The beer market dynamics in Russia is approaching zero, yet major brewers are divided into those who developed considerably in 2017 and those who considerably reduced their volumes. For instance, company Efes has managed to substantially extend their sales due to restrained pricing policy and activity in the modern trade. Heineken has also demonstrated an excellent performance promoted by significant increase of advertisement budgets launching a non-alcohol sort of the title brand and unusual activity in the economy market segment. Carlsberg and AB InBev have been focusing on margins and lost a market share of their inexpensive brands. Serious dependence on PET package and mass enthusiasm about Zhigulevskoe have negatively impacted the most of big regional brewers, that have been for the first time pressed by the leaders in the key sales channels, especially in Volga and Central regions. In the small business there has been a noticeable slowdown in appearing of new restaurant breweries, yet the number of craft breweries has been growing rapidly. In 2018, the beer market is likely to grow a little, while the share of AB InBev Efes may decrease due to the integration. ...
“Catalogue of Russian Beer Producers 2018” includes 1070 businesses ranging from large subsidiaries of international companies to rather small restaurant and craft microbreweries.The catalogue includes 32 large breweries, 75 regional breweries, 693 industrial mini- and microbreweries as well as 270 restaurant breweries. ...
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.
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