american craft brewing international

Transcription

CASE NUMBER: SM-45
FEBRUARY 1998
AMERICAN CRAFT BREWING INTERNATIONAL
Peter Bordeaux established American Craft Brewing International (AmBrew),
based in Metairie, Louisiana, in August 1994. Bordeaux was then the president and
chief operating officer of Sazerac Co., a firm he had built into the tenth largest
producer, importer, exporter and distributor of spirits, wines, beer and soft drinks
in the U.S.. Also in 1994, another 166 craft brewers across the U.S. started their
operations, continuing a decade of rapid expansion in this segment of the beer
industry. AmBrew, however, was different from other U.S. craft brewers: no beer
would be produced in the U.S.. Instead, Ambrew would create a network of
breweries overseas to bring distinctive craft beers to selected world markets,
tailoring the beers to local tastes.
Bordeaux’s growth plan was ambitious, aiming at the creation of about 20
microbreweries all over the globe within a few years. Bordeaux’s first move came in
May 1995, when he established Hong Kong’s South China Brewing Company – the
first microbrewery in the Asia-Pacific region. Next, Bordeaux contracted in 1997 to
purchase brewing equipment sufficient for 20 more microbreweries. To finance the
expansion, Bordeaux successfully raised $6.5 million in September 1996 through an
initial public offering. The company’s second subsidiary, Celtic Brew LLC, was
formed in Ireland in April 1997. The following month, Ambrew’s Cerveceria Rio
Bravo subsidiary started its operations in Tecate, Mexico.
Just as Bordeaux’s plan was taking shape, however, concerns arose of possible
over-expansion in the industry. In the summer of 1996, growth slowed in the U.S.
craft brew market even as existing microbreweries were expanded, more
microbreweries were founded, and the major breweries stepped up the marketing of
their own craft-brew products. Like many independent craft brewers, AmBrew saw
its stock price plummet. Within one year, Ambrew’s stock fell from its IPO price of
$5 to $0.75. Meanwhile, AmBrew was faced with several operational problems. By
the fall of 1997, only three locations were up and running, and plans were cancelled
for a second public offering. Entering 1998, Peter Bordeaux faced a difficult
challenge; how could he realize his ambitious plan for international growth under
conditions of increasing competition and uncertainty?
This case was prepared by Soong Moon Kang, Ph.D. student, and William Shen, MBA1
student, under the direction of Professors William Barnett and Glenn Carroll as a basis
for class discussion rather than to illustrate either effective or ineffective handling of an
administrative situation.
Copyright  1998 by the trustees of Leland Stanford Jr. University. No part of this
publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or
transmitted in any form or by any means - electronic, mechanical, photocopying, or
otherwise - without permission of the Stanford University Graduate School of Business.
American Craft Brewing International
The Craft Beer Industry in the U.S.
Various organizational forms
populate the U.S. craft brewing industry,
including microbreweries, regional
breweries, brewpubs, and contract
brewing companies.1 Microbreweries
typically produce less than 15,000
barrels of beer per year selling to the
customer through the usual retail
channels or directly from breweries.2
For instance, the Ipswich Brewing Co. of
Massachusetts is a typical microbrewery,
having produced 6,267 barrels in 1996.
Larger microbreweries are sometimes
referred to as regional breweries,
indicating that they have the capacity to
brew between 15,000 and 2,000,000
barrels. These larger microbreweries
include companies such as the Abita
Brewing Co. of Louisiana and Full Sail
Brewing Co. of Oregon, which in 1996
produced 34,000 barrels and 80,000
barrels, respectively. A brewpub is a
restaurant-brewery that brews and sells
most of its beer on site. When its sales
off-site exceed 50 percent of its total
production, a brewpub is considered a
microbrewery. Typically, however,
brewpubs produce fresher beer than
microbreweries and their products are
rarely bottled. Some brewpubs, such as
Gordon Biersch, have successfully
expanded to multiple locations. A
contract brewing company, such as
Pete’s Brewing Company (Pete’s
Wicked Ale) and the Boston Beer
Company (Samuel Adams), is a business
that hires another company to produce
its beer. Usually the contract brewing
company handles sales, marketing, and
1
See Mendocino Brewing Company (A),
Stanford University Graduate School of
Business, S-SM-15, 1995.
2
One barrel is equivalent to 31.5 gallons of
liquid.
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distribution. To answer the criticism
that they are not authentic brewers, some
contract brewers – most notably the
Boston Beer Company – recently have
acquired brewing facilities. Exhibit 1
shows the growth of each of the
organizational forms in terms of U.S.
sales. Exhibit 2 describes the total
number of craft breweries in operation as
well as the number of openings and
closings of craft breweries. Exhibit 3
lists the 50 largest craft brewers in the
U.S..
Between the late 1980s and mid1990s, craft brewers were the only
growing segment of the U.S. beer
market. While craft beers accounted for
less than 2 percent of total U.S. beer
consumption, the sales volume of these
beers grew by a compounded annual rate
of approximately 47 percent from 1985
through 1995. This growth included
expansion by many existing craft
brewers as well as many new brewery
foundings. According to the Association
of Brewers, in 1995 there were 804 craft
brewers in the U.S., an increase of 263
firms (48.6 percent) over the year before.
The failure rate in craft brewing,
however, also was high. In the U.S.
through 1996, one microbrewery out of
seven failed. Brewpubs had a slightly
lower failure rate over the same period
(1 in 8).
Large brewers, whose total
combined shipment was 179 million
barrels in 1996, have dominated the
wider U.S. beer industry. (See exhibit
4.) Anheuser-Busch is the largest
brewer, with 45.4 percent of the market.
In 1994, Anheuser-Busch made an
equity investment in Redhook Ale
Brewery, a microbrewery with sales of
93,577 barrels. Anheuser-Busch became
the exclusive distributor of Redhook
products and by 1996 Redhook Ale’s
2
sales had more than doubled to 224,578
barrels.
The top-selling craft beer, Killian’s
Irish Red, is owned by Coors, the third
largest beer company in the U.S..
Killian’s Irish Red has been joined by
Killian’s Brown and Wilde Honey.
Coors also started to use a multi-brand
strategy for its contract-brewed Blue
Moon. Such growth through line
extensions or partnerships is typical of
the large brewers’ forays into the craftbeer market. For example, after trying
the Miller Reserve line as an approach to
enter the craft beer market, Miller, the
second-largest U.S. brewer, has gone the
direction of forming joint ventures with
regionals and microbreweries. Exhibit 5
lists the ten largest craft-beer brands and
their share of the total domestic beer
market in 1994 and 1995.
The U.S. craft beer industry started
to show the first signs of a slowdown in
1996. Companies that enjoyed multiple
years of growth in high double digits
found themselves with low teens or
single-digit growth in 1996. After years
of demand exceeding capacity, in some
areas, such as the Pacific Northwest,
capacity had begun to exceed demand.
At the same time, however, the number
of new entrants continued to grow. In
1996, new records for the number of
openings were set in the U.S. as 106
microbreweries and 208 brewpubs
opened their businesses. At the end of
1996, the U.S. had surpassed Germany
in number of brewers, small and large.
Meanwhile, as a result of pressure from
the largest brewers, distributors close to
these brewers were weaning themselves
off of craft brewers. Other wholesalers
were simply getting more selective in
their rationalization of shelf space.
Jerome Chievara of Full Sail Brewing
Co. summed up the situation: “there
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[was] a proliferation of brands coupled
with a decline in distributors.” In a
February 1997 interview3, Peter
Bordeaux commented:
This past summer has been a
tough year for not only the big
microbreweries but a lot of the
marginal micros, so you have a lot of
people looking for anywhere from
$300,000 to $500,000 to keep their
doors open. But their prospects aren’t
very strong because they’re either
looking to expand their business
nationwide, thinking this is going to be
the panacea, or get their capacity up
so they can get their breakeven point.
But fundamentally the guys running it
don’t know what they are doing.
You’ve got a lot of people out there,
whether part-time lawyers or full-time
bankers, going into this business now
coming to grips with the fact that
there are some issues here that they
didn’t have the foggiest idea about,
namely the distribution network. The
biggest problem for most micros over
the next three to four years is how are
they going to expand and distribute
their product long-term. I see that as
an ongoing problem for the big and
small microbreweries.
The World Beer Industry
Market Demand
The worldwide beer market is
varied with many neighboring countries
showing vastly different levels of per
capita consumption. Worldwide beer
shipments totaled 30.1 billion gallons in
1994, with the United States accounting
for 20 percent of the worldwide total
(Exhibit 6). The largest markets in terms
of beer consumption are the U.S., China,
3
Khermouch, Gerry, “Tapped-in ‘outsider’,”
Brandweek, February 10, 1997, pp. 52-56.
3
Germany, Japan and Brazil, with these
five countries combined accounting for
55 percent of beer consumed worldwide
in 1994. In terms of per capita
consumption, the U.S. ranks 12th, at
23.0 gallons per person. The top five
countries from a per capita standpoint
are the Czech Republic (38.6 gallons),
Germany (37.6 gallons), Ireland (36.1
gallons), Denmark (33.7 gallons), and
Austria (33.6 gallons).
The fastest growing beer markets
are the Asia-Pacific and Latin American
regions with annual compounded growth
rate between 1990 and 1994 at 10.5
percent and 3.3 percent, respectively.
By comparison, the growth rate for the
U.S. in the same period was -2.1 percent.
Beer shipments in the Asia-Pacific
region totaled an estimated 7.4 billion
gallons in 1994, with more than half of
the shipments coming from China.
Although China has a relatively low per
capita beer consumption of 3 gallons, it
consumed 3.3 billion gallons of beer,
accounting for 13 percent of world’s
total consumption in 1994. The total
consumption of beer in China was
slightly more than half of the total
consumption in the U.S. and slightly
larger than Germany. The next largest
market in the Asia-Pacific region is
Japan, with shipments of 1.9 billion
gallons in 1994. Per capita consumption
in Japan was 16 gallons, far larger than
China’s 3 gallons, but much smaller than
some other Asia-Pacific countries such
as Australia (28 gallons) and New
Zealand (27 gallons). The estimated size
of the Latin American beer market in
1994 was 4.4 billion gallons, accounting
for 15 percent of worldwide
consumption. Within Latin America,
Brazil was the largest market, at 1.8
billion gallons, or 41 percent of the
region’s shipments in 1994. The next
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two largest markets were Mexico (1.1
billion gallons) and Venezuela (407
million gallons). Per capita consumption
was low in Latin America, with the
average being 11 gallons, about half of
the U.S. per capita consumption.
Breweries
The world brewing industry is very
fragmented and regional. The top 50
international brewers accounted for 7075 percent of worldwide beer
consumption in 19944 (Exhibit 7). The
largest brewer in 1994 by far was
Anheuser-Busch, with 89 million barrels
shipped. The next four brewers were
Heineken of the Netherlands (51 million
barrels), Miller Brewing (45 million
barrels), Kirin of Japan (30 million
barrels), and Foster’s of Australia (29
million barrels). On a geographic basis,
Heineken, Guinness of Ireland, and
Carlsberg of Denmark were the most
international of the 50 brewers listed in
Exhibit 7. Specifically, 89 percent of
Heineken’s beers were sold outside of
the Netherlands, 84 percent of Guinness’
were sold outside of Ireland, and 83
percent of Carlsberg’s are sold outside of
Denmark. In contrast, about 6 percent of
Anheuser-Busch’s Budweiser were sold
internationally, while only 5 percent of
Miller’s were sold overseas.5
The craft brewing strategy outside
of Europe and the U.S. is still in an
emerging stage. In Japan, for example,
there were about 32 craft breweries in
1996 whereas none existed two years
earlier. Analysts expect that the craft
beer market is very promising because
per capita beer consumption in Japan is
relatively high, and the Japanese are well
4
Goldman, E. et al., The Brewing Industry—
Industry Report, PaineWebber, August 1995.
5
Goldman, E. et al., The Brewing Industry—
Industry Report, PaineWebber, August 1995.
4
traveled, knowledgeable and have
disposable income. It is not unusual to
find Japanese consumers paying over $7
per bottle for a craft beer. In addition,
premium beers such as Sapporo or Kirin
are darker than the traditional U.S. pale
lagers. The leap to a more robust and
distinctive craft beer taste would not be
too difficult. Japanese brewers have
noticed the craft beer phenomenon that
overtook the U.S. during the 1990s and
have been approaching primarily U.S.
craft brewers for assistance. According
to Paul Sylva, co-owner of Ipswich,
which supplied technical assistance for
equity in a craft brewery in Nagano, the
main reason is that American craft
brewers are more open to sharing ideas
and brewing traditions are relatively
new. In Europe, the same openness and
cooperation are difficult to find.6
Hong Kong Beer Industry
Market Demand
The Hong Kong beer market has
been growing at a compounded annual
growth rate of 3.2 percent between 1992
and 1997 and was expected to continue
with similar growth in the near future.
Total consumption in 1997 was
approximately 50 million gallons. The
growth in beer consumption, relative to
other higher priced distilled alcohol
beverages such as Whisky or Brandy,
can be attributed to changes in lifestyle
and changes in local economy. Lately,
Hong Kong residents have become more
health conscious. By drinking beer,
people consume less alcohol over a
longer period of time, allowing them to
socialize while drinking and still avoid
6
Lenderman, Maxim, “Japan gets most favored
nation status from two American microbrewers,”
Periscope, Vol. 115, No. 1631, December 31,
1996.
