim Foundation governance index.

Unique in west Africa, it has not witnessed a civil war or a coup since independence. In 2012, then president Abdoulaye Wade handed over power to Macky Sall, bolstering Senegal’s reputation in a turbulent region.

With a break-even price of $35 a barrel for its initial Senegal project, Cairn wants to push ahead to production while oil prices, and industry costs, are still low. It says it aims to get the first oil flowing in 2021, meaning revenues could reach government coffers in less than five years.

By contrast, analysts say commercialising Kosmos’s gas discovery may be prohibitively expensive and could also be complicated by legal and political challenges, because one of the main fields is split by Senegal’s border with Mauritania. It may also require a pipeline to be built through the Sahara to Europe.

There is still a lot to do. Few critical decisions, such as what percentage if any of revenues will be deposited in a fund for future generations, have been taken. The government has to overhaul its 1998 petroleum code and decide bidding procedures for future blocks. It is deciding how and where to educate young Senegalese in petroleum studies so they can eventually take well-paid jobs in the industry.

“I see a difference in pace between the operations on the ground [by the companies] and the discussions at the government level,” said Massaer Cisse, senior manager at Deloitte Senegal, one of the consultancies advising the government.

Some in the industry privately voiced concern about the government’s readiness to handle oil and gas revenues. “I don’t think they know what is about to hit them, and they don’t yet have the capacity to handle it,” said a senior executive from one of the companies in the consortium that will be extracting the oil.

>>> What to look at today - 27th of December 2016

Generally markets remained mixed in thin holiday trade (Australia, New Zealand and Hong Kong remain closed). US dollar remained a bit firmer against most currencies, gold remained higher by nearly $3.50 throughout the session. China navy activities continue to keep the region on edge. Russian Ruble rose overnight attributed to expected corporate tax payments in Russia and higher oil. BoJ's new policy framework aimed at keeping long term interest rates around 0% will help maximize the benefits of global tailwinds for Japan's economy; Japan to take big step toward beating deflation in 2017 - speaking to Keidanren business lobby. Toshiba, 6502.JP: May take an extraordinary loss of ¥100B (prior $850M) on US nuclear ops - Nikkei; Not the source on US nuclear ops loss report; may book charge on US nuclear operations and a one time loss on CB&I Stone & Webster value.

Nikkei +0.03% Hang Seng -0.28% CSI -0.09% Shanghai -0.16%

Eur$ 1.0445 CNH 6.9576 CNY 6.9497 JPY 117.32 CHF 1.0278 RUB 60.9267 WTI $53.06 +0.08%

S&P -0.02% EuroStoxx +0.03% Dax -0.05% SMI +0.18%

Macro :
- Greek Debt-Relief Measures Unblocked by Eurozone, Move eases tensions between Greece and its creditors over bailout
- Russian Military Plane Carry 100 Missing After Takeoff: Tass
- Italy Plan Gives Banks a Year to Apply for Debt Guarantee: Rtrs - http://reut.rs/2hdUNRN
- Magnitude 7.7 Quake Hits 24 Miles SW Puerto Quellon,Chile: USGS

Keep an eye on :
- ABE SM : Abertis Buys Two India Road Projects From Macquarie, Mint Says
- BP IM : Banco Popolare, BPM Agree With Unions on 2,100 Early Retirements
- BMPS IM : *MONTE PASCHI IN TECHNICAL HALT
- BMPS IM : Monte dei Paschi Says ECB Sees Need for EU8.8b in Capital
- BMPS IM : Paschi Set for New Industrial Plan by January: Messaggero
- BMPS IM : Paschi CEO Confident Bank Will Be Relaunched With New Plan: Sole
- BIIB US : Biogen Estimates Seen Rising on Spinraza Approval, RBC Says
- BPOST BB : Bpost Says Avg Tariff Increase on Domestic Mail 1.5% for 2017
- DIS US : Disney Says ‘Rogue One’ Global Gross Est. $523.8m as of Sunday
- PPB LN : Paddy Power Wins Bid to Run Gambling Ops for NZRB: Sunday Times
- MS IM : Vivendi public offer on Mediaset would be blocked by communications regulator - Il Sole 24 Ore
- MS IM : Mediaset and Fininvest appoint advisors in Vivendi dispute, MS app. JPM & Intesa, Finvinvest Unicredit
- OHL SM : Villar Mir Readies OHL Stake Sale to HNA: Confidencial
- THULE SS : Thule CEO Sees North American Market Normalizing in 2017: DI
- 6502 JP : Toshiba May Book as Much as 500b Yen U.S. Nuclear Ops Loss: NHK --> -12% in Tokyo
- VIV FP : Vivendi public offer on Mediaset would be blocked by communications regulator - Il Sole 24 Ore
- VIV FP : Universal’s Animated ‘Sing’ Seen Earning $33M on Weekend
- VOW3 GY : VW Workers’ Council Chief Skeptical About Electric Cars: FAZ

