More bruising than boozing

Results from Heineken and Carlsberg yesterday highlighted what desperate doldrums European brewers find themselves in these days. The golden throatcharmer is no longer refreshing the parts it once reached and is probably not the best investment in the world.

More specifically, the problem lies in western European markets where flat or declining populations of drinking age are spending less of their disposable income on drinking. At the same time more of their dwindling beer money is going on cut-price bulk packs - known in the trade as "slabs" - from supermarkets.

Where once Tesco and Asda focused their price war muscle on staples such as bread and milk, for some time now they have been turning their attention to Bogof beer promotions.

It is little surprise that the British Beer & Pub Association estimates that more than half the beer drunk in Britain is now consumed at home. Similar trends away from sales in pubs and bars, where brewers are better able to charge a premium, are clear in Ireland and across all the mature markets of western Europe.

Those multinationals with foresight (or good fortune) have moved quickly to reduce their focus on this part of the world - there is much growth in the emerging markets of Russia, China and eastern Europe. The mature US market, with its growing drinking age population, is also much preferred.

Belgian brewer InBev has perhaps been the most fleet of foot. Last year it acquired Brazilian group AmBev in an $11.4bn (£6bn) deal that transformed it into the largest beer company in the world, when measured by sales volumes.

Meanwhile Britain's Scottish & Newcastle has been somewhat less nimble. A top bomber, it certainly is not. It remains substantially focused on western Europe despite promising operations in Russia, India and elsewhere.

Like its European rivals, much of its focus must be on costs, and it is here that the spotlight will shine as S&N publishes its full-year figures this morning.

New improved Pru


The Pru's about-turn on its 15 years of bonus cuts to holders of with-profits policies must help to provide a further explanation of why Britons prefer to spend rather than save.

The insurer is now hoping to change all that - not that it is boasting that bonuses will start going up. No, its 5.5 million policyholders will get the same as last year.

It is shocking that this should be regarded as good news. It is only so against a bleak backdrop: rivals Norwich Union and Scottish Widows have both revealed that some of their with-profits policyholders will get nothing from this year's bonus round.

Some of the Pru's news was not so good. Maturing endowment policy payouts have fallen in some cases. But overall there are some small reasons for the insurer's beleaguered policyholders to be cheerful.

It must also be a relief to Jonathan Bloomer, the Pru's accident-prone chief executive. After tapping his shareholders for £1bn last year to fund an unexpected expansion in Britain, Bloomer needed to prove that he had products that were worth selling. Some of his shareholders had been calling for his head. Against tough odds, he has survived thus far.

Yesterday's bonus figures might help to improve his odds of survival, at least in the short term. While with-profits are out of favour for obvious reasons, Bloomer can now argue that his are among the best of a bad bunch.

Hawk's shadow


When a member of the Bank of England's monetary policy committee says they want interest rate policy to be boring, it's time to sit up and take notice.

This time was no exception. Kate Barker, erstwhile dove among the nine MPC members, popped up in the Irish Times to say - apart from the "boring" bit - that the only reason the MPC did not put rates up this month was because of uncertainty over the short-term outlook for the economy. While the Bank pointed out Ms Barker had not said anything that governor Mervyn King had not said last week, financial markets were sent into a spin by what they saw as surprisingly hawkish comments.

Dealers had been almost sure in re cent months that rates had topped out at 4.75% but now realise that may not be the case after all.

Ms Barker said the housing market, which appears to be stabilising after several months of weakness, could be an "upside risk". She also said the MPC was now expecting inflation to move above its target in two years.

They are also worried about what might happen to consumer spending, which accounts for two thirds of the economy and was flat over Christmas. One thing is for sure, if rates rise much from here, the frail housing market, and consumer spending along with it, could rapidly turn into downside risks.

That is perhaps why Ms Barker stressed that even if rates had to go up again, it would not be by much. Nevertheless the Bank's remit is to keep inflation on target at 2% and it now sees that rising, along with wage inflation. If both continue to head north, it will not hesitate to raise the cost of borrowing again.