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.
Beer market of Vietnam: “Young tiger”Vietnam is one of the few big beer markets that continue to grow steadily. The beer popularity results from its low price, street consumption culture, and social motives. The outlooks of beer market as well as the Vietnamese economy inspire optimism, though the country is heavily dependent on export of goods. The state regulation can be called liberal, but the key risk for brewers is harbored in intensive rising of excise. Within TOP-4 there are two leaders, Sabeco and Heineken that grow at the fastest rates. The first company effectively employs its capacities, the second one focuses on marketing technologies. Almost 80% of the market belongs to century-old brands, yet the middle class and the youth are shifting their interest toward international premium that is growing taking share from the mainstream.
Analysis of beer market in China (on Russian)
Beer market of Ukraine: big three losing weightIn 2016, fast increase of excises and resulting price spike stood in the way of the beer market stabilization. Most of competition (as well as mass sorts) moved to the economy segment of the market. The biggest losses were incurred by the leading three, especially Obolon, which again experienced pressure after reallocation of Efes market share. However, one should already speak of TOP-4. Group Oasis CIS (PPB) became a strong player and competitor to transnational companies. Besides the net sales of many regional medium breweries look rather good and 16-fold cost reduction wholesale trade license for craft brewers opens up a possibility of rapid growth in 2017.
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