>>> Asian Update

Asia Mid-Session Market Update: Japan data weaker overall; currencies range bound; Toshiba may take loss

***US Session Highlights***
- US markets closed for holiday Monday and will re-open Tuesday December 27th

***US markets on close Friday: Dow +0.07%, S&P500 +0.12%, Nasdaq +0.48%***
- Best Sector in S&P500: Healthcare
- Worst Sector in S&P500: Consumer Discretionary
- Biggest gainers: WMB +4.2%; RHT +3.4%; DNB +3.7%
- Biggest losers: CME -3.1%; CTAS -3.1%; BBBY -1.5%
- At the close: VIX 11.44 (+0.01pts); Treasuries: 2-yr 1.206% +-0.01bps), 10-yr 2.54% (-0.008bps), 30-yr 3.116% (-0.013bps)

***Key economic data:***
- (CN) CHINA NOV INDUSTRIAL PROFITS Y/Y: 14.5% V 9.8% PRIOR; YTD: 9.4% V 8.6% PRIOR
- (JP) JAPAN NOV JOBLESS RATE: 3.1% V 3.0%E; Job to applicant: 1.41 v 1.41e (highest level since July 1991)
- (JP) JAPAN NOV OVERALL HOUSEHOLD SPENDING Y/Y: -1.5% V 0.1%E; 9th consecutive decline
- (JP) JAPAN NOV NATIONAL CPI Y/Y: 0.5% V 0.5%E; CPI EX FRESH FOOD (CORE) Y/Y: -0.4% V -0.3%E (9th straight decline, longest streak since 2011)
- (JP) JAPAN DEC TOKYO CPI Y/Y: 0.0% V 0.4%E; CPI EX-FRESH FOOD Y/Y: -0.6% V -0.4%E
- (KR) South Korea Dec Consumer Confidence: 94.2 (7.5 year low) v 95.8 prior
- (IL) ISRAEL CENTRAL BANK (BOI) LEAVES BASE RATE UNCHANGED AT 0.10%, 23rd straight month of hold
- (FR) France Nov Net Change in Jobseekers: -31.8K v -4.0Ke; Total Jobseekers: 3.45M v 3.477Me
- (JP) Japan Nov BOJ National CPI Ex Fresh Food, Energy (core-core) Y/Y: 0.2% v 0.2%e
- (JP) JAPAN DEC SMALL BUSINESS CONFIDENCE: 48.8 V 48.3 PRIOR

***Asia Session Notable Observations, Speakers and Press***
- Generally markets remained mixed in thin holiday trade (Australia, New Zealand and Hong Kong remain closed). US dollar remained a bit firmer against most currencies, gold remained higher by nearly $3.50 throughout the session. China navy activities continue to keep the region on edge.
- Russian Ruble rose overnight attributed to expected corporate tax payments in Russia and higher oil
- (JP) Bank of Japan (BOJ) Gov Kuroda: BoJ's new policy framework aimed at keeping long term interest rates around 0% will help maximize the benefits of global tailwinds for Japan's economy; Japan to take big step toward beating deflation in 2017 - speaking to Keidanren business lobby
- Toshiba, 6502.JP: May take an extraordinary loss of ¥100B (prior $850M) on US nuclear ops - Nikkei; Not the source on US nuclear ops loss report; may book charge on US nuclear operations and a one time loss on CB&I Stone & Webster value
- China Issues several papers and comments covering space activity, cyber security and intelligence reform
- (CN) Shanghai Avg New Home prices w/w +21.3% to CNY47.4/sqm v -4.6% prior; New home sales w/w -22.4% to 116K sqm v +14.2% prior - Uwin
- (CN) China Commerce Min Gao Hucheng: Sees 2016 FDI at CNY785B, +6% y/y

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei -0.3%, Hang Seng closed, Shanghai Composite +0.1%, ASX200 closed, Kospi +0.15%
- Equity Futures: S&P500 -0.6%; Nasdaq +0.3%, Dax -0.5%