SM-45
adverse effects associated with alcohol
consumption. The market is mainly
dominated by pale (lager) beer, which
accounts for more than 95 percent of
overall market. Although dark (stout)
beer has been growing at a faster rate (9
percent a year), it is expected to remain
as a small segment of the total market in
the near future (Exhibit 8).
Domestic Breweries.
Until the establishment of the South
China Brewing Company in 1995, there
were only two local breweries: San
Miguel, the traditional market leader
from the Philippines, and Carlsberg, the
Danish brewery (Exhibit 8). Both San
Miguel and Carlsberg have been facing
adverse market conditions such as the
emergence of the premium segment and
growing consumer preference for
imported beer. The situation was
especially difficult for San Miguel,
which has mainly been positioned as a
beer for blue-collar workers. As a result,
both breweries have taken aggressive
measures to cut costs and scale down
their production in Hong Kong. In 1996,
both San Miguel and Carlsberg set up
plants in Guangdong province in
mainland China, where both land prices
and labor costs are much lower than in
Hong Kong.
Foreign Breweries.
Heineken. This leading premium
imported lager from the Netherlands is
distributed by Guinness (Hong Kong)
Ltd. Heineken’s strategy has been to
focus on building a premium image. It
has spent aggressively on TV
advertisements and upscale magazines
with an image that is most appealing to
the growing ‘yuppie’ community. It has
successfully penetrated most of the
premium drinking establishments in
5
Hong Kong, including night clubs, bars
and restaurants for expatriates and
affluent local consumers. It has also a
strong presence at Park’N Shop and
Wellcome, the leading supermarket
chains in Hong Kong, in spite of the
lower margins that it offers to the
retailers as compared to San Miguel and
Carlsberg.
Blue Girl. Originally, Blue Girl was
introduced in Hong Kong in the
beginning of the century as a premium
beer, but over the years it lost the
premium image. Jebsen, a Danish
trading company that owns Blue Girl,
opted to target blue-collar workers in
Hong Kong. Blue Girl experienced
some success during the 1970s and early
1980s when Hong Kong emerged as a
major Asian manufacturing country. As
Hong Kong was making its transition
into a service-based economy, however,
Blue Girl suffered the same fate as San
Miguel, as consumers migrated to the
premium segment. Recently, Jebsen has
attempted to upgrade Blue Girl’s image
to make it attractive to younger, affluent
customers through new packaging and
increased marketing efforts.
Löwenbräu. Although it is sold as
imported German beer, Löwenbräu is
produced locally under license by San
Miguel. In 1994, San Miguel started a
HK$12 million advertising campaign to
re-launch Löwenbräu Original beer.
The campaign included TV and
magazine advertisements in addition to
activities and games in bars and
restaurants.
Samuel Adams. In June 1996, the
leading U.S. craft brew company,
Boston Beer Company, re-launched
Samuel Adams Boston Lager in the
Hong Kong market through Beer World,
a distributor owned by San Miguel. The
previous attempt to introduce Samuel
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Adams, by the now defunct USA and
Co. grocery chain, failed reportedly due
to lack of promotion. Hong Kong is the
sixth overseas market for Boston Beer
company after Britain, Ireland, Canada,
Sweden and Germany. Samuel Adams
Boston Lager is specifically targeted
towards expatriates aged 25 to 35.
Promotion is focused on beer tasting
campaigns and two-for-one offers.
Boston Beer Company expects to use
Hong Kong as a test market to determine
whether Asia is ready for craft beer.
Miller. Miller Genuine Draft and
Miller Lite are currently distributed also
by Beer World.
Distribution.
San Miguel has its own dedicated
distribution network and delivery trucks.
It also deals directly with leading
retailers such as Park’N Shop and
Wellcome through subsidiaries.
Carlsberg relies on Swire Trading Co.,
one of the largest trading companies in
Hong Kong, to distribute and market its
products. Most of the imported brands
are distributed by trading companies
such as Guinness (Hong Kong) Ltd.,
Solar Mix Ltd., and Yeo Hiap Seng
(Hong Kong) Ltd. Guinness has been
very successful in building the Heineken
brand during the past decade and turned
it into the number one selling imported
beer in Hong Kong. Solar Mix
specializes in high-end import brands
such as Stella Artois and Moretti. Yep
Hiap Seng is the distributor of
Budweiser for Anheuser-Busch. Most of
these trading houses also distribute other
food and beverage products, which tend
to share the same channel as beer.
In Hong Kong, beer is sold ‘ontrade’ or ‘off-trade.’ On-trade locations
include bars, clubs, restaurants and
hotels. Off-trade locations are
6
supermarkets, convenience stores and
small groceries. The on-trade market
has been growing rapidly during the
1990s. Although on-trade prices are five
to ten times higher than off-trade, this
segment increased its share of overall
sales, as more and more consumers
shifted from distilled liquor (mostly
consumed on-trade) to beer. The new
affluent young consumers have also
been spending more time in bars and
restaurants. This trend, however, is
expected to level off in the near future
mainly because of economic
uncertainties. The on-trade channels are
extremely important for premium beer
since a higher percentage is consumed
on-trade as compared to lower priced
beer.
The off-trade segment experienced a
major consolidation during the 1980s
when both Park’N Shop and Wellcome
expanded, driving most independent
stores out of business. Their expansion
was helped by the development of
satellite cities in the New Territories.
Irish Beer Industry
Market Demand
With per capita beer consumption of
36.1 gallons (1994), Ireland is one of the
major beer drinking countries in the
world -- behind only the Czech Republic
(38.6 gallons) and Germany. Between
1990 and 1995, total beer consumption
in Ireland grew at an annual rate of 3
percent, whereas the growth rate in
Germany was only 1.6 percent (Exhibit
6). The Irish beer market is
characterized traditionally by dark beer
consumed mainly in public houses.
(Nearly 90 percent of beer is consumed
in pubs.) During the 1990s, however,
consumption of lager has been steadily
increasing as compared to stout. In
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1996, lager represented 48 percent of
total sales compared to 40.7 percent for
stout (Exhibit 9).
Breweries
Guinness is the dominant local
brewer, producing 70 percent of the
stout and 52 percent of the lager
consumed in Ireland in 1996. Heineken
is the only brewer to have dented
Guinness’ dominance, mainly through
its Heineken brand rather than its
Murphy’s stout (Exhibit 9). However,
just as Irish consumers have awakened
to the virtues of handcrafted, naturally
produced foodstuff, since 1996 a small
but burgeoning chain of independent
craft brewers is opening up across the
country, patterned on the success of
similar operations in the U.S.
Mexican Beer Industry7
Market Demand
The beer market in Mexico was
valued at more than US$1.7 billion in
1996. Between 1990 and 1995, the total
beer consumption grew at an annual rate
of 2.2 percent (Exhibit 10). Most
important, however, is the overall
youthfulness of the Mexican population.
In 1996, 44 percent of the population
was between the ages of 20 and 50 years
old, the prime age range for beer
drinking, and another 44 percent was
under 20 years old.
Domestic Breweries
Domestic beer producers consist of
Grupo Modelo and Fomento Economico
Mexicano S.A. (FEMSA). Grupo
Modelo has the single most popular beer
in Mexico with its Corona brand. This
product has also had considerable
7
Euromonitor Market Research, Alcoholic
Drinks in Mexico, Euromonitor, June 1996.
7
success in the U.S. and Europe. Among
the leading brands manufactured by
FEMSA, only Tecate is widely available
abroad (Exhibit 12). FEMSA started a
partnership with Philip Morris in 1992
and was merged with John Labatt of
Canada in 1994. Anheuser-Busch
acquired 17.7 percent of Grupo Modelo
in 1993. The foreign investment led to
two-way traffic with domestic brands
being exported worldwide and new
products being introduced to Mexican
consumers.
Foreign Breweries
Although still a negligible
percentage of total sales, imported beer
has increased its presence in Mexico
over the years, in the same way that
many Mexican beer brands have become
fashionable beverages in many
developed countries, including the U.S.
and U.K. (Exhibit 10). Whereas imports
were responsible for less than 0.5
percent of total beer sales in Mexico in
1990 in value and volume terms, this
increased to 2.2 percent in value terms
and 1.3 percent in volume terms by
1995. Anheuser-Busch and John Labatt
have been two of the most successful
importing brewers.
Distribution
The two Mexican beer producers,
Modelo and FEMSA, control their own
distribution channels as well as retail
outlets in the form of convenient stores.
(FEMSA owns the OXXO chain, while
Modelo owns the Modelorama chain.8)
Both companies purchase barley
domestically through an agricultural
cooperative (Impulsora Agricola
8
OXXO and Modelorama are not the sole outlets
for beer at the retail level, but the influence of
the duopoly is such that their supply networks
heavily influence the market as a whole.
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Mexicana), make their own containers
and packaging, do their own bottling,
and in some cases even make their own
production machinery. Outside
companies working with either Modelo
or FEMSA have access to these
manufacturing and distribution systems.
Ambrew Company History
The origins of AmBrew
International dates back to December
1993. Peter Bordeaux was traveling to
Hong-Kong and was asked by a friend to
deliver a set of golf clubs to his son-inlaw, David Haines. Haines was a young
psychologist and a beer-lover working in
Hong Kong. Although he had no formal
business training or experience, he
realized that there was a potential
business for “hand-crafted” beers such
as those supplied by microbreweries
back in the U.S.. Bordeaux and Haines
met for a dinner to deliver the golf clubs.
During the dinner, the conversation
occasionally turned to beer and Haines
presented his plans. The next morning
Bordeaux decided that the idea of
exporting the American-style
microbrewery concept abroad was worth
pursuing, and he offered Haines his
backing. In the following months,
Bordeaux convinced other major
investors -- including Federico Cabo, a
Mexican tequila maker -- to found
AmBrew and its first subsidiary South
China Brewing Co. in Hong Kong.
AmBrew International was established
on August 9, 1994 and South China
Brewing Co. was formed in May 1995.
Strategy
Bordeaux believed that the growing
demand for microbrewed beers in the
U.S. was part of a broader shift in
preferences among certain consumers
8
away from mass-produced products and
towards high-quality, distinctive foods
and beverages. AmBrew’s strategy was
to take advantage of this opportunity by
selling high-quality, hand-crafted beer in
certain international markets, just as U.S.
microbrewers have done in domestic
markets. Bordeaux argued that the
demand for craft beers was not limited to
the U.S., and he decided to produce a
variety of craft beers designed to appeal
to a growing number of consumers in
local markets worldwide. Bordeaux
pointed out:
While I don’t have a crystal ball
to have predicted 10 years ago that
there would be 1,000 microbrewed
brands, I think you’re talking about a
big piece of business. The microbrew
business is still less than $2 billion of
an industry... and if it goes up to $10
billion and someone can get a 20
percent market share, that’s $2
billion. If you can throw off $100
million pre-tax, that’s a lot of cash...
[In going abroad] we’re looking for a
small piece of market share in any of
these locations (where) the
opportunity is very strong... We’re
talking about building relatively small
breweries that have six to eight
employees, roughly $1 million in
capital expenditures, and doing full
capacity of 70,000 case-equivalents
(5,385 barrels). So it’s not like doing
greenfield, $100 million breweries that
have to do 25 or 30 million cases of
beer in order to be successful.9
According to James Ake,
AmBrew’s chief operating officer, part
of the appeal for international audiences
is simply the cachet of American-style
products, as a matter of change. This
opinion was shared by Charlie Papazian,
president of the Association of Brewers:
9
Brandweek, February 10, 1997, pp. 54, 56.
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“Beer drinkers want something different
than what they have been able to buy,
historically, in their country... When you
have a marketplace that is exclusively
dominated by one brand, one brewery
and one type of beer, there’s always
room for diversity... I think that
companies (that) are going into it are
going to find a nice market.”10
AmBrew relied on the extensive
experience of its senior management and
board of directors in the international
beverage alcohol industry to identify
new markets receptive to the Americanstyle microbrewery concept and to seek
out strategic local partners to co-invest
in new microbreweries in such markets.
AmBrew planned to establish and
operate a series of microbreweries
similar in concept to the South China
Brewing Co., either through wholly
owned subsidiaries or through majorityowned or otherwise company-controlled
joint venture arrangements. The foreign
partners were expected to use their
knowledge of local regulations and
markets to facilitate the establishment of
microbreweries and the acceptance of
their products.
In pursuing these partnerships,
Bordeaux preferred informal strategic
alliances to structured joint ventures,
calling the former “living together
without benefit of clergy.”11 Joint
ventures would be acceptable only on
certain terms. There could be no more
than three partners on any deal. In the
case of more than three partners, two of
the partners should dominate. “When
there are too many partners, just getting
all to agree on a time and place for a
10
Slaton, James, “Louisiana firm holds passport
to microbrew,” Southern Draft Brew News,
February-March, 1997.
11
Mandell, Mel, “Gung-Ho on Hong Kong,”
World Trade, April 1997.
9
needed meeting is a big deal.” By
searching for potential partners,
Bordeaux looked first to their cultures.
“If it’s their practice to rotate managers
every few years, forget it. For success
and to avoid aggravation, you need
stability in your opposite numbers.”
