M&A Deals Brew In Spain With Growth Of Artisan Beer

M&A Deals Brew in Spain with Growth of Artisan Beer

M&A Deals Brew in Spain with Growth of Artisan Beer

Spain’s brewing industry has long been dominated by three companies: Heineken, Mahou San Miguel and Damm, the last two both Spanish-owned. They control over 80 per cent of the Spanish beer market, with Mahou San Miguel in pole position.

Unlike other industries where internationalisation has been a key trend, the brewing industry has swapped back into Spanish ownership in recent years. Multinationals like Coors, Danone and Guiness have all pulled out of Spain.

And as the sector’s structure has changed, so have beer consumption trends, dampened by the economic crisis. The Spanish beer market notched up revenues of $16,763.2 million in 2012, equivalent to a compound annual rate of change of -1.1 per cent in the period 2008-2012, according to Companies and Markets.com.

Beer consumption in bars and restaurants has been hard hit by the downturn, as cash-strapped Spaniards stay home to enjoy their favourite tipple or opt for retailers’ cheaper brands.

But it’s not all bad news!

The increase in microbreweries is taking the industry by storm, and the competition in this new business is fierce, sparking consolidation expectations.

ARTISAN BEER: AN ALTERNATIVE TO RIOJA WINE

While Spaniards produce and drink the most non-alcoholic beer in the European Union, their “regular” beer consumption is much lower than in countries like Germany or the Czech Republic. So the potential for growth in this market is substantial, something which has not escaped some Spanish entrepreneurs, who are setting up microbreweries across the country.

Microbreweries are small producers of beer that serve local or regional markets, with a long tradition in the US and the UK. They are fairly cost-efficient, and setting up the brewery does not require a heavy investment commitment – an advantage when financing is hard to find.

Spain’s first microbrewery sprung up in Catalonia about six years ago, even before the crisis began.

Many microbreweries have sold their products in supermarkets and large retailers, but others such as Toledo-based Sagra are targeting a more discerning customer by using distributors specialising in artisan beer. Their aim is to turn this into a gourmet product like fine Rioja wine or Iberian ham.

M&A ON THE CARDS FOR FRAGMENTED INDUSTRY

There are around 100 microbreweries throughout Spain, with new start-ups emerging almost every week.

Sagra, founded in 2011, produces 20,000 litres of beer a month, while Madrid-based La Virgen, also launched in 2011, produces 10,000 litres.

Valencia-based Micalet – founded just seven months ago – currently produces 1,500 litres. It aims to triple this amount in 2014.

Such a fragmented, competitive industry is ripe for M&A as the main players fight to gain market share.

For information on Spain’s artisan beer industry, contact corporate law firm Argali Abogados.

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