Al Stroucken, chairman/CEO, O-I, US glass bottle manufacturer, shared details of its Q2 results when he met with company directors recently to discuss key business developments, review financial results for the second quarter and trends affecting its business in 2013.
Stroucken blamed the weather in France in regard to filling and said statistics from the French Brewer Association, reported beer output in the first half of this year was 16.5% below the first half of last year. So beer sales may have been down 5% or 6% this year.
Europe at a low point
“France clearly shows a much weaker development in the entire European region than other countries. In particular, brewers have curtailed their production by about 16.5%. And what we also saw is that, particularly the weather in France was abysmal with regard to filling,” he said.
“Particularly champagne was affected by that. So I think there are differences also in where the emphasis of our business is. I would expect overall, Europe may be at its low point at this point in time as far as consumption is concerned.”
George Staphos, research division, BofA Merrill Lynch, who attended the meeting, agreed and said beer has taken some significant volume lumps this year as a market because of the weather and because of economic uncertainty.
He added Europe is going through what the US went through three or four years ago and there is a sense that customers are shifting to other pack mix types, specifically cans.
Brigitte Batonnet of Comité Champagne trade association confirmed champagne sales were down in Q2.
“Champagne sales are very sensitive to economic conditions but not to the weather. Sales of Champagne in France and Europe were down for the first six months of 2013.”
Beer markets declined
Overall, O-I reported adjusted EPS of $0.81, the same as the prior year quarter. Price was up 2% for the quarter and fully offset cost inflation. Globally, shipments were down 1%. While May volumes were strong, demand tapered off toward the end of the quarter, causing volumes to come in modestly softer than anticipated.
“For the quarter as a whole, sales in beer markets declined in all of our regions due to well-known issues, namely abysmal weather in North America and Europe, along with macroeconomic pressure in South America,” said Steve Bramlage, CFO, O-I.
“In Europe, wine volumes in the second quarter were higher year-on-year despite an overall down market. In fact, overall European profit expanded in the second quarter due to an improved product mix, primarily increased wine sales, progress on reducing costs and early benefits from the asset optimization program.”
Mega beer brands
In Asia Pacific, the company benefited from restructuring undertaken in the course of 2011 and 2012. Second quarter 2013 segment sales were $1.8 billion, up approximately 1% over the prior year.
“In North America, our operating profits were down $3 million from prior year. Shipments were down approximately 1% in the quarter, and this was primarily due to a decline in shipments of the mega beer brands,” said Stroucken.
“We are seeing steady growth in the craft beer segment, of which we have a 70% share, and we experienced volume gains in wine, spirits and to nonalcoholic beverages.”