Another key element, according to
Bordeaux, was communication with the
subsidiaries.
In pursuing its expansion strategy,
AmBrew targeted both markets
dominated by mass-market breweries
and markets in which high-quality beer
producers already exist. In markets
where mass-produced beers are sold to a
broader consumer profile, AmBrew
intended to develop craft beers as locally
produced premium product alternatives.
In markets in which there were already a
number of traditional high-quality beer
producers, AmBrew would focus on
market segments.
Following this strategy, AmBrew
entered into a joint venture with Celtic
Brew LLC in December 1996 to
establish and operate the Dublin, Ireland
brewery. In January 1997, AmBrew
leased a facility in Tecate, Mexico near
the Mexico-California border with
Corporation Calfik, a company whollyowned by Frederico G. Cabo Alvarez, a
member of AmBrew’s board of directors
and one of initial investors. This
agreement established a wholly-owned
subsidiary of Ambrew, Cerveceria Rio
Bravo. In addition, the company had
signed a letter of intent with a Chinese
restaurant group, United Restaurants of
Gallery, to form a joint venture to
establish and operate an expansion
brewery in Shanghai.
In September 1996, at the time of
the company’s initial public offering,
AmBrew planned to open up to 20
microbreweries abroad by the end of
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1998. As of June 1997, possible
locations included the U.K., Singapore,
India, Chile, Brazil, Argentina, Spain,
Poland, and more locations in Ireland.
In choosing these locations, Ake said
that the company looked for areas that
did not have a craft brewing industry.
For instance, “we don’t consider
Belgium or Germany [as viable places].
They have numerous craft breweries in
place... If we were to go there, we’d be
beating our heads against a wall... In all
these countries that we’ve earmarked,
most of them only have the large,
industrial-type brewers—Budweiser,
Foster, Guinness—and do not have the
small craft brewer.” In addition, the
country had to be open for foreigncontrolled ventures operating in their
country, which excluded, for instance,
Korea and Taiwan. Then the company
looked for a population that had enough
disposable income to support a
microbrewery. In Hong Kong, for
example, the local population combined
with expatriates and tourists made it a
good location. Finally, and most
importantly, the company needed a local
partner in the area who was tuned in to
the sales and distribution of beverages.
Once the local partner was on board,
then Ambrew could begin to put the
brewery in place.
As AmBrew expanded,
management expected to achieve greater
economies of scale with its breweries
through volume discounts on equipment
and ingredient purchases, a reduction of
brewery start-up expenses, and
economies in distribution. For example,
according to Ake, because brewing
equipment is uniform and modular in
construction, AmBrew could easily
disconnect and move the equipment, for
minimal cost, to another location if the
site the management selected did not
10
turn out to be viable. In addition,
according to Bordeaux, “there is a
synergy that develops as you increase
critical mass.” So it was not
inconceivable that a Mexican-style beer
would be distributed in Hong Kong by
South China Brewing. As Bordeaux
commented in May 1997,12 “There’s a
total business that’s beginning to
develop, that has a limited amount of
investment at each location, but
maximizes the return by the integration
of the cross-border commerce.”
Operations
Start-up costs for the first AmBrew
breweries averaged $1 million, although
the added capacity of Cerveceria Rio
Bravo caused its price tag to total
somewhere between $1.5 to 2 million.
Start-up costs include costs of
equipment, preparation of the on-site
facility, and basic supply costs for initial
batches of barley, yeast, hops, bottles,
kegs, etc. According to Ake, a lead time
of six months is needed before a site
becomes operational and approximately
a year before a new location begins to
show profit. “Our facilities are designed
so that when we get close to capacity we
can increase capacity by 50 [percent] for
a relatively inexpensive cost.”13
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for $10 million, including a $200,000
non-refundable deposit. Ambrew made
additional down payments of $164,017
and $176,064, respectively, for the
systems in production for the Dublin and
Tecate breweries. As Ake noted,
“because of the quantity order, we got a
price discount unavailable to people who
are purchasing on a piece-meal basis...
Secondly, because of our long-term
commitment with them, we get preferred
scheduling for our equipment orders so
that we don’t have to wait as long when
we decide to go ahead on a project.”14
AmBrew also entered into an agreement
with Micro Brew Systems to identify
and conduct feasibility studies on
potential future sights, and to act as
project consultants.
Supplier
In early 1997, AmBrew signed a
contract to purchase brewing equipment
manufactured by JV Northwest, Ltd.,
one of the premiere fabricators of
microbrewery systems. The company
ordered twenty microbrewing systems
Products15
In each local market, product is
tailored to fit the region. For example,
in Hong Kong, one launch was a
specialty brew dubbed Red Dawn Ale in
celebration of the handover of Hong
Kong to the People’s Republic of China.
“The name was selected as a positive
message about the new era,” explained
Ake, noting that red is associated with
weddings and festivals in China, while
dawn is a metaphor for change.
Packaging is also made to suit local
tastes. “We don’t make it here,” Ake
said. “The local area makes it up and we
(in the U.S.) provide concepts. Our
board has about 130 years’ experience in
international marketing and sales of
alcoholic beverages. We allow the local
area to develop the package, and we help
12
14
Carlos Briceno, “AmBrew crafts a company to
make micros worldly,” Periscope, Vol. 116, No.
1640, May 31-June 30, 1997.
13
Impact International, “AmBrew maps its
strategy for major international expansion,” July
15, 1997, p. 14.
15, 1997, p. 14.
15
15, 1997, p. 14.
11
them refine it. For example, we know
what things have to be added for the
U.S., such as bar codes, ATF approval
on the label and government warning.”
Distribution
In December 1996, AmBrew
purchased 95 percent of Atlantis Import
Company Incorporated, now AmBrew
USA, for approximately $100,000 plus
an agreement to pay certain royalties in
the future. The company expected to use
AmBrew USA to import into the U.S.
and distribute beer produced at its
subsidiaries beginning in summer 1997.
Since spring of 1997, AmBrew USA
sought actively new products, both
alcoholic and non-alcoholic, to add to its
sales mix.
On May 9, 1997 AmBrew USA
became the sales and marketing agent
for Dixie Brewing Company for the
U.S., except Louisiana, and selected
markets abroad. The Dixie brands
marketed by AmBrew included Dixie
beer, Jazz Amber Light, White Moose,
Crimson Voodoo Ale, and the flagship
beer Blackened Voodoo Lager. This
distribution and marketing relationship
allows Dixie to expand its customer base
by utilizing AmBrew USA’s sales force
and marketing expertise. Dixie Brewing
is one of the few remaining regional
breweries in the U.S. and the sole
survivor of New Orleans’ onceflourishing beer industry.
At the same time, AmBrew started
to handle the distribution in the U.S. of
soft drinks Tizer, the English version of
Seven-Up, and Irn Bru, the most popular
non-alcoholic beverage in Scotland, both
of which are A.G. Barr PLC products.
Also in May 1997, AmBrew entered
into a supply agreement with AnheuserBusch. AmBrew would develop
additional products to be brewed under
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either AmBrew or Anheuser-Busch
trademarks and distributed through the
Anheuser-Busch wholesaler network.
According to Bordeaux, the association
with Anheuser-Busch, gives credibility
to AmBrew: “I think it tells people that
we’re a capable brewer of beer.”
Management
The management of AmBrew
includes Peter W. H. Bordeaux as the
president and chief executive officer,
James L. Ake as the chief operating
officer, and the general managers of
each subsidiary—AmBrew USA, South
China Brewing Company, Celtic Brew
LLC and Cerveceria Rio Bravo—who
report to Mr. Ake (Exhibit 13).
Mr. Bordeaux, 48, was the founder
of AmBrew and has been its president
and chief executive officer since
February 12, 1997. He has also been the
chairman of the board of directors since
June 5, 1996. Before taking the
direction of AmBrew, Mr. Bordeaux was
the president and chief executive officer
of New Orleans-based Sazerac
Company, Inc.. Under his direction,
Sazerac became the tenth largest U. S.
producer, importer and exporter of
spirits as well as a large U.S. distributor
of wine, beer and non-alcoholic
beverages. As Bordeaux recalled in an
April 1997 interview,16 “as assistant to
the president of Tulane University
[Bordeaux’s alma mater], I became
friendly with a prominent alumnus who
was looking for a general manager.
When I joined Sazerac in 1980, it was a
strictly regional operation grossing less
than $15 million a year, but profitable;
last year we grossed over $125 million,
about 10 percent from overseas sales.”
Mr. Bordeaux resigned from Sazerac in
16
Mandell, Mel, “Gung-Ho on Hong Kong,”
World Trade, April 1997.
12
February 1997 to focus fully on
managing the growth of AmBrew. Mr.
Bordeaux has served as Chairman of
Concorde Holdings Limited (Beijing), a
distributor of alcoholic and nonalcoholic beverages, since November
1994, and as president, since 1992, of
Leestown Company, Inc., which owns
the world's largest bourbon distillery.
Bordeaux is also a member of the
Louisiana bar.
James Ake, age 52, has been the
Executive Vice President and Chief
Operating Officer of AmBrew
International since June 5, 1996 and has
been associated with its subsidiaries
since August 9, 1994. Mr. Ake has been
President of AmBrew USA, since
December 1996. Before joining the
Company, Mr. Ake had been the
Director of Financial Analysis and
Planning for Sazerac since 1993 where
he was responsible for expansion of
operations overseas with emphasis on
ventures in the Pacific Rim countries. In
addition, since November 1994, Mr. Ake
has served as Managing Director of
Concorde. Prior to joining Sazerac, Mr.
Ake was a director in Zapata-Haynie
Corporation in Hammond, Louisiana, the
largest fishing company in the United
States, where Mr. Ake was responsible
for corporate planning and oversaw
profitability and the development of
various departments. Mr. Ake is a
registered engineer and is a member of
the Board of Directors of the JapanLouisiana Friendship Foundation.
Nancy Hernandez, age 28, is
AmBrew International’s controller and
joined the company in December 1996.
Before joining the Company, Ms.
Hernandez was the Accounting Manager
for Tropical Export Co., a global
exporter of industrial and automotive
parts and equipment, from 1993 to 1996.
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Ms. Hernandez had been with Tropical
Export since 1986. During 1995 and
1996 Ms. Hernandez also served as
Treasurer for Tropical Sales Ltd., a truck
parts and equipment retail store.
Stephen Armstrong, age 34, joined
AmBrew International in connection
with the company's acquisition of
Atlantis Import Company, and is now
the Executive Vice President and
General Manager of AmBrew USA. Mr.
Armstrong was the founder of Atlantis
and was its president from 1994 through
1996. From 1992 to 1996, Mr.
Armstrong served as Vice President and
Director of Sales and Marketing for
Dixie Brewing Company.
In June 1997, Brooks Hamaker
joined AmBrew as its corporate brewing
director. Before this position, Mr.
Hamaker was vice president and head of
brewery operations at Abita Brewing Co.
in Louisiana.
For its subsidiaries overseas,
AmBrew uses local staffing. According
to Ake, “we plan to hire 100 [percent]
nationals... The only individual who
might be a foreigner would be the
brewer himself, and the main reason for
that is [that] the microbrewery industry
has its roots in the U.S., and that’s where
you find the expertise we need in a
brewer.”17
In June 1996, AmBrew’s board of
directors was composed of nine
members from the beverage industry and
the financial community as well as
lawyers. In April 1997, AmBrew’s
board of directors was expanded to
include an additional four members
(Exhibit 14).
Since July 1996, the board of
directors adopted a stock option plan.
17
15, 1997, p. 14.
13
By April 1977, the company reserved a
total of 600,000 shares of common stock
for the plan. The stock option plan is to
provide key employees (including
officers) and independent contractors of
the company (including AmBrew’s
subsidiaries) with additional incentives
by increasing their equity ownership in
the company.
Finance
Prior to public ownership,
AmBrew’s operations and capital
requirements were funded through a
combination of private sales of equity,
borrowings from shareholders and from
an institutional lender supported by a
guarantee and letters of credit from
shareholders and cash flow from
operations. On September 1, 1996,
AmBrew completed an initial public
offering of 1,580,000 shares of common
stock at $5.50 per share and 1,580,000
warrants at $0.10 per warrant generating
net proceeds of $6,506,880. In addition,
the exercise of the over-allotment option
to purchase 236,000 warrants generated
net proceeds of $20,532. More recently,
in an effort to address initial start up
costs and the need for working capital,
AmBrew has taken steps to use bridge
loans from shareholders, directors and
others to fund operations until
permanent financing can be obtained.
AmBrew’s consolidated financial
statements from 1994 through 1997 are
presented in Exhibits 16, 17 and 18
South China Brewing Company, Hong
Kong
Background
The South China Brewing Company
was the first subsidiary of AmBrew and
was a product of David Haines’ vision.
Mr. Haines came to Hong Kong
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following his wife, a China analyst at
Jardine Matheson, in the early 1990s.
One day, while drinking beer with
friends in a local pub frequented by
affluent expatriates, he realized that
there was no craft-brewed beer in Hong
Kong. Soon he started to do his own
research of the local beer market in his
free time, and visited several
microbreweries in the U.S. tasting beer
and talking to the industry experts.
