Carlsberg Okocim buys 3 regional breweries

Newly created Carlsberg Okocim Group bought controlling shares in three regional breweries, but industry analysts are skeptical of the firm’s ability to sustain its market share.
By : Greg Goodale

   Danish brewer Carlsberg announced last week that the merger of its subsidiary Okocim with three regional Polish breweries will make Carlsberg Okocim the country's third-largest brewing group, with up to 16% of the beer market. But industry analysts doubt whether the Okocim brand is strong enough for the venture to succeed.

   The deal unites Okocim, Szczecin's Bosman, Wroclaw's Piast and Sierpc's Kasztelan breweries, creating a group of seven breweries employing 2,100 people with a combined output of 4 million hectoliters. Their total revenue last year was zl. 800 million ($181.8 million).

   "We expect that the merger of these four companies will yield savings of about zl. 60 million ($14.2 million), which will be a useful cash injection as each of these companies has financial problems," said Marcin Pirog, chairman of the new group. He added that the move was motivated by Carlsberg's need to increase market share at a difficult time for the brewing industry. "Even if our market share were to rise to 10%, this would still not be enough to fight the leaders on the market," Pirog said.

   Poland's beer market is split between Netherlands-based Heineken's Zywiec Group, with a 32% market share, and South African Breweries' Kompania Piwowarska, whose Lech and Tyskie brands hold 30% of the market. According to figures from beer market research company Piwochmiel, Okocim's sector share has grown from 5% to 7.5% in the past six months, while Piast, Bosman and Kasztelan each have an estimated 3% of the market, giving the new group 16% of the market.

   To create the group, Carlsberg acquired 81% of Piast from Dutch brewer Dyland BV in exchange for Carlsberg Okocim shares. Okocim bought Bosman and Kasztelan from German brewer Bitburger for zl. 220 million ($52.3 million), to be paid in cash and shares. The transaction will give Bitburger an 18% share in Carlsberg Okocim while Carlsberg will have a 67% controlling stake with the remaining 15% in the hands of minority shareholders. Margarethe Skov, Carlsberg's spokeswoman, was cagey about whether the company intends to buy out Bitburger's stake in the future. "It's always good to have knowledgeable people on board who know the local market situation," Skov said.

   Okocim announced a 34% fall in second-quarter profits year on year, and some analysts doubt that the formation of the new group will improve its performance. "I'm not sure that Okocim will be able to maintain the market share it will achieve with this purchase," said an industry analyst who asked not to be named. "It has a long way ahead to restructure this group," the source said, adding that the group does not have a national brand with sufficient market share to carry out its expansion plans.