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.
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.
Getting Hooked on Craft Brewers Alliance
Still, I wasn't immediately interested in owning the stock. Though its brands are gaining in popularity, the company is a micro-cap, with a value south of $200 million. And what analyst coverage the company does receive mostly involves people thinking it's overvalued. According to its most recent quarterly report, Craft Brewers Alliance only had $13,000 in cash and equivalents and a current ratio below 0.9. Not the most reassuring numbers...
At the beck and call of Bud and Beck's
What's more, the company is at the beck and call of Anheuser-Busch InBev (NYSE: BUD). The beer giant gets to appoint two members of CBA's board of directors, and has a slew of limitations on the company's freedom -- not to mention its ownership of roughly 35% of Craft Brewers's stock.
Craft Brewers Alliance also has a deal to use Anheuser-Busch InBev's distribution system (which is a good thing, giving the smaller company nationwide distribution), but Anheuser-Busch InBev generates quite a bit of fees from this. And as Anheuser-Busch InBev offers this option to more and more craft brewers, what once might have been the craft niche's serious advantage in this highly competitive market will erode.
I'm not just a fan of the craft-brew category. I'm also convinced of its long-term consumer appeal and huge potential for growth. Craft beer is really beginning to catch on, and not just among my own Whole-Foods-obsessed, vegan-shoe-wearing, often-tiresomely sanctimonious-about-what-they-consume yuppie crowd.
According to the Craft Brewers Alliance's last annual report, "Shipments of craft beer in the United States in 2009 are estimated by industry sources to have increased by approximately 7.2% over 2008 shipments, up from a 5.9% shipment increase for 2008 from 2007. The growth rate of the craft beer segment ran counter to the activity in every other segment of the beer industry." Long term, this popularity bodes well for Craft Brewers Alliance, its mission and its bottom line.
Sure, you might not hold up Craft Brewers Alliance as a pillar of financial strength right now. But the company is free cash flow-positive -- not bad for a fairly small business.
Now the part about me being followed
Furthermore, I keep seeing Craft Brewers Alliance brands everywhere I go. A weekend or two ago, at a sports bar, I found the place had Long Hammer IPA on draft (delicious but strong -- watch that 6.5% ABV). Then at Safeway, shopping for Super Bowl snacks, I saw Craft Brewers's brands in three different places along the beer aisle. On game day, a friend brought over a six-pack of -- what else? -- Widmer Hefeweizen, another of the company's beers.
"HOOK is stalking you," said my husband.
"Or I'm stalking it," I said.
But I can't be the only one having this experience, right? Isn't this little beer company becoming ubiquitous? I believe it is, which is why I've finally bought some of its stock. In for an excellent hefeweizen, in for some shares. Watch this space.
16 Feb. 2011