Receiving financial backing from
Bordeaux was just a beginning. The
next step was to obtain a license to
operate a brewery. In 154 years, the
Hong Kong government had awarded
only two such licenses: San Miguel of
the Philippines and Carlsberg of
Denmark. When Haines first
approached government officials, they
laughed thinking that South China had
ambitions to become the next San
Miguel or Carlsberg. It took more than a
year to receive the license.
In May 1996, the South China
Brewing Company, the first Americanstyle microbrewery in Asia, started its
operations. Soon the story of Haines and
his new company was featured in major
local and international newspapers,
including the New York Times, the
International Herald Tribune, and the Far
Eastern Economic Review.
Management
Since 1994, David Haines, age 31,
has devoted his efforts to establishing
and developing the South China
Brewing Company. From June 5, 1996
until December 31, 1996, Mr. Haines
worked as the Managing Director of
Hong Kong Operations of AmBrew
International, focusing on business
development opportunities for
AmBrew’s international expansion.
Since January 1, 1997, he has been
14
employed as a consultant to AmBrew
and the South China Brewing. Before
his engagement in the creation of South
China Brewing Company, he practiced
clinical psychology for one year in Vail,
Colorado and was in private practice as a
psychologist for two years in Hong
Kong.
Scott Ashen, age 28, had been
general manager of the South China
Brewing Company since January 1997,
and had been an employee since 1995.
Before joining the Company and since
April 1994, Mr. Ashen opened and
operated, as Managing Partner, The Pour
House, a pub on the upper-East side of
Manhattan, New York. Mr. Ashen was a
manager of Nichimen America Inc., a
Japanese trading company, from June
1990 until December 1993. During the
summer of 1997, Ashen was replaced by
a local general manager, Tsui Church
Yiu (“Hammer”).
Edward Miller, age 27, was hired as
the head brewer at South China Brewing
on May 15, 1995. From June 1994
through May 1995, Mr. Miller was one
of the five brewers at the Thomas
Kemper Brewery, a subsidiary of the
Hart Brewing Company in Poulsbo,
Washington. From November 1990
through May 1994, Mr. Miller was
employed at Broad Ripple Brew
Company, a brewpub in Indianapolis,
Indiana. He was an assistant brewer at
Broad Ripple from November 1990
through December 1992 and was head
brewer from January 1993 through May
1994.
Products
South China Brewing produces
three styles of full-flavored craft beers
using traditional brewing methods, high
quality ingredients and state-of-the-art
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brewing equipment. They are packaged
in bottles and kegs.
Proprietary Brands. South China
produces three branded products, each
with its own distinctive combination of
flavor, color and clarity. Crooked Island
Ale is the flagship brand and accounted
for approximately 20.1 percent of sales
during the fiscal year ended October 31,
1996. This ale is produced from pale
malted barley from Great Britain and
hops from the United States. Dragon’s
Back India Pale Ale is brewed to reflect
a traditional oak barrel British pale ale
using a blend of premium British malted
barley. Dragon’s Back is brewed for
distribution only in kegs and accounted
for approximately 10.1 percent of sales
for the fiscal year ended October 31,
1996. Introduced in August 1996,
Stonecutter’s Lager is the third
proprietary beer and was the number one
growth product when it was introduced.
Stonecutter’s Lager is produced using
only premium British malt and the
highest quality European and American
hops. These proprietary brands
accounted for 13 percent of AmBrew’s
sales in July 1997. In April 1997, the
South China Brewing introduced Red
Dawn Ale to commemorate the historic
return of Hong Kong to China on June
30, 1997. The new beer received
immediate media coverage, including
articles in the Wall Street Journal. By
end of July 1997, Red Dawn Ale
accounted for 6 percent of AmBrew’s
sales and 35 percent of South China
Brewing’s sales.
Specialty Brewing. In addition to its
branded products, the South China
Brewing custom brews for local Hong
Kong establishments, in accordance with
their individual product specifications, to
market under their own labels. The
company produces specialty brews for
15
two customers, Iconic America and
Delaney’s Irish Pub. For the fiscal year
ended October 31, 1996, specialty
brewing sales accounted for
approximately 67.5 percent of the
brewery’s sales. By July 31, 1997,
contract brewing represented only 17.5
percent.
Marketing
South China Brewing’s marketing
efforts are aimed at educating consumers
as to the distinctive qualities of its
products, and include local promotions
designed to enhance its word-of-mouth
reputation. In 1996, the company spent
approximately $45,000 in advertising
and promotion. It devoted considerable
effort, approximately 65 percent of the
marketing budget, to the promotion of
on-premise consumption at participating
pubs and restaurants, and on limited
advertising (approximately 35 percent of
the budget) mostly in English
magazines. Among other things, South
China Brewing participated in and
sponsors cultural and community events,
local music and other entertainment
venues, local festivals and cuisine
events, and local professional sporting
events in Hong Kong. The company
also educates retailers about beer
freshness. South China uses various
point-of-sales tools, such as tap handles,
coasters, and table tents. It also markets
its products through sales and giveaways
of T-shirts, polo shirts, baseball hats and
glasses. Eventually, the sale of
merchandise is expected to develop as an
independent source of revenue. In
addition, the company offers guided
tours of its facility to further increase
consumer awareness of its products.
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Operations
Early on, quality problems plagued
South China. These problems arose both
in the operation of the brewery itself and
due to the exposure of beer to warm
temperatures on route to customers.
Much of Ashen’s early efforts were
intended to solve these quality problems.
The brewery in 1997 had an annual
capacity of 5,200 barrels with room for
future expansion. The initial investment
for brewery equipment in 1995 was
estimated at $500,000. The company
had decided to add another fast bottling
line in the summer 1997, which would
more than quadruple its bottling capacity
of approximately 18,000 barrels of kegs
and 25,500 barrels of bottles. Capacity
constraint were unlikely in the near
future because another 50 percent
capacity could be added to the site for an
additional $75,000 to $100,000. In early
1997, the facility was at 35 percent of its
capacity – including significant
production for distribution back to the
U.S. – but Ashen estimated that it would
eventually reach 70 percent by the end
of the year.
The cost of brewing a keg of beer in
1997 was approximately HK$ 425 and a
case of 24 bottle (355 ml) beer
approximately HK$155. The difference
in brewing cost between keg and bottle
mainly reflects the difference in
packaging cost as well as the extremely
low utilization of the bottling line.
Production costs could be reduced by 15
to 25 percent if the company could
achieve the targeted 70 percent capacity.
(The minimum efficient scale is
estimated at 80 percent of capacity
utilization.) A lower production cost
would allow the company to be more
flexible in offering volume discounts to
large accounts.
16
During the third quarter of 1997,
South China Brewing was retrofitted
with new electrical and other utility
connections, and the floor, walls, and
ceiling were upgraded to comply with
health standards. In addition, a “flash
pasteurization” unit was introduced on
site, extending the shelf life of the beer.
These projects required the suspension
of brewery operations for an extended
period of time during the third quarter of
1997.
Distribution
South China distributes its own
products to both on-trade and off-trade
accounts and does not use independent
distributors. On-trade accounts are
mainly pubs and bars in upper class
areas such as Wan Chai and Central with
high population of expatriates. Around
45 of these accounts are considered
frequent customers with high volume
demand. The company delivers on
average once a week to these accounts
with a van and a 13-ton truck.
Off-trade retailers include Park’N
Shop and Wellcome. In early 1997,
Crooked Island brand was sold in
approximately 23 Wellcome outlets and
Dragon’s Back in approximately 10
Park’N Shop supermarkets. Both
supermarket chains have a centralized
purchasing department. However, while
Wellcome has a centralized distribution
center, Park’N Shop requires South
China Brewing to deliver directly to
each individual store. Ashen prefers
individual delivery since this makes it
easier to monitor sales per outlet. The
volume of off-trade sales is
approximately 5-10 percent of bottle
volume.
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Celtic Brew LLC, Ireland
Background
On April 14, 1997, AmBrew opened
its second venture, the Celtic Brew in
Enfield, County Meath, Ireland.
According to James Ake, “We think
there is a market there for a good, freshbrewed lager.”18 AmBrew’s local
partners and investors include 18 pub
owners and senior partner Aidan
McGuiness, who owns Premier
Worldwide Beer PLC, a beer importing
and distribution company in Ireland.
AmBrew owns 60 percent of the
operation, and McGuiness owns 40
percent. The opening ceremonies for the
new microbrewery featured Irish Prime
Minister John Burton.
Operations
The new brewery consists of two
plants, one to produce ales and stouts,
and another to produce lagers as well as
ales and stouts. Between the two, the
combined output is expected to reach
250 kegs a week, according to
McGuiness.
Celtic Brew experienced the normal
delays and start-up issues associated
with any venture. Subsequent to test
brewing and recipe development, the
actual operational production and sales
of beers did not begin until late June
1997. During the spring of 1997,
customers in Ireland were fitted with
draft equipment and the Celtic Brew
products began their introduction into
the Irish pubs. Another factor affecting
the Celtic Brew was the delay
experienced in obtaining the bottling and
labeling equipment, which delayed sales
of bottled products and the start date of
18
Fay, Rick, “AmBrew International takes micro
around the world,” Celebrator Beer News,
Jun/July 1997, p. 56.
17
export sales. The pasteurizer was
installed during the third quarter of 1997
and the bottling equipment was
delivered during the fourth quarter of
1997.
Three beers are being brewed
initially: Finian’s Blond Ale, Finian’s
Irish Ale and Finian’s Authentic Porter.
The Finian label is based on Saint
Finian, who established the original
brewing tradition in Ireland in the 5th
century.
Additionally, the company’s beers
are to be exported to pubs in the United
Kingdom, beginning with the installation
of draft equipment at the establishments.
The United Kingdom market is expected
to be a significant portion of Finian’s
brand sales. Export shipments to the
United States is also expected to have a
significant impact on the sales of
Finian’s brand. By July 31, 1997,
aggregate sales of Celtic Brew were
$3,332. The sales of Celtic Brew
accounted for less than 1 percent of the
AmBrew’s total sales of the quarter.
Management
The general manager of Celtic Brew
is Dean McGuiness, Aidan’s son. Mr.
McGuiness, age 24, has completed the
intensive brewing program at the Siebel
Brewing Institute. Before joining the
Company in August 1996, Mr.
McGuiness acted as consultant and
Marketing Manager for TourIT Ltd, a
market research firm. There he
developed and implemented marketing
strategies using the Internet for
promotional efforts, travel reservations,
market research and integrated
information management. During 1994
and 1995 Mr. McGuiness acted as
consultant to various service
management companies, including
Market Research Consultancy and the
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Centre for Quality Service Management.
Mr. McGuiness earned his Bachelor of
Commerce and Masters of Business
Studies during 1989-1994. The
company also has a head brewer, Bill
Jenkins, from Washington state.
Cerveceria Rio Bravo, Mexico
Background
AmBrew’s partner in its Mexican
venture was Federico Cabo, president
and chief operating officer of Cabo
Group, Inc., a major distributor of
alcoholic beverages in Mexico and
California. Mr. Cabo has been involved
with AmBrew since its beginnings as an
investor in the South China Brewing
Company. The business relationship
between Mr. Cabo and Mr. Bordeaux
dates back to his Sazerac days, when
Sazerac started buying tequilas in bulk
from Cabo Group.
Operations
Cerveceria Rio Bravo property is
located 300 feet from the U.S. border
and 40 miles from San Diego. The site
is picturesque, including a Spanish-style
building on ample grounds fronted by
olive trees and a fountain. In an effort to
attract tourists, the brewery has installed
a tasting room and introduced public
tours. This location also has a railway
spur connecting to the cross-border
railroad behind the property, and a major
highway out front that feeds into a new
U.S.-Mexico port of entry. In addition, a
natural artesian well at the site provides
good quality water. By July 1997,
AmBrew had spent nearly $2 million
converting an old water bottling plant
into the Rio Bravo brewery. Beer
production initially occupies 21,000
square feet of the facility but can be
expanded to 47,000 square feet, meaning
18
that annual output can be increased from
an anticipated 200,000 cases (15,385
barrels) per year to 3 million cases. In
contrast, both the Hong Kong and
Ireland locations have a capacity of
65,000 cases (5,000 barrels) per year.
While 90 percent of AmBrew’s
Hong Kong and Ireland products are
sold in those respective markets,
AmBrew’s plan is to export at least half
the beer produced at Cerveceria Rio
Bravo to the U.S.. As Ake mentioned,
“our location [in Tecate] is really to tap
into the American market. We feel most
of the sales will take place in the United
States. Southern California, with its
population, alone offers big
possibilities.”19 Since the hottest trends
in the beer market are microbrews and
imports, Ake felt optimistic about
Tecate-brewed labels. Initial plans
called for making about 200,000 cases
(15,385 barrels) a year of lager, to be
marketed primarily in Mexico and in
Southern California with limited
quantities being available in New
Orleans and elsewhere in the United
States.
There are two main brands brewed
in Tecate—Cerveza Mexicali and
Azteca. The Cerveza Mexicali brand
carries a special cachet from the five
decades it was brewed in Mexicali, a
Baja California desert city across the
mountains from Tecate. AmBrew
bought the rights to the label from the
company that produced the beer in San
Antonio after 1973—the year when the
Mexicali brewery was destroyed by fire.