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.0433-1.0458; JPY 117.06-117.46; AUD 0.7273-0.7191; NZD 0.6879-0.6899
- Feb Gold +0.40% at 1,138/oz; Feb Crude Oil +0.17% at $53.11/brl; Mar Copper -0.01% at $2.46/lb
- USD/JPY: (JP) Japan Chief Cabinet Sec Suga: Attributes yen depreciation following election of Donald Trump to "proper crisis management" of exchange rates by Japan Govt
- (CN) PBOC to inject combined CNY80B in 7-day, 14-day and 28-day reverse repo operation vs. CNY70B prior
- (CN) PBOC SETS YUAN MID POINT AT 6.9462 V 6.9459 PRIOR
- (JP) Japan MoF sells ¥2.09T v ¥2.3T indicated in 2-yr 0.1% JGBs; Avg yield: -0.157% v -0.156% prior; bid to cover: 4.51x (highest since June) v 4.27x prior

***Asia equities / Notables / movers by sector***
- Consumer discretionary: Start Today Co 3092.JP +1.8% (raised to outperform)
- Financials: Sealand Securities Co 000750.CN halted (update on bond dispute); Guotai Junan International Holdings 601211.CN -0.2% (requested to increase internal checks)
- Industrials: Shimadzu Corp 7701.JP -0.2% (SMBC Nikko upgraded to outperform ); Fuji Heavy Industries 7270.JP +0.5% (Nov result
- Technology: Toshiba Corporation 6502.JP -13.5% (speculation on US nuclear ops loss); NavInfo Co 002405.CN -0.1%, Tencent 700.HK -1.0% (JV with Tencent and NavInfo); Nintendo 7974.JP -0.8% (plans to release 3 smartphone games a year); Sharp Corp 6753.JP +3.4% (guidance)
- Materials: Itochu Corp 8001.JP +0.6% (acquisition)
- Healthcare: Ono Pharmaceutical Co 4528.JP +6.0% (seeks wider opdivo use); Chugai Pharma 4519.JP +0.7% (emicizumab antibody meets target in phase 3 study for hemophilia)
- Telecom: KDDI Corp 9433.JP +0.9% (forms tie-up)

>>> What to look at this Xmas - 24th, 25th & 26th of December 2016

Weekly Update
Dow +0.46% S&P +0.25% Nasdaq +0.47% Russell +0.52% EuroStoxx +0.45% FTSE +0.81% CAC +0.13% Dax +0.40% Ibex -0.48% MIB +1.74% SMI +0.06% Nikkei +0.80% Hnag Seng -2.03% CSI -1.43% Shanghai -0.41%
US indices largely marked time heading into the final trading sessions of 2016. Volumes were commensurate with the seasonal slowdown associated with holiday trading schedules, running significantly below their 3-month averages. The hope that has manifested itself as the 'Trump bump' appears to be fading as the reality sets in that his administration is only week's away from taking the reins. Concerns about a potential trade war with China and Trump's tweet about expanding the nuclear arsenal raised questions about how aggressive the new government will be in global affairs, nevertheless the VIX volatility index moved below the July low in a continued sign of investor complacency. Stocks remain just below the recent all-time highs while the Dollar index seems to have stalled out around 1.03. In general, currencies, fixed income, and commodities remain confined within their recent ranges with the US 10-year yield consolidating in the mid 2.5% range. Central Banks including the BOJ and Riksbank kept policy on course at their scheduled meetings and it appears the ECB is likely to wait until after Germany's October election before making any significant policy moves. FedEx and Nike headlined the late December earnings reports and neither generated much in the way of excitement, but Micron shares surged and helped put a bid under other names in the semiconductor space after beating Q1 expectations forecasting Q2 results well above the analyst's consensus. For the week the DJIA rose 0.5%, the S&P500 gained 0.2%, and the Nasdaq added 0.5%.


Macro :
- Greek Debt-Relief Measures Unblocked by Eurozone, Move eases tensions between Greece and its creditors over bailout

Keep an eye on :
- MS IM : Vivendi public offer on Mediaset would be blocked by communications regulator - Il Sole 24 Ore
- MS IM : Mediaset and Fininvest appoint advisors in Vivendi dispute, MS app. JPM & Intesa, Finvinvest Unicredit
- VIV FP : Vivendi public offer on Mediaset would be blocked by communications regulator - Il Sole 24 Ore