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.
Foster’s Group told to justify demerger
The brewer is to tomorrow report its first-half results, with Citi tipping a 2 per cent fall in net profit after tax to $349 million, against the previous corresponding period and Macquarie expecting a slightly higher $350m.
But all eyes are on the expected unveiling of full terms - including a cost/benefit assessment - for its proposed demerger of its CUB beer unit and Treasury Wine Estates division into two listed entities.
Macquarie analyst Greg Dring said while the board has outlined some benefits, how each will make more profit being separated than combined “needs addressing”.
He said the “under siege” board was justifying a demerger on the basis the businesses are different, which isn’t a “compelling reason”.
“There is only one compelling reason to demerge and that is that the board is confident there will be bids for both…otherwise investors are going to be exposed to earnings dis-synergies and multiple contraction,” he said.
“We continue to believe a demerger is a bad idea.”
In late afternoon trade, Foster’s shares were up 3c at $5.76.
Mr Dring said the board should call for formal interest to test Foster’s internal views on valuation against market values before proceeding with the demerger, which Citi expects to cost up to $300m in one-off restructuring costs.
“If the interest isn’t there, sell the Californian wine assets and keep the company intact,” Mr Dring said.
On interest in the beer business, Mr Dring noted the “popular predators” are slowly ruling themselves out. Japanese giant Asahi last week reiterated it had no plans for a bid and Coca-Cola Amatil last year also said CUB is too expensive.
Despite previously dousing reports SABMiller could buy the beer unit, Credit Suisse analysts today changed their tune, saying “we are becoming increasingly of the view that SAB Miller may seek to acquire Foster’s”.
The Treasury business has had more formal interest, with Foster’s, helped by advice from Goldman Sachs and Gresham, in September turning down a bid from US private equity firm Cerberus Capital worth up to $2.7 billion.
But Mr Dring noted Constellation Brands’ recent sale of its wine business to private equity group Champ for an enterprise value of $290m, “highlights an absence of asset price tension for wine assets”.
On Deutsche Bank’s numbers, the beer unit is worth $10.6bn on a discounted cash-flow model, with wine between $3bn and $3.5bn using a through-the-cycle earnings valuation.
14 Feb. 2011