The beer is distributed in the U.S. by
Alford Distributing Co. of El Centro and
Wine Wherehouse Co. in the City of
Commerce near Los Angeles.
SM-45
In October 1997, a new brand,
Azteca, was introduced. The
introduction of Azteca was supported by
a full line of Hispanic outdoor, print and
radio advertising and point-of-sale
material. The beer’s primary target is
the Hispanic population, aged 21-34,
living in the U.S.. Azteca is a golden
lager containing 150 calories and has 4.7
percent alcohol per volume. It is
available in six packs of 12-ounce
bottles. The brand has been distributed
by Anheuser-Busch in portions of the
Los Angeles area and throughout the San
Diego market since November 1997.
David English, Anheuser-Busch’s vice
president responsible for imports
expressing the group’s optimism said:
“The sales of Mexican beer in the U.S.
grew at a rate of 27 percent [in 1996]
and the segment is expected to keep
growing. We think Azteca is a strong
entry into this category.”20
Most ingredients and supplies for
Cerveceria Rio Bravo come from the
U.S.. The North American Free Trade
Agreement has helped by eliminating
taxes on grains and other materials
brought into Mexico from the U.S..
Bottles are supplied by Vitro glass
operation in Mexicali.
Management
In June 1997, AmBrew’s
employees, including brewmaster
Hamaker, were involved in the
construction of Cerveceria Rio Bravo.
After the brewery is set-up and fully
operational, it will be turned over to
locals for the day-to-day operations. In
the meantime, Hamaker is the acting
general manager. By July 1997,
AmBrew had hired 15 Mexican workers.
19
Lindquist, Diane, “New brew,” The San
Diego Union-Tribune, June 15, 1997.
20
Press release, October 30, 1997.
19
SM-45
Recent Developments and Future
Challenges
A little more than one year after its
initial public offering, AmBrew
International has been hit by a fall in
stock prices seen in the craft brewing
industry generally. Its stock price has
dropped from $5.25 a share in October
1996 to $0.75 in October 1997 (Exhibit
19). AmBrew’s plunging stock prices
paralled dives taken by other publicly
owned craft brewers (Exhibit 20), as the
market became crowded and investors
did not see the returns they hoped for. In
Bordeaux’s view, however, AmBrew
should not be included in the U.S. craft
beer category because it does not
produce beer primarily intended for the
U.S. market. “We want to distance
ourselves from that, especially for the
investment community because it’s
death right now... The initial investors
are wondering how are you going to be
able to pull your stock up when the rest
of the category is going down.” The fall
in AmBrew’s stock prices prevented a
second public offering in the fall of
1997. As a result, AmBrew has turned
to debt and equity from investors to raise
the estimated $1 million needed to
continue its operations.21
For the first nine months of fiscal
1997, AmBrew posted a loss of $2.1
million, more than 19 times greater than
its loss of $104,357 reported for the
same period in 1996. Two factors that
contributed most to these negative
results were related to the expenses of
building two new breweries and
problems associated with the oldest
subsidiary—the South China Brewing.
For the nine months ended July 31,
1997, South China Brewing experienced
a decline in sales of $120,705 compared
to the same period in 1996. This
decrease in sales was caused by a variety
of factors, including significant
competition from imported beer in the
Hong Kong market. Also, South China
faced a reduction in purchases by a
significant customer, reduced production
for an extended period of time for
upgrades and the installation of new
equipment, and a change in brewery
personnel.
The sales of AmBrew USA, on the
other hand, were becoming more crucial
for AmBrew. For nine months ended
July 31, 1997, the sales of AmBrew
USA accounted for 73 percent (or
$641,078) of AmBrew’s sales; for the
three months ended July 31, 1997, it
represented 84 percent (or $455,308).
The increased sales were primarily
attributed to AmBrew USA’s
distribution of products brewed by Dixie
Brewing Company. With the
introduction of Cerveza Mexicali, the
company expected further sales growth
for AmBrew USA.
From initially planned expansion
breweries, Singapore was deemed too
expensive because of high labor costs,
Shanghai did not materialize because of
bureaucratic concerns, and in other
locations no local partnerships were
forged. As Bordeaux commented, “The
key elements is having [a] joint venture
partner with local expertise and
distribution expertise... Finding those
(partners) in all our locations has been a
lot tougher than we expected.”22
Faced with these facts, AmBrew’s
strategy has shifted from being strictly
an international brewer of craft beers to
include more importing and distributing
21
22
Slaton, James, “AmBrew gets caught short as
stocks for craft beers go flat,” New Orleans
Citybusiness, October 20, 1997.
Slaton, James, “AmBrew gets caught short as
stocks for craft beers go flat,” New Orleans
Citybusiness, October 20, 1997.
20
SM-45
of beer and soft drinks. During the
second half of 1997, AmBrew USA
added five field salespeople to increase
sales capability. The company has also
switched from its original plan of
constructing several small breweries
producing 5,000 barrels a year to fewer
but larger breweries capable of
producing 10,000 barrels. Both the Irish
and Mexican plants will expand to
double their capacity.
In the beginning of January 1998,
AmBrew sold its 100 percent interest in
the South China Brewing Company to
Golden Crown Management Limited, a
group of Hong Kong investors.
AmBrew USA will become the
distributor for the South China Brewing
brands in the U.S. and certain other
markets. Bordeaux also noted that
AmBrew has been studying
opportunities to develop plans to acquire
U.S. breweries in consolidation to
enhance the brand growth of AmBrew
USA’s beer and soft drinks portfolio.
Looking back, Bordeaux concluded
that “... like any other business plan for
what is essentially a new (business)
category, you kind of keep tweaking it as
you go along to find the most
advantageous way to make money.”
Looking to the future, Bordeaux was
optimistic. The breweries in Ireland and
Mexico were operational and shipping
their products. In addition, the growth
of AmBrew USA’s product mix and the
agreement with Anheuser-Busch Inc.
would bring added revenue in 1998. As
Bordeaux put it: “I think we’re basically
on the tail end of our red ink.”
21
Exhibit 1. Total U.S. Craft Brewing Industry Domestic Sales
by Category (in U.S. barrels)
2500
—0—— contract brewing companies
—0—— regional specialty breweries
bre ubs
2000
ci,
—0—— microbreweries
1500
—_____
_____
____________
_______
_______
oD
~0
-~
0
(a
1000
—
0~—
500
—__________________________________
1987
1988
1989
1990
__________
1991
1992
1993
1994
1995
1996
year
Exhibit 2. Number of U.S. Craft Breweries*
U)
a)
ci)
ci)
0
a)
-o
E
1986
1987
1988
1989
1990
1991
1992
1993
1994
year
*
Microbreweries and brewpubs in the U.S.
Source: Institute for Brewing Studies, North American Resource Directory, 1997-1998
1995
Exhibit 3. Shipments By 50 Top U.S. Craft Brewing Companies
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
Boston Beer Co. (including Oregon Ale & Beer Co.)*
Pete’s Brewing Co.*
Jacob Leinenkugel Brewing Co. (subsidiary of Miller Brewing Co.)
F.X. Matt Brewing Co.
Sierra Nevada Brewing Co.
Redhook Ale Brewery (all facilities)
Pyramid Breweries (including Thomas Kemper Brewing Co.)
Widmer Brothers Brewing Co. (all facilities)
Anchor Brewing
Full Sail Brewing Co. (all facilities)
Portland Brewing Co. (all facilities)
Spanish Peaks Brewing Co.*
Mass Bay Brewing*
New Belgium Brewing Co.
Deschutes Brewing Co. (all facilities)
Shipyard Brewing Co. (subsidiary of Miller Brewing Co.)
Nor’Wester Brewery & Public House
Abita Brewing Co. (all facilities)
Rockies Brewing Co.
Alaskan Brewing and Bottling Co.
Pennsylvania Brewing Co.*
Summit Brewing Co.
Rock Bottom Restaurants (all facilities)
Breckenridge Brewery (all facilities)
Boulevard Brewing Co.
Dock Street Brewing Co.*
Goose Island Brewing Co. (all facilities)
Brandevor USNoubuque Brewing & Bottling Co.
Cells Brewery Inc. (subsidiary of Miller Brewing Co.)
Oregon Brewing Co/Rogue Ales Brewery
SLO Brewing Co.*
Long Trail Brewing Co.
Old Dominion Brewing Co.
Gordon Biersch (all facilities)
BridgePort Brewing Co. (subsidiaryof Gambrinus Co.)
Catamount Brewing Co.
McMenamin’s (all facilities)
Humboldt Brewery
Mendocino Brewing Co.
Brooklyn Brewery*
Wild Goose Brewery
Otter Creek Brewing Inc.
Odell Brewing Co.
Kalamazoo Brewing Co.
D.L. Geary Brewing Co.
Black Mountain Brewing Co.*
Schirf Brewing Co./Wasatch Brew Pub (all facilities)
Stoudt’s Brewery*
Frederick Brewing*
Broadway Brewing Co.*
Total U.S. Top 50 Craft Brewing Companies
Total U.S. Craft Brewing Industry
*
1996
Shipments
(barrels)
Percent
Growth
Over 1996
Market
Share
1,213,000
425,600
300,000
285,000
265,000
224,578
128,000
125,000
108,000
80,000
66,666
60,000
57,425
54,875
47,100
39,070
34,842
34,000
34,000
32,000
28,500
28,000
25,593
25,227
25,000
25,000
24,849
24,805
24,100
24,000
23,000
22,016
21,000
20,695
20,000
19,500
18,136
18,000
17,200
16,500
16,000
16,000
15,631
15,248
15,101
13,000
12,675
12,100
11,000
11,000
28
22
7
4
33
45
4
81
5
12
8
13
32
73
44
28
6
11
5
47
50
41
22
41
19
0
NA
-2
23
-8
NA
52
13
NA
4
2
14
-5
14
7
12
60
51
49
13
-7
11
-12
8
13
22.62
7.94
5.59
5.31
4.94
4.19
2.39
2.33
2.01
1.49
1.24
1.12
1.07
1.02
0.88
0.73
0.65
0.63
0.63
0.60
0.53
0.52
0.48
0.47
0.47
0.47
0.46
0.46
0.45
0.45
0.43
0.41
0.39
0.39
0.37
0.36
0.34
0.34
0.32
0.31
0.30
0.30
0.29
0.28
0.28
0.24
0.24
0.23
0.21
0.21
4,203,032
5,362,697
All or partially contract brewed by another company
Source: Institute for Brewing Studies, North American Brewers Resource Directoiy,1997-l 998
NA
26
78.38
100.00
Exhibit 4. Shipments by Major U.S. Brewers
1995
1996
market
share
(1996)
88.5
45.2
20.4
11.9
8.3
6.3
1.8
87.5
45.0
20.0
18.2
91.1
43.8
20.0
16.7
45.4
21.8
10.0
8.3
1.9
1.0
2.5
-2.5
6.6
1.9
5.6
1.8
2.8
0.9
-1.0
-4.5
181.7
6.9
182.4
7.0
179.2
8.2
179.1
9.0
89.2
4.5
0.0
17.4
188.7
188.6
189.5
187.4
188.1
93.7
0.4
8.0
8.4
9.3
10.6
11.4
12.6
6.3
3.7
196.0
197.1
197.9
200.1
198.8
200.6
100.0
0.6
1988
1989
Shipments (millions of barrels)
1990
1991
1992
1993
1994
Anheuser-Busch Cos.
Miller Brewing Co.
Adolph Coors Co.
Stroh Brewery Co.*
G. Heileman Brewing Co.*
Pabst Brewing Co.
Genesse
78.5
40.3
16.5
20.5
14.6
6.1
2.6
80.7
41.9
17.7
18.4
13.0
6.6
2.4
86.5
43.5
19.3
16.2
10.9
6.7
2.2
86.0
43.6
19.5
14.8
9.4
6.6
2.2
86.8
42.2
19.6
14.0
9.1
6.9
2.2
87.3
44.0
19.8
12.6
8.9
7.0
2.0
Total Major U.S. Brewers
Other U.S. Brewers
179.1
2.5
180.7
2.7
185.3
3.3
182.1
5.8
180.9
7.9
Total U.S. Brewers
181.6
183.4
188.6
188.0
9.4
8.7
8.8
191.0
192.1
197.4
Imports
Total
*
Stroh completed purchase of Heileman in July 1996
Source: Institute for Brewing Studies, North American Brewers Resource Directory, 1993-94; 1997-1998
1988-96
ACGR(%)
Exhibit 5. lop 10 Domestic Craft Beer Brands
Rank
1
2
3
4
5
6
7
8
9
10
Brand
Brewer
Type
Shipments*
1994
1995
George Killian’s Irish Red
Samuel Adams Boston Lager
Red Wolf
J.W. Dundee Honey Brown Lager
Sierra Nevada Pale Ale
Weinhard Red
Pete’s Wicked Ale
Shiner Bock
Redhook E.S.B.
Weinhard Pale Ale
Coors Brewing Co.
Boston Beer Co.
Anheuser-Busch Inc.
Genesee Brewing Co.
Sierra Nevada Brewing Co.
G. Heileman Brewing Co.
Pete’s Brewing Co.
Gambrinus Co.
