Global hop marketA local alternative to mass beer suggested by independent brewers has been successful and is now altering the global market. Beer is becoming more diversified, so transnational companies have to accept the new game rules and to switch focus to young and fast growing markets. All these processes increased the demand for aroma and bitter hop as well as their acreage expansion on two continents. However now there appeared a downward trend of alcohol consumption in the world, so even special sorts can soon turn to be sufficient. In this connection the dynamic American hop market is already facing some problems. EU hop producers have become more cautious, they are not racing to exceed the demand and look forward with more confidence, judging by the contract terms.
Hop Market in RussiaGermany still dominates the Russian market, yet over the recent two years one has been able observe a continuous success of Czech hop suppliers. Their expansion and growing popularity of hops from the United States became the drivers of supplies growth in 2016 despite the preceding modest harvest crop in the EU, as well as the factor of relative stability in 2017. In this connection, in 2017, the ratio of the varieties continued to shift towards the aroma ones, and the supplies of Magnum hop and other alpha varieties were reduced. However, the import of bitter hop pellets is partially replaced by extracts, especially from the major beer manufacturers. Total volumes of alpha acid supplies, according to our estimation, decreased by approximately 5% and returned to the level of 2015. Barth Haas Group continues dominating the hop products market; HVG also increased its weight. At the same time, Morris Hanbury significantly reduced the supplies in 2017.
10+1 trends of Russian beer market 2015-2017Despite of the moderately negative prognoses for 2017, the beer market can be stabilized soon. Yet the years of the negative dynamics have resulted in marketing being limited just to “optimization” and the art of balancing between price and volumes. Bigger supermarkets share means stronger trade marketing. These processes are connected to the majority of the described trends. At the same time, the federal brands inflation leads to searching for new tastes, sales channels and contact formats that expand the product range and diversify the beer market, but do not imply a substantial volume increase. Let us enumerate and further discuss the ten trends of the beer market we can see in 2015-2017 as well as the major event of 2017.
Beer market of Ukraine 2017In the first half of 2017, the Ukrainian beer market goes on decreasing slowly. Yet, the companies manage to compensate their lost volumes by raising prices and improving the sales structures. This results in the mid price market segment reduction while the sales of premium brands are rising. These processes are connected to position strengthening of companies Carlsberg Group and Oasis and the market share reduction of Obolon. Most of the novelties by the market leaders belong to craft or hard lemon categories.
Beer market of Russia 2016: PET goes to draftThe beer market of Russia was warmed up by the hot summer, but the preparation for large volume PET prohibition has already impacted it negatively. The year was successful for Efes, MBC and regional producers; Carlsberg’s positions were virtually stable but AB InBev and Heineken lost a part of market share having focused on the sales profitability. The dynamics of big brands was determined by how much the companies were willing to keep the prices down or by their promotional activity. In this context the economy segment of the beer market and sales of inexpensive draft beer were increasing. The premium segment started shrinking due to license brands migrating to the mainstream segment.
Doubts over SABMiller bid for Fosters
Why would the London-listed global brewer clear the decks if it was not gearing up to pounce? On the other hand, analysts are far from convinced that SABMiller would benefit much from doing so, apart from increasing its size and planting a flag in the Pacific.
The actual profit potential from synergy savings is marginal, especially in Australia, which is a developed market.
Figures from Evolution Securities point to Australia being five times more profitable per hectolitre of beer than the UK, but Foster's share price is already discounting a fully priced bid of about $11.5 billion and that includes the troubled wine interests, Treasury Wine Estates, which encompasses the Rosemount, Penfolds, Wolf Blass and Wynn's labels.
Could rivals be tempted into the fray and flush out SABMiller? Some speculate that Japan's big brewers, themselves struggling with static home markets, might be interested, but they have never made a success of overseas acquisitions and would face the same lack of cost-saving opportunity as SABMiller.
However, the cost of capital to the Japanese is minimal and the desire to do something - anything - to revive their businesses is strong.
Foster's shareholders would love a premium to the present share price, which almost 10% below where it stood last summer when the group said it was considering splitting the beer and wine arms into two separately listed companies, so divergent were their prospects and calls on capital.
However, it is hard to see anyone paying a premium price after Foster's announces its six-month figures in a couple of weeks' time. They are likely to be less than buoyant due to the floods and other recent natural disasters in its home market.
Even more depressing is that the potential that value of Treasury Wine Estates has probably decreased since Foster's turned down a ?1.7bn bid from Cerberus Capital, the US investment group, in the autumn.
Analysts calculate that the beer division is worth about $10bn, which at Foster's present share price puts a value of just $1.5bn (?1bn) on Treasury. Foster's said the Cerberus offer undervalued Treasury but the Americans have made no further move. Perhaps they think they are now in a buyers' market.
However, the Foster' s board has this week acted to secure Treasury's vital supplies of New Zealand wine by lifting its stake in Rapaura Vintners to 50%.
The popularity of sauvignon blanc, which now outsells chardonnay in Australia, means secure sources in Marlborough are essential. Rapaura is a key supplier to international markets with the capacity to package 11m cases a year.
That may help improve the prospects of a bidder for Treasury, but the Foster's board has a delicate balancing act to perform on February 15.
Assuming that Foster's announces the split of the beer and wine arms (watch the share price fall if it doesn't), the best prospect of attracting a premium bid for the beer division is to have it carry as little debt as possible. But that would mean saddling Treasury with extra burdens and making it less attractive.
Could Foster's announce a final solution with offers for both divisions on February 15? Stranger things have happened.
28 Jan. 2011