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.
Carlsberg Group: Financial statement as at 31 December 2010
• Operating profit margin grew by 130bp to 17.1% (15.8% in 2009) and operating profit increased to DKK 10.25bn (DKK 9.39bn in 2009). Reported net result grew by 49% to DKK 5.4bn.
• Overall beer market trends improved in 2010 compared to 2009. Importantly, the Russian market was stronger than the Group anticipated at the beginning of the year.
• The Group significantly intensified investments behind its key brands, including innovations, new products, media, digital, consumer and customer activations. Furthermore, the Group invested in innovations to be launched in 2011 and the coming years.
• The Group gained market share in a large part of the business in 2010. The Northern & Western European region grew overall market share. In Eastern Europe, our market share in Russia was flat at 39.7% (source: Nielsen), despite the price leadership throughout the year. In Q4, Carlsberg's share of the Russian market grew by 40bp to 39.7%. Ukraine continued to do well. In Asia, market share gains were once again achieved across the region.
• Supported by football activations and increased investments in a World Cup year, the Carlsberg brand grew by 3%.
• The Group's beer volumes were down by 1% to 114m hl with a 2% organic volume decline (2% decline for total beverages). Excluding the Russian stock-building in Q4 2009 and subsequent destocking in Q1, organic beer volume would have grown by an estimated 1%.
• In Q4, organic beer volumes declined by 5%. Adjusting for the Russian stock-building in Q4 2009, organic beer volumes were flat for the quarter.
• Group net revenue increased by 1% to DKK 60.1bn (DKK 59.4bn in 2009) despite challenging Russian market dynamics due to the significant excise duty increase. The organic decline was 3% and the positive currency impact was 5%, mainly due to stronger Eastern European currencies. Price/mix was -1%.
• Operating profit increased by 9% to DKK 10,249m (DKK 9,390m in 2009). Organic operating profit growth was 1%. Adjusting for the Russian stock-building and subsequent destocking, organic operating profit growth would have been 8%. Currency movements impacted positively by 8%.
• Net profit grew by 49% to DKK 5,351m (DKK 3,602m in 2009). This includes non-cash, non-taxable income in special items of DKK 598m related to step acquisitions.
• Strong growth momentum in Asia with us outperforming market. The Group delivered significant volume, revenue and profit growth in the region.
• The remaining part of the DKK 1.3bn synergies from the Scottish & Newcastle acquisition were successfully achieved in 2010 ? ahead of plan.
• The focus on deleveraging continued and net interest-bearing debt was reduced to DKK 32.7bn (DKK 35.7bn at the end of 2009). Net debt/EBITDA declined to 2.3x (2.7x at the end of 2009). Having spent more than DKK 2.5bn on acquisitions, free cash flow was DKK 5,179m.
• For 2010 the Company proposes a dividend per share of DKK 5.00 corresponding to a 43% increase compared to DKK 3.50 for 2009.
• For 2011, the Carlsberg Group expects:
• Market share growth in markets representing 2/3 of our business
• High single-digit percentage growth in operating profit
• Adjusted net profit growth of more than 20%
Commenting on the results, CEO J?rgen Buhl Rasmussen says: “2010 was an extraordinary year for the Group due to the substantial excise duty increase in our largest market and we are very pleased with the strong 2010 performance. The improved market share in a large part of our businesses demonstrates our ability to strongly execute on our plans. For 2011 we believe market dynamics will improve slightly, not least in Eastern Europe where we anticipate the Russian market to return to growth. In our efforts to balance profitable growth with continuous efficiency improvements we will roll out innovations and market tools to support growth during 2011. The ongoing and new initiatives aimed at ensuring our business model becomes more efficient will be implemented without compromising on the quality and service we deliver to our customers and consumers.”
21 Feb. 2011