Redhook Ale Brewery
Lager
Lager
Lager
Lager
Ale
Ale
Ale
Lager
Ale
Ale
7,995
7,000
1,400
940
1,505
1,545
1,600
1,340
985
1,515
8,680
7,835
6,900
2,620
2,330
2,065
1,950
1,825
1,620
1,520
8.6
11.9
392.9
178.7
54.8
33.7
21.9
36.2
64.5
0.3
39,340
26,795
41.4
Total Others
27,819
17,181
Total Domestic Craft-Beer Shipment
45,000
66,135
47.0
Total Top 10
*
In thousands of 2.25 gallon cases
Source: Impact Databank
Percent
Change
56.0
Exhibit 6. Worldwide Beer Market (selected countries)
Historical Beer Consumption (millions of barrels)
1990
1991
1992
1993
1994
Europe
Germany
Great Britain
Spain
CIS
France
Poland
Italy
Netherlands
Belgium
Hungary
Austria
Romania
Portugal
Denmark
Sweden
Per Capita
Consumption
1994(gallons)
1990-94
ACGR(%)
37.6
26.1
20.6
2.4
10.6
11.2
7.1
22.8
28.8
27.1
33.6
11.4
20.5
33.7
16.2
1.6
-0.4
-2.2
-5.3
-1.2
9.9
1.8
0.4
-2.2
-0.3
0.2
-1.3
-2.7
0.4
3.6
92.32
49.78
28.55
28.60
20.80
9.60
12.38
11.14
10.24
9.12
8.53
8.94
7.77
5.55
4.00
92.60
50.80
27.58
28.40
19.78
11.60
12.38
11.32
9.70
9.23
8.72
8.34
7.56
5.54
4.00
94.19
49.51
27.25
23.80
17.55
12.60
12.38
11.71
9.85
9.57
8.72
8.34
7.33
5.64
4.60
94.95
49.51
25.36
23.10
19.78
13.60
12.38
11.15
9.48
9.12
8.47
8.40
7.20
5.64
4.70
98.27
49.01
26.12
23.01
19.78
13.99
13.28
11.32
9.36
9.01
8.61
8.50
6.98
5.64
4.60
6.20
5.11
4.86
4.37
4.13
14.5
-9.7
Greece
Switzerland
Finland
Total Europe
3.66
3.18
3.56
3.55
327.47
3.63
3.28
3.66
3.63
326.86
3.77
3.63
4.08
3.78
323.16
3.95
3.80
3.91
3.61
322.48
4.12
4.06
3.95
3.48
327.22
36.1
11.9
17.4
21.3
13.4
3.0
6.3
2.7
-0.5
0.0
Asia-Pacific
China
Japan
Australia
Republic of Korea
Philippines
New Zealand
Total Asia-Pacific
57.65
55.80
17.69
11.00
13.00
3.07
158.21
69.80
57.90
17.48
13.39
13.00
3.11
174.68
83.05
59.46
16.62
13.30
11.40
2.97
186.80
99.84
58.52
15.74
12.80
11.40
2.94
201.24
127.10
62.73
16.13
14.40
12.26
2.99
235.61
3.3
15.5
27.7
9.9
5.5
27.4
5.0
21.9
3.0
-2.3
7.0
-1.5
-0.6
10.5
North America
UnitedStates
Canada
Total North America
199.41
18.83
218.24
195.50
18.40
213.90
195.31
16.93
212.24
195.11
17.14
212.25
193.55
17.33
210.88
23.0
19.1
22.6
-0.7
-2.1
-0.9
Latin America
Brazil
Mexico
Venezuela
Colombia
Argentina
Peru
Chile
Total Latin America
52.92
31.47
10.65
14.90
4.74
3.24
2.32
120.24
56.30
32.95
11.69
13.00
6.09
3.95
2.63
126.61
46.25
33.90
13.25
13.00
7.24
3.94
3.13
120.71
50.60
34.90
13.50
13.00
7.88
4.12
3.40
127.40
58.29
36.02
13.12
13.00
8.93
4.14
3.25
136.75
11.4
12.1
19.8
11.3
8.2
5.4
7.2
11.2
2.4
3.4
5.4
-3.4
17.1
6.3
8.7
3.3
21.44
2.60
2.49
26.53
21.78
3.01
2.54
27.33
21.88
3.52
2.83
28.23
21.54
4.01
2.90
28.45
22.55
4.21
3.16
29.92
15.9
2.1
0.1
0.9
1.3
12.8
6.1
3.1
850.69
869.38
871.14
891.82
940.38
7.5
2.5
Bulgaria
Republic of Ireland
Other selected countries
South Africa
Turkey
India
Total 3 countries
Total Worldwide
Source: Goldman, E., et al., The Brewing Industry—Industry Report, PaineWebber Inc., August, 1995
Exhibit 7. Shipments By 50 Major International Brewers
Anheuser-Busch Cos.
Heineken NV
Miller Brewing Co.
Kirin Brewing Co.
Foster’s Brewing
South Africa Breweries
Carlsberg Ltd.
Brahma
Guiness PLC
Cerveceria Modelo SA
Danone Group
Santo Domingo
Adolph Coors Co.
FEMSA
Cia. Antartica Paulista
Asahi Breweries
lnterbrew
Cerveceria Polar
San Miguel Corp.
Stroh Brewery Co.
Bass PLC
Sapporo Breweries Ltd.
Labatt Breweries
Molson Breweries
Quinsa
Oriental Brewery
Lion-Nathan Ltd.
Binding Group
Brau und Brunnen
BBAG
Holsten-Brauerei AG
Pabst Brewing Co.
Whitebread
Kaiser
Warsteiner Brauerei
Chosun Brewery
Mahou
Suntory
AB Pripps Bryggerier
DBBreweriesLtd.
Backus Y Johnson S.A.
UnicerSA-GEP
Cerveceria Unidas S.A.
Plzenske Pivovary
Feldschlossen Group
Radegast Brewery
United Breweries
Budweiser Budvar
U.S.
Netherlands
U.S.
Japan
Australia
South Africa
Denmark
Brazil
Ireland
Mexico
France
Colombia
U.S.
Mexico
Brazil
Japan
Belgium
Venezuela
Philippines
U.S.
U.K.
Japan
Canada
Canada
Luxembourg
Korea
U.S.
New Zealand
Germany
Germany
Austria
Germany
U.S.
U.K.
Brazil
Germany
Korea
Spain
Japan
Sweden
NewZealand
Peru
Portugal
Chile
Czech Republic
Switzerland
Czech Republic
India
Czech Republic
Shipments (millions of barrels)
1990
1991
1992
1993
1994
1990-94
ACGR(%)
86.5
45.6
43.5
27.6
19.6
20.4
16.1
25.3
11.9
16.7
21.0
14.9
19.3
17.3
22.1
13.7
12.4
9.7
12.7
16.2
12.3
10.1
9.7
10.4
4.2
7.7
10.9
9.1
7.0
4.9
3.0
4.9
6.7
7.0
4.7
3.8
3.3
3.7
4.5
1.9
3.4
2.0
2.9
2.2
2.7
1.6
0.9
0.9
0.4
86.0
44.7
43.6
29.2
23.0
20.9
18.2
25.6
17.1
18.0
2.4
14.7
19.5
18.0
23.0
14.0
12.3
10.9
10.8
14.8
12.0
10.6
9.9
10.3
5.5
8.6
9.4
8.8
7.6
5.9
3.3
6.0
6.6
6.8
5.4
4.5
4.6
3.7
4.5
2.0
3.3
2.7
3.0
2.3
2.6
1.6
1.0
1.0
0.4
86.8
45.8
42.2
29.7
27.6
21.0
18.1
23.9
20.5
18.7
22.5
20.0
19.6
17.2
18.2
14.4
14.3
12.6
11.7
14.0
12.4
10.9
10.0
9.9
7.3
9.1
9.1
9.0
7.8
5.8
6.8
6.7
6.9
6.6
5.6
5.0
4.0
3.7
4.3
2.0
3.3
2.8
3.1
2.8
2.6
2.2
1.1
1.1
0.5
87.3
47.7
44.0
29.1
26.9
25.1
23.4
21.7
20.8
19.9
22.0
20.0
19.8
16.8
17.6
14.3
13.7
12.9
11.7
12.6
11.8
11.0
10.5
9.7
8.6
9.1
8.9
8.7
7.4
6.1
7.1
6.2
7.0
6.4
5.9
5.2
3.9
3.6
4.0
3.3
3.1
2.9
3.0
3.0
2.6
2.1
1.1
1.1
0.5
88.5
51.4
45.2
30.3
29.0
28.5
25.7
24.7
21.8
21.5
21.4
21.2
20.4
17.0
17.0
16.3
14.2
12.9
12.4
11.9
11.9
11.2
11.0
10.4
9.6
9.0
8.3
8.3
7.6
7.3
7.1
6.7
6.3
6.3
6.1
5.4
4.8
3.6
3.6
3.3
3.2
2.9
2.9
2.8
2.8
2.1
1.4
1.2
0.6
0.6
3.1
1.0
2.4
10.3
8.8
12.5
-0.6
16.3
6.5
0.6
9.2
1.4
-0.4
-6.3
4.5
3.4
7.6
-0.6
-7.5
-0.9
2.6
3.2
0.0
23.0
4.0
-6.6
-2.3
2.1
10.5
24.0
8.1
-1.5
-2.6
6.7
9.2
9.8
-0.7
-5.4
14.8
-1.5
9.7
0.0
5.9
0.9
7.0
11.7
7.5
10.7
Total North American-based brewers
Total Latin American-based brewers
Total European-based brewers
Total Asia/Pacific-based brewers
Total other selected brewers
284.6
149.3
158.3
25.8
1.3
291.2
139.0
162.3
26.7
1.4
295.1
165.4
171.2
27.9
1.6
305.2
164.9
170.7
28.7
1.6
323.3
170.8
174.5
28.6
1.8
-0.1
2.4
6.1
3.5
8.8
Total from 50 international brewers
619.3
620.6
661.2
671.1
699.0
3.1
Source: Goldman, E., et al., The Brewing Industry—Industry Report, PaineWebber Inc., August, 1995
Exhibit 8. Hong Kong Beer Industry
Historical Beer Consumption (millions of gallons)
1990-94
1992
1993
1994
1995
1996
1997 ACGR (%)
Pale
Dark
41.77
0.85
42.90
0.92
44.70
1.00
46.02
1.08
47.79
1.19
48.66
1.29
3.1
8.9
Total
42.61
43.83
45.70
47.10
48.98
49.96
3.2
7.34
7.40
7.53
7.53
7.79
7.90
1.5
Per capita consumption
(gallons)
1992
San Miguel
Heineken
Calsberg
Pabst Blue Ribbon
Blue Girl
Tsing Tao
Guiness
Other import
Total
Market Share (percent)
1993
1994
1995
45.0
7.2
19.0
6.0
8.9
6.0
2.0
5.9
38.9
13.2
18.6
6.6
8.6
5.6
2.1
6.4
28.4
17.4
18.0
10.0
8.4
6.5
2.2
9.1
24.4
18.8
17.5
9.0
8.2
6.0
2.3
13.8
100.0
100.0
100.0
100.0
Retail Prices (in HK$)
large
small
bottle
bottle
can
(640 ml) (355 ml) (330 ml)
Tsing Tao
San Miguel
Carlsberg
Blue Girl
Budweiser
Guiness
Heineken
Crooked Island
10.60
11.10
13.70
14.40
8.70
8.10
—
—
—
15.20
16.30
—
9.70
8.70
10.80
6.80
5.70
6.70
6.90
7.80
Wholesale Prices (in HK$)
large
bottle
can
(640 ml) (330 ml)
10.50
8.92
12.25
6.25
4.38
6.13
13.75
7.29
—
8.20
Exhibit 9. Irish Beer Industry
Beer Consumption (millions of gallons)
1992
1993
1994
1995
1996
1992-96
ACGR (%)
Stout
Ale
Lager
59
16
45
58
14
47
58
13
48
58
13
52
58
12
53
-0.6
-6.4
4.5
Total
120
119
119
122
123
0.8
Beer Consumption (IRpounds million)
1992
1993
1994
1995
1996
1992-96
ACGR(%)
Stout
Ale
Lager
434
153
417
421
140
436
421
129
451
423
125
481
423
117
498
-0.6
-6.5
4.5
Total
1,004
997
1,001
1,029
1,038
0.8
Manufacturer
Stout Market Shares (percentage of value)
1992
1993
1994
1995
1996
Guiness
Murphy’s
Beamish
Other
Total
73.0
14.2
6.8
6.0
72.0
14.8
7.0
6.2
71.5
15.3
7.5
5.7
71.0
16.0
8.3
4.7
70.0
16.2
9.1
4.7
100.0
100.0
100.0
100.0
100.0
Manufacturer
Brand
Guiness
Murphy’s
Beamish
Guiness
Guiness
Other
Budweiser
Heineken
Foster’s
Harp
Carlsberg
Other
Total
Lager Market Shares
(percentage of value)
1996
25
20
17
15
12
11
100
Source: Datamonitor Drinks Database from trade interviews.
Exhibit 10. Mexican Beer Industry
1990
Shipment (millions of gallons)
1991
1992
1993
1994
1995
1992-96
ACGR (%)
Domestic
Imported
990.0
4.2
1032.3
4.5
1057.4
5.7
1099.4
7.4
1135.7
1094.5
12.2
14.1
2.0
27.2
Total
994.3
1,036.9
1,063.1
1,106.8
1,147.8
1,108.6
2.2
1994
1995
1992-96
ACGR (%)
1990
Shipment (nuevo pesos million)
1991
1992
1993
Domestic
Imported
4,249.6
4,719.2
23.3
5,721.4
34.2
7,085.3
51 .9
8,367.4
96.3
10,839.1
17.2
Total
4,266.8
4,742.5
5,755.6
7,137.2
1,518.4
1,575.6
1,862.7
2,287.6
8,463.7
2,557.0
11,086.2
(US$ million)
1994
1995
Imports
Shipment (percentage of volume)
1991
1992
1993
247.1
1,659.6
Country of Origin
1990
United States
92.6
5.4
2.0
93.9
4.2
1.9
95.1
2.9
2.0
95.7
2.6
1.7
95.9
2.5
Other
91.6
5.1
3.3
Total
100.0
100.0
100.0
100.0
100.0
100.0
Shipment (percentage of volume)
1996
1997
1998
1999
Netherlands
Market Shares
(percentage of value)
1996
Manufacturer
55
Grupo Modelo
FEMSA
45
100
Total
Packaging
Trends
1995
Can
Barrel
85.4
14.0
0.6
82.5
15.5
0.6
80.5
17.9
0.7
79.4
19.0
0.7
79.0
20.3
0.7
Total
100.0
100.0
100.0
100.0
100.0
Distribution
Channels
1990
Shipment (percentage of value)
1991
1992
1993
Bottle
Retail
Horeca
Total
Retail
Horeca
Total
1.6
1994
1995
80.1
19.9
81.0
19.0
79.9
20.1
80.7
19.3
80.5
19.5
81.0
100.0
100.0
100.0
100.0
100.0
100.0
80.1
19.9
81.0
19.0
79.9
20.1
80.7
19.3
100.0
100.0
100.0
100.0
80.5
19.0
19.5
81.0
19.0
100.0
100.0
Source: Euromonitor, Banca Serfin, SECOFI, CNICM, INEGI, company sources
20.6
70.4
21.0
1.8
Exhibit 11. Beer Imported to the U.S. by Country of Origin
Country
Netherlands
Canada
Mexico
Germany
United Kingdom
Ireland
Japan
NewZealand
China
Czech Republic
Denmark
All Others
Total Imports
1989
Shipments (thousands of 2.25 gallon cases)
1990
1991
1992
1993
1994
35,308
29,961
23,365
14,309
3,959
2,948
2,077
569
803
209
789
5,023
36,607
29,011
22,091
15,020
4,402
3,274
2,006
694
944
265
734
5,966
31,172
28,731
18,910
11,890
4,531
3,510
2,230
696
1,004
284
685
5,561
33,740
29,570
21,080
12,310
5,073
4,012
2,384
834
910
184
764
3,810
37,021
35,656
23,276
12,340
5,827
4,479
1,962
978
3,428
41,315
43,902
26,916
12,280
7,313
4,445
1,723
1,012
674
551
794
3,586
119,320
121,014
109,204
114,671
127,410
144,511
Source: Jobson Beverage Group; Department of Commerce
1,045
588
810
1995
market
share
1995
1989-95
ACGR (%)
43,931
42,050
34,278
13,117
8,315
4,917
1,451
1,033
934
749
724
3,679
28.3
27.1
22.1
8.5
5.4
3.2
0.9
0.7
0.6
0.5
0.5
2.4
3.7
5.8
6.6
-1.4
13.2
8.9
-5.8
10.4
2.6
23.7
-1.4
-5.1
155,178
100.0
4.5
Exhibit 12. Top 20 Imported Beer Brands in the U.S.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Heineken
Corona Extra
Molson Ice
Becks
Molson Golden
Foster’s
Amstel Light
Guiness
Bass Ale
Labatt’s Ice
Tecate
Labatt’s Blue
Moosehead
Dos Equis
Modelo Especial
St. Pauli Girl
Sapporo
Molson Light
Molson Canadian
Grolsch
Total Top 20 Imported Brands
Other Imported Brands
Total Imported Beer
1988
1989
Shipments (millions of gallons)
1990
1991
1992
1993
1994
73.0
48.0
70.0
36.0
67.5
28.1
85.3
62.0
27.0
20.0
13.2
12.0
12.0
11.3
—
—
—
—
—
7.0
7.2
8.3
8.5
8.6
12.4
13.1
13.6
13.3
13.3
13.9
11.8
13.0
11.0
9.7
8.0
7.0
8.0
7.8
4.5
4.5
—
—
6.5
2.2
3.4
3.8
5.7
2.3
3.8
3.5
4.6
1.0
5.8
2.4
4.0
3.5
4.6
1.1
4.7
2.5
4.2
3.5
4.6
1.3
4.5
2.6
4.2
3.5
4.6
1.8
4.4
2.6
4.2
3.4
4.7
3.0
4.4
2.6
3.8
2.5
2.6
2.8
2.5
2.2
2.2
1.9
2.0
2.1
7.4
5.1
4.6
4.4
3.2
2.8
2.7
2.5
252.4
232.1
223.3
204.2
208.7
232.8
274.3
285.7
310.5
24.1
21.2
6.6
9.8
5.5
5.0
—
23.6
19.8
6.4
11.0
5.9
5.6
—
18.0
19.3
7.2
11.2
5.7
5.5
—
18.0
19.0
7.9
11.0
5.5
5.5
72.0
36.7
35.0
19.0
14.0
9.8
11.1
9.0
8.5
7.7
8.9
76.5
46.1
29.3
20.0
13.6
8.7
9.0
9.0
9.8
7.6
5.0
3.5
4.4
2.3
3.2
2.6
26.0
22.3
9.0
8.7
5.0
5.0
—
60.5
29.5
1996
66.5
31.5
6.9
18.5
19.0
8.2
10.6
8.5
7.7
1.9
8.7
—
58.7
26.0
1995
10.8
11.7
10.5
1988-96
ACGR(%)
2.0
3.3
NA
-3.2
9.2
-6.3
3.7
4.1
10.7
7.9
9.0
9.0
NA
3.2
7.8
-5.6
-6.8
1.6
NA
-4.8
4.8
-2.4
-4.2
-0.5
2.6
38.9
36.3
48.9
41.5
49.3
53.9
50.9
63.5
78.8
9.2
291.3
268.4
272.2
245.7
258.0
286.7
325.2
349.2
389.3
3.7
Source: Institute for Brewing Studies, North American Brewers Resource Directory, 1997-1998
Exhibit 13. Company Organization Chart
PETER BORDEAUX
President/CEO/Chairman
JAMES AKE
Chief Operating Officer
STEVE AMSTRONG
Executive Vice President
NANCY HERNANDES
AmBrew USA
Controller
General Manager
MEL ZULKER
BOB HAFENBRACK
Northwest Sales
Midwest Sales
AmBrew USA
AmBrew USA
LEONARD MORENO
Southeast Sales
AmBrew USA
South Central Sales
AmBrew USA
West Coast Sales
AmBrew USA
KAREN MOSS
Sales/Administrative AmBrew
USA
BROOKS HAMAKER
DEAN MCGUINESS
TSUI CHURCH YIU
Cerveceria Rio Bravo
Celtic Brew LLC
South China Brewing Company
Director Tecnico
General Manager
General Manager
Exhibit 14. Board of Directors as of December 1997
PETER W. H. BORDEAUX
Age 48; Director since 1996. Mr. Bordeaux has been Chairman of the Board of Directors of AmBrew International
since June 5, 1996 and has been associated with its subsidiaries since August 9, 1994. Mr. Bordeaux has been
President and Chief Executive Officer of AmBrew International since February 12, 1997. Prior to his employment
in these positions and since 1982, Mr. Bordeaux was President and Chief Executive Officer of New Orleans-based
Sazerac Company, Inc., the tenth largest United States producer, importer and exporter of spirits as well as a large
U.S. distributor of wine, beer and non-alcohol beverages. Mr. Bordeaux had been with Sazerac since 1980. In
addition, Mr. Bordeaux has served as Chairman of Concorde Holdings Limited (Beijing), a distributor of alcohol and
non-alcohol beverages since November 1994, and as President, since 1992, of Leestown Company, Inc., which
owns the world’s largest bourbon distillery. Mr. Bordeaux was Vice Chairman of the Board of the National
Association of Beverage Importers, is a Board Member, Vice President and member of the Executive Committee of
the Board of the World Trade Center, New Orleans, Chairman of the International Advisory Council of Hibernia
National Bank (New Orleans) and a Board Member and Treasurer of Episcopal Housing for Seniors, Inc.
JOHN F. BEAUDETTE
Age 40; Director since 1996. Mr. Beaudette has been a director of AmBrew International since June 5, 1996 and has
been associated with its subsidiaries since April 27, 1995. Mr. Beaudette has been President of BPW Holding LLC,
a beverage investment and consulting company, and its predecessor, since February 1995. Mr. Beaudette has been the
President of MHW, Ltd., a beverage alcohol importer distributor and service company located in Manhasset, New
York, since September 1996, and was Executive Vice President and General Manager of MHW from 1994 to 1996.
From 1992 to 1994, Mi-. Beaudette was Vice President and Chief Financial Officer of Monsieur Henri Wines, Ltd.
and from 1988 to 1992, he was Director of Planning at PepsiCo Wines and Spirits International. Both companies
were involved in the United States and Canadian marketing and distribution of imported wines and spirits from
around the world.
NORMAN H. BROWN, Jr.
Age 50; Director since 1996. Mr. Brown has been a director of AmBrew International since June 5, 1996 and has
been associated with its subsidiaries since August 9, 1994. Mr. Brown has been a Managing Director of Donaldson,
Lufkin & Jenrette in the Investment Banking Division since 1985. In this capacity, Mr. Brown acts as Head of the
Metals and Mining Industrial Coverage Group and as CO-Head of Industrial New Business in Canada. Until July 31,
1996, Mr. Brown has served as a director of Gaylord Container Corporation, a manufacturer of paper, box board and
corrugated cardboard.
FEDERICO G. CABO ALVAREZ
Age 52; Director since 1996. Mr. Cabo has been Deputy Chairman of the Board of Directors since June 3, 1996 and
has been associated with AmBrew’s subsidiaries since August 9, 1994. Since 1970, Mr. Cabo has been Chief
Executive Officer and President of Cabo Distributing Company, Inc., formerly the largest distributor of Mexican
beers in the United States and currently a distributor of beer and producer spirit products.
JOHN CAMPBELL
Age 57; Director since 1996. Mr. Campbell has been a director of AmBrew International since June 5, 1996 and a
partner of the law firm of Appleby, Spurling & Kempe since 1972.
WYNDHAM H. CARVER
Age 53; Director since 1996. Mr. Carver has been a director of AmBrew International since June 5, 1996. Since
1995, Mr. Carver has been on a two-year secondment from Grand Metropolitan PLC, an international producer,
distributor, wholesaler and retailer of spirits, wines and foods, to the British Department of Trade and Industry where
Mr. Carver is a Latin American export promoter. Mr. Carver has served in a variety of capacities on behalf of
International Distillers & Vintners, Ltd., an international producer and distributor of spirits and wine and a subsidiary
of Grand Met, since 1965, including Managing Director of Wyvern International, the marketing division of IDV, and
Regional Director for IDV in the Caribbean and Central America. Mr. Carver is a director of Test Valley Water
Company, a private company in Hampshire, England.
TONESAN AMISSAH FURBERT
Age 31; Director since 1996. Mr. Campbell has been a director of AmBrew International since June 5, 1996 and an
associate of the law firm of Appleby, Spurling & Kempe since 1989.
DAVID K. HAINES
Age 31; Director since 1996. Mr. Haines was the Managing Director of Hong Kong Operations of AmBrew
International from June 5, 1996 until December 31, 1996. Since January 1, 1997, Mr. Haines has been employed as
a Consultant to the Company and the South China Brewery. Since 1994, Mr. Haines has devoted his efforts to
establishing and developing the South China Brewery. Before his involvement with the Company, Mr. Haines
practiced clinical psychology for one year in Vail, Colorado and was in private practice as a psychologist for two
years in Hong Kong.
JOSEPH E. HElD
Age 50; Director since 1996. Mr. Heid has been a director of AmBrew International since June 5, 1996. Mr. Heid
has been Senior Vice President of Sara Lee Corporation, an international food and consumer products company,
Chief Executive Officer of Sara Lee Personal Products North and South America, a line of business responsible for
Sara Lee’s brands in apparel and accessories in North and South America,siace1996, President and Chief Executive
Officer of Sara Lee Personal Products—Pacific Rim, a line of business responsible for Sara Lee’s brands in apparel
and accessories in the Pacific Rim, since 1994 and Vice President of Sara Lee since 1992. From 1988 to 1992,
Mr. Reid served as President of Guinness America, a holding company of Guinness PLC’s United States ventures,
and Executive Vice President and Chief Operating Officer of United Distillers—North America, a subsidiary of
Guinness that imports, produces, markets and sells beverage alcohols.
CHARLES L. JARVIE
Age 60; Director since 1997. Mr. Jarvie was elected as a director of AmBrew International on April 22, 1997. Mr.
Jarvie became an Investor in and President of Host Communications in December 1992 and also served as the
Chairman, since 1995, of Universal Sports America, the nation’s largest collegiate and grassroots sports marketing
company. From 1959 until 1980 Mr. Jarvie was employed by Procter and Gamble, most recently as Corporate Vice
President for food product and General Manager of Procter and Gamble’s 2.5 billion edible products sector. After
leaving Procter and Gamble, Mr. Jarvie was successively President and Chief Operating Officer of the Dr.
Pepper/Canada Dry Company, Marketing General Manager of Fidelity Investments, Chairman and Chief Executive
Officer of the Schenley Spirits Company and Chief Executive Officer of the New Era Beverage Company. Mr.
Jarvie currently serves as a Director of the Dallas Chamber of Commerce and Texas Commerce Bank. Mr. Jarvie
also serves on the Cornell University Council and as Chairman of the DFW International Trade Center, which played
a central role in the NAFTA negotiations.
EDWARD F. MCDONNELL
Age 61; Director since 1977. Mr. McDonnell was elected as a director of AmBrew International on April 22, 1997.
Mr. McDonnell has been the President of The Premier Group, an investment group investing in beverage alcohol
companies and related activities, since June 1995. Before joining The Premier Group, Mr. McDonnell served as
President and Chief Executive Officer of Seagram Spirits and Wine Group and Executive Vice President of Seagram
Company Ltd since 1981. Mr. McDonnell also served as a Director of the Seagram Company Ltd. from 1992 until
June 1996.
SUSANNA E. TOWNSEND
Age 47; Director since 1977. Miss Townsend was elected as a director of AmBrew International on April 22, 1997.
Since 1995, Miss Townsend has served as advisor to His Royal Highness The Prince of Wales on commercial
operations and has assisted in raising funds for The Prince of Wales Charities Trust. From 1990 to 1994, Miss
Townsend served as Managing Director of Lord Rothschild’s Private Companies, including Clifton Nurseries
Holdings, Ltd., Clifton Nurseries Ltd., Clifton Little Venice Ltd., Rothschild Waddesdon Ltd, Waddesdon Gardens
Ltd. and Robert Day Flowers Ltd. From 1980 to 1989, Miss Townsend served as Managing Director of all United
Kingdom Overseas Companies of Crabtree & Evelyn, including Crabtree & Evelyn Ltd., Crabtree & Evelyn Shops,
Ltd., Crabtree & Evelyn Overseas Ltd. and Scarborough & Co. Ltd. Miss Townsend is a director of Duchy
Originals Ltd. and A.G. Carrick Ltd.
STEVEN A. ROTHSTEIN
Age 46; Director Since 1997. Mr. Rothstein was appointed as a director of AmBrew International to fill an existing
vacancy on April 22, 1997. Mr. Rothstein has been the Chairman of the Board of National Securities Corporation,
a securities broker-dealer, since 1995. Mr. Rothstein also is Chairman and President of Olympic Cascade Financial
Corporation, the parent holding company of National Securities Corporation. From 1994 to 1995, Mr. Rothstein
served as a Managing Director of H.J. Meyers & Co., a securities broker-dealer. From 1992 to 1994, he served as a
Managing Director of Rodman and Renshaw, a securities broker-dealer. From 1989 to 1992, he served as a
Managing Director of Oppenheimer & Co., a securities broker-dealer. Prior to that, he was a limited partner of Bear
Stearns & Co., a securities broker-dealer. Mr. Rothstein received an A.B. degree from Brown University. He is
currently a director of SigmaTron International, Inc., New World Coffee, Inc., and Vita Food Products, Inc. and
Gateway Data Sciences Corporation.
From Company reports
Exhibit 15. Common Stock Ownership as of January 25, 1997
The following table sets forth certain information with respect to the beneficial ownership of the common
stock (i) of each person (or group of affiliated persons) who is known by the Company to own beneficially
more than 5% of the Common Stock, (ii) of the Company’s directors and named executive officers and (iii)
ofall directors and executive officers as a group.
Number of Shares
Beneficial Owner
Percent of
Beneficially Owned (1)
Total
(percent)
152,000
4.1
Peter W. H. Bordeaux (3)
272,067
7.2
Federico G. Cabo Alvarez (4)
914,400
24.7
380,000
10.3
3,160(6)
(7)
1,721,627
46.2
John F. Beaudette (2)
MHW, Ltd.
1165 Northern Boulevard
Manhasset, New York 11030
One Galleria Boulevard, Suite 1714
Metairie, Louisiana 70001
CaboDistributing Co.
9657 East Rush Street
South Elmonte, California 91733
David K. Haines
J.P. Walsh & Co. Ltd.
Block F (8th Floor) 3-3G Robinson Road
Hong Kong
Steven A. Rothstein
National Securities Corporation
875 North Michigan Avenue, Suite 1560
Chicago, Illinois 60611
All executive officers and directors as a group
(eleven persons)(2)(3)(5)(6)
(1) Applicable percentage ownership, except as described in note 3 to this table, is based on 3,696,876 shares of
Common Stock outstanding as of the date hereof. Beneficial ownership is determined in accordance with the rules
of the Commission and generally includes voting or investment power with respect to securities, subject to
community property laws, where applicable.
(2) Represents shares of Common Stock held of record by BPW. Messrs. Beaudette (a director of the Company),
Edmund Piccolino (former Vice President of Human Resources for PepsiCo. International, a division of PepsiCo
Inc.) and Peter Warren (former President of PepsiCo. International and a former director of PepsiCo. Inc.) each
own one third of the membership interest of BPW.
(3) Includes Mr. Bordeaux’s vested options to purchase 66,667 shares of Common Stock. Mr. Bordeaux’s
percentage of outstanding shares was calculated by adding to the number of outstanding shares 66,667 shares
deemed to be issued pursuant to Securities Exchange Act Rule l3d-3(d)(l).
(4) Excludes warrants to purchase 5,700 shares of Common Stock held by Diane Elizabeth Cabo. Ms. Cabo is Mr.
Cabo’s daughter. Mr. Cabo disclaims beneficial ownership of the shares underlying Ms. Cabo’s warrants.
(5) None of Messrs. Carver, Heid, Jarvie, McDonnell and Miss Townsend, directors of AmBrew International, and
Mr. Ake, the Executive Vice President and Chief Operating Officer of AmBrew International, beneficially own any
shares of Common Stock.
(6) Represents warrants to purchase 3,160 shares of Common Stock owned by Mr. Rothstein, which warrants are
exercisable within 60 days of the date hereof.
(7) Less than 1%. Mr. Rothstein’s percentage of outstanding shares was calculated by adding to the number of
outstanding shares 3,160 shares deemed to be issued pursuant to Securities Exchange Act Rule l3d-3(d)(l).
From Proxy, Notice ofAnnual Meeting ofStockholders, March 20, 1997
)
Exhibit 16. American Craft Brewing International Limited and Subsidiaries
Consolidated Balance Sheets
(amounts in U.S. dollars)
October 31,
1994
October 31,
1995
July 31,
1997
October31,
1996
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net allowance for doubtful
accounts of $556, $1,500 and $37,500
Inventories
Prepaids and other current assets
$
Total current assets
Equipment and capital leases, net
Rental, utility and other deposits
Deferred tax assets
Total assets
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Long-term bank loan, current portion
Capital lease obligations, current portion
Accounts payable and accrued liabilities
Shareholders’ loans
$
$
102,248
$ 5,780,672
21,680
22,922
391
73,581
35,508
126,465
197,752
147,241
6,016,226
803,369
10,295
9,433
1,536
634,767
35,174
49,096
663,830
235,749
85,501
3,333,412
1,376,744
109,538
$
866,278
$ 7,001,306
$ 5,626,063
$
113,000
13,284
39,294
85,638
$
$
197,752
219,016
—
$
—
182
2,490
Total current liabilities
2,672
Long-term bank loan, net of current portion
Capital lease obligations, net of current portion
—
Total liabilities
2,672
$
50,306
176,388
299,776
276,899
17,549
12,858
242,014
642,571
251,216
395,500
254,872
660,120
30,221
17,364
16,637
676,937
272,236
676,757
Minority Interests
393,824
Commitments and Contingencies
Shareholders’ equity:
Preferred stock, $0.01 par, 500,000 shares authorized,
none issued
Common stock, $0.01 and $0.13 par, 10,000,000 and
11,000 shares authorized, 3,696,876 and 5,000
shares issued and outstanding, respectively
Common stock warrants, 2,090,876 outstanding
Additional paid-in-capital
Cumulative translation adjustment
Subscription monies received in advance
Accumulated deficit
645
Total liabilities and shareholders’ equity
216,344
$
219,016
36,969
181,906
7,388,205
(46,525)
189,341
(878,010
(3,008,073)
866,278
$ 6,729,070
4,552,482
7,001,306
$ 5,623,063
437,156
(248,460)
224,119
(7,776)
Total shareholders’ equity
36,969
181,906
7,388,205
$
)
Exhibit 17. American Craft Brewing International Limited and Subsidiaries
Consolidated Statemetns of Operations
Nine Months
Year Ended
Year Ended
Ended
Ended
October31,
October31,
1995
October31,
July31,
1996
July31,
1997
1994
Net Sales
$
Cost of sales
Gross profit
—
$
—
63,707
(2,431 066)
(2,197,544)
1,536
47,560
Minority interests
Net loss
$
Net loss per common share
$
Weghted average number of shares outstanding
$
(240,684)
(74,747)
(665,955)
(665,955)
36,405
$
(629,550)
12,829
$
(104,357)
—
(7,776)
—
2,071,422
879,413
(645,891)
(117,186)
(288,244)
(7,776)
$
280,960
(9,312)
$
355,707
(361,026)
(36,086)
(1,034)
(398,146)
Loss before income taxes
Loss after income taxes
$
323,277
(9,312)
—
427,750
(685,541)
(303,408)
(283)
24,747
(292,888)
(17,838)
(2,265)
(288,244)
—
$
(104,473)
(9,312)
—
1996
(38,960)
Selling, general and administrative expenses
Interest expense, net
Other expenses, net
Total expenses
Income tax benefit
Nine Months
Year Ended
$
(240,684
$
(0.12
2,071,422
$
$
(629,550)
(0.28)
2,232,448
$
$
(104,357)
(0.58)
3,696,876
233,522
(2,405,971)
41,273
(66,368)
24,037
$ (2,173,507)
43,444
$ (2,130,063
$
(0.58
3,696,876
ExIiibit 18. American Craft Brewing International Limited and Subsidiaries
Consolidated Statements of Cash Flows
Year Ended
October31,
Year Ended
October31,
1994
1995
Nine Months
Ended
July31,
Year Ended
October31,
1996
Nine Montht
Ended
July 31,
1997
1996
Cash flows from operating activities:
Net loss
$
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation
Deferred income tax benefit
Non-cash interest expense
Minority interests
Increase in operating assets:
Accounts receivable, net
Inventories
Prepaids and other current assets
Rental, utility and other deposits
Increase in operating liabilities:
Accounts payable and accrued liabilities
Net cash used in operating activities
Cash flows from investing activities:
Purchases of equipment
Cash flows from financing activities:
Contribution from joint venture partner
Proceeds from bank loan
Repayment of bank loan
Repayment of capital lease obligations
Proceeds from bridge notes
Repayment of bridge loans
Proceeds from shaholders’ loans
Repayment of shareholders’ loans
Subscription monies received in advance
Proceeds from issuance of common stock
and common stock warrants
Stock issuance costs paid
Net cash provided by financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
$
Supplemental disclosures to statements of cash flows:
Cash interest paid
Conversion of bridge notes to common stock
and bridge warrants
(7,776)
—
(1,536)
$
(240,684)
$
21,997
(47,560)
—
—
—
—
(629,550)
$
68,455
(36,405)
274,208
(104,357)
$ (2,130,063)
48,335
(12,829)
118,220
(24,037)
—
—
—
(43,444)
—
(9,433)
(21,680)
(22,922)
391
(25,741)
(51,901)
(12,586)
(126,074)
(200,575)
(61,040)
(8,346)
(23,971)
(575)
182
(18,563)
39,112
(297,869)
202,720
(511,708)
41,287
(121,496)
(3,247,300)
(10,295)
(595,037)
(97,518)
(69,953)
(2,849,133)
—
—
—
—
—
—
—
—
—
—
—
2,490
—
1
644
—
—
197,752
—
197,752
—
—
6,287,650
146,634
(95,504)
5,678,424
(44,815)
102,248
5,780,672
102,248
57,433
250,000
—
—
797,402
50,335
—
—
117,231
(254,035)
29,166
—
(10,953)
(20,638)
117,659
$
470,749
—
7,610,817
(1,083,405)
197,752
____________
$ 102,248
403,760
(56,500)
(9,424)
370,000
18,000
(1 03,638)
—
213,037
(156,806)
(1,034,467)
—
(508,500)
(13,283)
370,000
(120,000)
83,148
224,119
226,610
—
565,000
(56,500)
(7,927)
(101,066)
(244,397)
$
36,421
—
—
—
459,796
(5,730,366)
$
5,780,672
50,306
2,329
Exhibit 19. AmBrew’s Stock Price Evolution
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Exhibit 20. Comparison of Stock Price Performance
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american craft brewing international

Transcription

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